Thursday, February 9, 2012

State to retirees: Eat less, drive less, turn down your heat

Let's think about this.

If you were a state government dominated by corporate interests, and your ultimate goal was to privatize all state services, how might you dissuade citizens from viewing their government as a viable resource for public services?

For one thing, you might make public employment so unattractive that few people would want to work for the state. Then you could say to citizens: We have to privatize these services and turn them over to profit-making companies, because no one wants to work for the state and provide these services.

To accomplish this, you might pay public employees such meager wages that they have to take on two or three jobs. You might run them down in the media, talk about them like dogs, rail against their incompetence and ineffectiveness.

Then, for good measure, you might cut back their retirement benefits, and tell them you have no control over it! That in order for them to get pay increases or improvements in the retirement, your investments in the stock market have to make money.

See how easy that is? Within a generation, you'll be rid of pesky retirees, no one will want to work for the state, and you can award state contracts to the companies that send the largest donations to your re-election campaigns.

What a plan.

South Carolina’s 106,000 retired teachers, state employees and local government workers would get raises only if the state’s retirement fund makes more money consistently from its investments.

And state workers hired after July 1 would have to work longer – 30 years, up from the current 28 – before they could retire.

That’s what’s facing state employees according to a proposal moving through the state House of Representatives designed to reduce the state’s $13 billion pension debt.

South Carolina’s taxpayers and state employees put $1.6 billion into the state’s retirement fund in 2010, but the state paid out $2.6 billion in benefits to retirees. That gap – coupled with the cost of early retirements, cost-of-living increases and stock market losses – means the state has a $38 billion liability to its employees but only $25 billion to pay them – a $13 billion deficit. The House proposal, which has not yet been introduced as a bill, is tied to a larger plan that would overhaul the retirement system in an effort to corral corral that deficit.

For instance, it would promise a cost-of-living raise to retirees only if the average earnings over five years from the retirement fund’s investments equal or exceed 7.5 percent. Right now, retirees are promised a raise, capped at 1 percent, every year based on inflation.

This is absolutely not the only option available to lawmakers.

See, the state Constitution gives lawmakers the power to raise revenues however they deem appropriate to fund the state's essential obligations and institutions. Public services represent, to rational people, an essential obligation and institution. So if, for example, lawmakers chose to eliminate all those corporate tax loopholes, that action alone likely would yield sufficient revenue to raise all public employee wages by ten percent, plus give a five percent cost of living adjustment to retirees, and they could still afford to leave alone the age and experience eligibility requirements for full retirement.

But are they likely to do that?

In South Carolina?

This plan could only be considered good in comparison to previous, more draconian, proposals. But, this being South Carolina, you have to praise what there is to praise, and keep working.

Carlton Washington, executive director of the S.C. State Employees Association, and Sam Griswold, a spokesman for the State Retirees Association of South Carolina, both said Wednesday they support the direction lawmakers are headed.

“The Legislature is having a genuine concern for employees,” Washington said.

Just two months ago, the same House committee endorsed a plan that would have required most current employees with less than 23 years on the job to work until they had 30 years of service and were 62 years old to retire. That plan, combined with no automatic raises for retirees, would have reduced the retirement system’s deficit by $4.4 billion instead of $500 million, according to the accounting firm.

But state employees and retirees would have sued the state, resulting in costly litigation. Lawmakers also would have had to vote on whether to give cost-of-living raises to retirees every year, changing the fund’s projections as officials are trying to stabilize it.

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