State retirees Pensions to grow 2% yearly Governor says state may not be able to afford promises that plan makes

John O'Connor

Jun. 18, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- State retirees will be guaranteed at least a 2 percent annual increase in their pensions after the State Budget and Control Board approved the change Tuesday -- over Gov. Mark Sanford's objection.

The new cost-of-living adjustment was part of a package of changes to the state's retirement system to try to protect benefits for the more than 100,000 retired state and local government workers. Another change bumped the assumed return on state investments to 8 percent from 7.25 percent, which allows the state to assume more money will be available to pay for those benefits.

The 4-1 vote to guarantee the cost-of-living increases brought loud cheers from roughly 150 people who were gathered in the Wade Hampton Building lobby.

But Sanford criticized the changes, saying the state has added a $2.6 billion bill to its retirement benefits without finding a way to pay for it. State investments, Sanford said, were likely to fall short of the needed 8 percent gains.

For more than 45 minutes Sanford argued investing, the economy and long-term debts with retirement system and investment staff.

Sanford cited a letter from noted investor Warren Buffet to his company's investors warning that 8 percent -- the state's new assumption on its investment returns -- was too high.

"We're saying we're going to outperform Warren Buffet," Sanford said.

"I think this one's going to come back to both hurt the retirees and the taxpayers of South Carolina."

But Comptroller General Richard Eckstrom disagreed.

The new retirement rules were drafted by a committee that studied the issue, he said, and were a compromise. Retirees would get a 2 percent cost-of-living adjustment, Eckstrom said, but would get no more unless the state reduces the outstanding amount due retirees.

Retirees receive 3 percent or more cost-of-living increases in most years. The average annual retiree pension is $17,903, according to the State Budget and Control Board.

Lawmakers seeking a boost in retiree pay thought an increase was timely given price bumps in gas and other goods and services.

"I feel really good," said Sam Griswold, a state retiree who was on the panel that came up with the new rules. "We did extensive research on that, whether it was an appropriate rate."

Budget and Control Board debate over an expected deficit at the Department of Corrections also was heated. The agency expects to be $4.3 million short this year, and run up to a $14 million deficit next year.

Sen. Hugh Leatherman, R-Florence, questioned Corrections director Jon Ozmint about whether his agency had been low-balling their budget requests, leading to an underfunded agency.

"I frankly don't know what's going on at the Department of Corrections," Leatherman said. He asked Eckstrom's office to investigate the agency's spending.

Ozmint said politics have made lawmakers loath to pay for programs that benefit inmates. Therefore, he said, his agency cannot ask for millions to pay for inmate health care, and instead must shift money from other sources to pay those costs.

Sanford objected to lawmakers blaming the agency for the deficit.

"It's a joke that he's here," Sanford said of Ozmint being required to request running a deficit from the Budget and Control Board. "The bottom line is you guys handed him a deficit."

Reach O'Connor at (803) 771-8358.

Newstex ID: KRTB-0044-26058614