House robs veteran state employees' retirement benefits

If this action occurred at the intersection of Main and Gervais streets in Columbia, the police would be called, someone would be arrested and 220,000 charges of grand larceny -- felonies, all -- would be filed.

But because it happened a couple hundred yards away, in the House Ways and Means Committee meeting, it's entirely legal. It's still highway robbery -- still grand larceny -- but it's legal.

What happened is this: Committee members voted to take retirement benefits away from 220,000 state employees by making them pay one percent more per year, by stretching out the period of years upon which the retiree's final average compensation is based, and by robbing employees of their ability to include unused sick leave and vacation leave in their benefit calculation.

Stealing back their unused sick leave and vacation leave alone will cost retirees roughly $1,000 per year, or five percent of their lifetime benefit. That's because most state employees are not paid well -- we're not talking about Steve Spurrier or those secret legislative retirement packages; we're talking about municipal workers who began their careers during the Carter administration. State retirees collect an average retirement benefit of $18,500 per year.

The Ways and Means Committee unanimously approved Tuesday a bill requiring newly hired employees to work an additional two years to collect full retirement benefits, while current employees could still retire after 28 years.

It would require workers to contribute more toward their retirement. The committee approved a phase-in, increasing the contribution from 6.5 percent of their salary to 7.5 percent over two years, instead of in one shot July 1.

This is called paying more and getting less.

Other parts of the bill are meant to prevent what's called spiking. Benefits would be based on employees' last five years of pay, rather than three.

Until the pay freezes of the past four years, state employees could count on a little bit of an increase in their pay each year -- enough of a raise to add cheese to a Whopper combo, not enough to buy a new Oldsmobile -- and an employee's final average compensation was calculated on their last twelve consecutive quarters, or three years. Lawmakers have decided its wiser to stretch that out to twenty consecutive quarters, or five years, in order to lower the employee's potential retirement benefit.

The difference means that during winter months, when heating fuel prices spike, retirees will be keeping their thermostats down at 65 degrees rather than 72 degrees.

Various attempts were made to limit the carnage, including throwing some veteran state employees under the bus in order to protect other ones.

The Palmetto Teachers Association believes employees within five years of retirement should be exempted from those changes, while the South Carolina Education Association wants all current employees exempted from them.

Why only exempt employees within five years of retirement? That boneheaded notion concedes that the theft from those just outside the arbitrary five-year line is legal, fair and ethical.

In fact, every current state employee should be exempted from any changes that are made to the retirement system. It's a foreign concept, I know, but there's an issue of fairness here: The agreement made with a public employee when he or she is hired is the agreement that should stand throughout that employee's career. You don't change the terms of the contract ten years down the road, or 20 years, or 28 years, and make the changes retroactive to day one.

That is r o b b e r y.

I noticed that a district court judge in Florida ruled on behalf of teachers and public employees there just yesterday, saying that any changes made to the retirement system may be prospective -- meaning they apply to future public employees -- but not retroactive. Sure, that's Florida, and South Carolina's lawmakers take no direction from Florida's laws, but then South Carolina lawmakers take no direction from their own laws, either.

Rep. Joe Neal, D-Hopkins, said the changes and increased contribution requirement will "inflict pain and damage on very vulnerable people."

The average salary for all employees who are paid at least partially through the state budget is $49,000. Nearly 56 percent of public employees earn less than $35,000 yearly, according to the state Budget and Control Board.

Neal's absolutely right. Ask the nearest public employee what he or she earns, and marvel at how little it is -- even teachers in your child's school. There's no danger of becoming wealthy as a public employee in South Carolina, unless you're a heart surgeon at the Medical University of South Carolina, or you coach football at USC.

The State newspaper quoted Rep. Jim Merrill on the matter:

“The easy thing to do would be for this committee and the House to do nothing. You do nothing and everybody walks away and no election impacts, no dirty emails,” said state Rep. Jim Merrill, R-Berkeley, chairman of the subcommittee that crafted the bill. “What the committee did is it rolled up its sleeves and made difficult decisions.”

Yet I've seen no one discussing the difficult decision of replacing all those public employees laid off and fired during the past several years' budget cuts, when everyone understands that adding more public employees would infuse the retirement system with fresh contributions.

Nope, no one's mentioned that. Can't afford it.

But we can afford to give $37 million in tax breaks to wealthy parents who enroll their children in private and parochial schools.

Something's rotten in this picture, as The State cannily observed.

Just moments before discussing the retirement bill, the House Ways and Means committee approved a bill that would give tax deductions to parents of home-school and private-school students. If that proposal becomes law, it would cost the state $36 million, money that state Rep. Brian White, the budget committee’s chairman, said he did not know where the state would get.

“They should have dug deeper to protect current employees just like they dug deep on (the private- and home-school deduction),” said Carlton Washington, executive director of the S.C. State Employees Association. “State employees expect the General Assembly to do what was promised to them.”

Wise words from the state employees' leader. Promises were made.

But in South Carolina, a promise made by our legislature is just so much hot wind.

Lawmakers propose robbing, then punishing, public employees

It's the same old song.

State Constitution empowers lawmakers to raise revenues necessary to fully fund the state's essential obligations and institutions. It doesn't give that power to the rest of us, only to the 170 men and women sitting in judgment in Columbia.

And when their decisions to rejigger how we invest retirement system funds, at precisely the moment of an economic downturn, results in a big drop in investment returns, what's their best proposal?

Rob more money from the pockets of poor, working-class public employees, then punish them further with cuts to retirement benefits.

This is not creative problem-solving; this is abrogation of responsibility. Deadbeat dad-ism. Absentee landlord-ism.

Here are the highlights identified by The State newspaper:

State workers to put more in, get less out

A look at the financial impact of proposed retirement changes

The average state employee would pay an extra $408 a year in retirement contributions.

State retirees, over the next 30 years, would receive $8 billion less in benefit payments.

State taxpayers, over the next 30 years, would pay $8.3 billion less into the retirement system.

It's a win-win-win, right? For everyone except those poor individuals who were willing to devote their careers to public employment, knowing that it meant lower wages but safe, secure retirement benefits that let us age in dignity.

Proposals like these drain the dignity from the process.

Proposed changes to the state retirement system immediately would cut $2.2 billion from its $13 billion deficit, according to a review of the plan by an independent accounting firm.

That is because, under the proposal, state workers’ retirement benefits would be based on five years of salary instead of three years of salary, a move that could lower benefits. And state workers could no longer include unused sick and vacation days to earn higher benefits.

The proposed changes mean that, over the next 30 years, state retirees would get $8 billion less in benefits than they would have under the current plan. And state taxpayers — required by law to contribute to the state retirement fund — would contribute $8.3 billion less than would have been required under the current plan.

House lawmakers plan to introduce a retirement bill this week, following months of negotiations with state workers, retirees and Gabriel Roeder Smith & Co., the consulting firm paid hundreds of thousands of dollars to advise lawmakers on the retirement system’s finances.

Here's the answer -- and it wouldn't have cost the state those "hundreds of thousands of dollars": Treat public employees with dignity and respect. Either pay them up front in much higher wages, or afford them the retirement security that comes from having reasonable retirement benefits they can count on.

“We are pushing hard to make sure we take corrective action now,” said House Majority Leader Rep. Kenny Bingham, R-Lexington. “If we can do it now, we’re really going to save the system a great amount of pain in years to come.”

Corrective action was necessary two decades ago, when lawmakers chose a path of atrophy: Paying less from state resources, investing less from state resources, cutting corporate taxes by loopholes and wholesale, demanding more from employees and offering less to them.

Or, if you want to look at things in the much longer view: Corrective action was necessary two generations ago, when lawmakers voted in 1954 to establish South Carolina as a "right-to-work-for-less" state, anchoring us forever to the old plantation and mill labor systems.

The S.C. State Employees Association opposes the changes for current employees, which would have the biggest impact on the deficit, according to the consultants’ review.

“We didn’t get into this scenario overnight, and we’re not going to get out of it overnight,” said Carlton Washington, the association’s executive director. “It would be, we think, punitive to punish employees who have provided the committed service over a number of years and built their portfolio around those expectations.”

Washington hit the nail on the head: South Carolina punishes its public employees -- just as it allows private employers to punish its workers -- for not being born into the state's aristocracy and ruling elite. Born powerless, we're kept powerless with a corporate boot on our collective neck.

In addition to benefit changes, state workers would have to pay an extra 1 percent from each paycheck into the retirement fund — an average increase of $408 a year. State Rep. Gilda Cobb-Hunter, D-Orangeburg and a member of the House retirement ad hoc study committee, said Monday she will push to have that increase phased in over two years to lessen the impact.

Why accept this proposal at all? Rather than offering to lessen the impact by phasing it in over two years, why not send those high-paid consultants back to the drawing board and asking them this question: How much revenue must be raised and appropriated to the retirement system in order to preserve -- and even strengthen and improve! -- retirement benefits while holding harmless our public employees who don't have the extra thousands of bucks to cover this gap.

Say it with me: Public employees are not responsible for this problem. State lawmakers had, have and will always have the power to do what's right.

But Bingham, who is also a member of the retirement committee, said the reason for the 1 percent increase is to “make sure the (retirement) system got an infusion immediately.”

The system needs an infusion immediately? Easy fix: Immediately eliminate all corporate tax loopholes and instruct a grand total of one staff person to direct all necessary additional corporate tax revenues directly to the retirement system. And when the system is solvent, apply the rest of the additional revenues directly to the base student cost under the Education Finance Act.

By my calculation, that should take care of the retirement system AND restore the base student cost to 2012-13 levels.

Problem solved. And I won't charge a penny for the consultation.

But, no, that leaves public employees whole. It affords them a little dignity. It helps them sleep a little more soundly at night. So it's absolutely unworkable. If slavery and mill culture taught us anything, it's that the ruling class must keep its workers hungry and anxious in order to get the most compliance. So, another quarter-turn to the thumbscrews.

If passed into law, the proposal means new employees would have to work 30 years, or reach age 65 with five years of service, in order to retire with benefits. And they would be ineligible for the TERI program, the controversial program that allows employees to retire and receive benefits while still working.

Current employees — who are eligible to receive retirement benefits after 28 years of service — would be exempted for both of those changes.

All of the changes would apply to members of the S.C. Retirement System, the largest of the state’s five pension systems, which includes state employees, local government employees and teachers.

Police officers, firefighters and other law enforcement officers have their own retirement system. They also would have to use an average of five years of salary to calculate their retirement benefits. And they would be banned from using unused sick or vacation days to determine the amount of their benefit checks.

But law enforcement officers — including new hires — still would be able to retire after 25 years of service.

Lawmakers would not escape unscathed, either.

Under the bill, a state lawmaker would have to give up his or her seat in the Legislature in order to receive retirement benefits. The proposal would end the practice of lawmakers retiring but remaining in office and replacing their $10,400-a-year salaries with much larger pension benefits — more than $30,000 a year, in some cases.

My heart bleeds for our lawmakers, forced to retire before they could collect their thirty grand a year for life. How will they live?

For advice, they might consult their public workers, who've been living on pittances for generations.

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.