Is Ware Shoals cutting educators' pay?

A note was published last week in the Greenwood Index-Journal about a proposal to cut educators' salaries to help balance the local district's budget, but I haven't heard whether the issue has been resolved, or how.

This was the original note, by reporter Erin Owens:

Ware Shoals School District Board of Trustees discussed possible ways in which the district can cut its budget for the 2012-13 school year during its meeting Monday.

Though the state's budget has not yet been set, school districts throughout the state could potentially see a decrease in funding should the current state budget pass. To make up for the losses, Ware Shoals discussed raising millage and reducing pay for retirees in the district, though no official decisions were made Monday.

"This is just an exercise in frustration right now, because we have such little information and it's my understanding that we won't get any more information until June," Superintendent Fay Sprouse said.

Sprouse said the district is eligible to make a 3.2 percent increase in millage in the county, which would affect mainly businesses and rental properties. Sprouse said a 3.2 percent millage increase would not generate a significant amount of money, but could help the district. Board members will consider the millage increase and discuss it further next month.

Cutting pay for retired district employees was another option discussed during the meeting. Sprouse said the district has six full-time retiree employees and two part-time, who are currently paid at the 11-year experience level on the pay scale. About three years ago, the retired employees' salary was decreased from the highest experience level to the mid-experience level. Decreasing retiree pay further to the zero experience level next year would save about $81,000 for the district, and would be a 20 to 25 percent salary cut for the employees.

"We value our retirees for their commitment to the district and for their expertise," Sprouse said. "But we also have to make sure we take care of those who are not retirees and that we are able to maintain our budget. We want them to continue working for us for a fair wage, but we have to weigh it in light of all the other things we've had to endure."

In other words, retirees who are collecting their meager retirement benefits while continuing to teach, in order to make ends meet, should learn to eat less to cut back on their grocery bills, turn up the thermostat to consume less electricity during the coming summer months, and make fewer trips to the doctor's office to save on gas.

Free Times details state's pension reform dilemma

The cover story in this week's edition of the Free Times of Columbia digs deep into the mess that's been stirred up around our state retirement system and the punitive measures being considered by lawmakers to right the ship.

The entire matter can be boiled down to a simple fact which leads to a simple solution.

Simple fact: During the past 12 or so years, thanks to deep and damaging budget cuts to public services, we've drastically cut the number of state employees who contribute to the largest account of the state retirement system.

Simple solution: Rebuild public services and the ranks of public employees, to ensure that sufficient numbers of employees are contributing to the system.

See the simplicity?

But because this is South Carolina, the simple fact is ignored and the simple solution will never be considered. Thus, we're left with a morass of allegations and recriminations from the grand tradition of "I know you are but what am I?" and lawmakers looking for even more ways to cut public employment, cut retirement benefits for those still working, and eliminate opportunity for people who might work for the state in the future.

It's a privatizer's dream -- which means that for some lawmakers who have long antagonized the retirement system, it's a dream come true.

The Free Times opens its coverage with the political drama, the finger-pointing and accusations of wrong-doing to score political points. Then it gets to the problem at hand.

But the fundamental force driving the debate is something much more powerful and longstanding than political tit-for-tat: It’s demographics.

In 1999, there were more than three state workers for every retiree. Now, there are less than two. (The ratio has changed from 3.16 workers for every retiree to 1.71.) Part of the changed ratio comes from cutbacks in state government; part of it comes from people living longer.

Either way, the math is clear: It says that in order to keep the state pension system viable, South Carolina needs to pay out less to retirees, bring in more from employee or employer contributions, make more money on its investments — or some combination of all three.

“Certainly the demographics of where we are is having an impact,” says Sen. Thomas Alexander, a Republican from Oconee who sits on the Senate Finance Committee and co-chairs a subcommittee looking into retirement issues. “It’s not a bad thing that people are living longer, but the system has to be reflective of the trends so we are viable for the long term,” he adds.

The official numbers go like this: On June 30, the value of the South Carolina Retirement System Fund stood at $25.4 billion. In fiscal year 2011, the fund paid out almost $897 million to retirees. Meanwhile, its unfunded liability — the amount of shortfall in the system over a 30-year period if nothing is done to stabilize it — is $13.4 billion. That’s up from just $177,000 in 1999, according to a 2010 story in The State.

Officials characterize the situation as a serious challenge, but one that can be managed with just a few tweaks to the system.

Starting with the simple solution I identified: Re-open public employment, restore the thousands of jobs cut during the Sanford administration, and bring a wave of new public servants into the fold.

Or maybe not.

No, of course not. Logic and rational decision-making has never been our state's strongest suit.

As of Jan. 12, the value of the state’s pension fund had dropped to $24.3 billion, according to a weekly portfolio summary put together by the Investment Commission. The decline came at a time when the Dow Jones index was virtually unchanged — it closed at 12,414 on June 30 and 12,471 on Jan. 12 — underlining Treasurer Loftis’ concerns about the fund’s performance and investment philosophy.

As for the other side of the ledger, some experts think the estimate of $13.4 billion in unfunded liabilities is unrealistically low.

A 2011 study by researchers at the University of Rochester and the Kellogg School of Management found that even taking into account economic growth, contributions by local and state governments to pension systems would have to increase by a factor of 2.5 for pension systems to be fully funded. In terms of yearly contributions, the study, “The Revenue Demands of Public Employee Pension Promises,” estimates that South Carolina would have to increase its yearly contributions from $1.5 billion to $3.6 billion for its pension system to be fully funded — an increase of $1,186 per household per year for each of the roughly 1.7 million households in the state.

One of the researchers on the study, Joshua Rauh, says South Carolina’s shortfall could be as high as $53.5 billion, according to the Post & Courier.

A Pew Center report also finds South Carolina in a challenging situation. In its 2010 report “The Trillion Dollar Gap,” it found that South Carolina’s liabilities are funded at 70 percent. The center divided states into three categories: solid performer, needs improvement and serious concerns.

South Carolina was one of 19 states listed in the category of serious concerns.

Since then, the percentage of the state’s pension liabilities that are funded has dropped to about 66 percent. By comparison, in the late ‘90s the state pension fund was nearly fully funded, hovering around 98 or 99 percent.

Notice that no one mentions the thousands of job cuts, or the benefits that would accrue to the system if those jobs were restored in the budget.

Why not? Because our lawmakers have engaged in a slash-and-burn policy when addressing public services, and it's likely that the state or its decimated agencies have already let contracts to private entities to provide what were formerly public services. The beauty of that system, of course, is that public money moves into the private sector through a closed spoils system -- it's not what you do, it's who you know! -- and public employees are wiped off the public employment rolls, meaning the state's obligation for health care and retirement benefits is reduced, too.

But South Carolina is now bearing witness to the fallout from that slash-and-burn policy, and decision-makers are scrambling to figure out ways to legally cut retirement benefits for those still on the job, while charging them more for the lesser benefits.

Charles Logan is a retiree who was a deputy director at the S.C. Land Resources Commission and later a section chief at the S.C. Department of Natural Resources.

During his long tenure as a state worker, Logan witnessed or participated in lots of meetings before legislators “begging for money” for his agency, he says.

“I saw so many of them just had a complete disregard for state employees,” he says. “They looked at state employees as almost peasants — or servants almost. A lot of them were not just egomaniacs but also weren’t knowledgeable about programs.”

He takes aim directly at the Legislature for mishandling the state’s pension fund — specifically, the TERI program and 28-year retirement.

“I find it disgusting that South Carolina’s politicians act like they’re rescuing the solvency of the S.C. Retirement Fund when their actions have caused the severe decline in the retirement fund,” he wrote in a recent letter to Free Times.

“When they passed the TERI plan, it was originally intended just for teachers, but they also used it for favoritism and political payback that they could give to people — their cronies that they wanted to dole it out to,” Logan says in a follow-up interview. “But then there was a lawsuit [in 2005] saying that it was unfair to just pick out a specific part of the public employees, so it had to be applied to every public employee. At that point, they should have canned the program — it just sucks money out of the retirement system.”

Sen. Alexander emphasizes, however, that both the TERI program and the 28-year retirement were done for public employees and retirees, and that they were implemented at a time when the pension fund was close to fully funded.

Logan doesn’t deny that the programs were beneficial to state workers; he just takes issue with the Legislature launching programs without paying for them. He says he’s collected more than a decade’s worth of articles, editorials and letters to the editor from throughout the state, all urging the Legislature to be more prudent in its management of the state pension fund.

“It’s obvious what they are going to come up with,” Logan says. “They are going to act like they are the saviors keeping [the pension fund] from going under when they caused the problems to begin with. And they will do it on the backs of the public employees: They will raise the contributions and they will cut the cost-of-living adjustments — yet they will not touch their own retirement system.”

“I don’t have any confidence in them,” he says. “How can you have confidence in the General Assembly?”

Hard to argue with the facts.

It's an object lesson to those willing to learn: When you make political decisions for short-term gain, you do long-term harm.

So, in the absence of doing what's smart and what's right, what solutions are being discussed?

Apparently, paid actuarial consultants have proposed converting our retirement system from defined benefit -- in which everyone knows what benefit they'll receive when they retire -- to a defined contribution system, in which the state and its employees contribute to a retirement account, but no benefit is guaranteed; a retiree's benefits are then subject to the whims of the stock market -- benefits might get better when the market does well, benefits might bottom out when the market falls off. Under such a system, the only ones who benefit are the investment bankers; they get paid whether the market grows or crashes.

As much doubt as some retirees might have in the Legislature, it could be worse. Speaking at a Jan. 5 legislative workshop for the media, GOP Rep. James Merrill of Charleston said legislators are determined to keep the pension checks coming — and not, as actuaries have advised, to move from a defined-benefit to a defined-contribution system.

If legislators did move to a defined-contribution system, state employees would get a taste of life in the private sector — no guaranteed pension whatsoever, just a small yearly contribution to an IRA or 401K.

In order to keep the pension system afloat, however, there will need to be changes — big ones. Those changes might include reducing cost-of-living adjustments, raising the retirement age or changing the number of years it takes for an employee to be fully vested in the system.

“Everything will be on the table,” Alexander said at the Jan. 5 legislative workshop.

Easy choices will not make a dent, Democratic Rep. Gilda Cobb-Hunter said at the event. Plus, she added, she’s interested in solving the problem once and for all.

“I am not interested in kicking the can down the road,” she said.

Meanwhile, the demographic wave continues to create pressure on all sides — employees, retirees, legislators, fund managers and taxpayers — toward a solution that likely no one will be happy with, and that might have to be revisited over and over in the coming years.

Much as retirees — and everyone else — might wish it were otherwise, there are no guarantees.

Retired public employees blamed for budget instability

The way the dialogue is being framed tells the tale; we can see from a mile away who the bad guys are going to be:

South Carolina taxpayers should expect the amount of money they pump into the state pension system to increase in the coming years as the program struggles to close a widening $13 billion shortfall.

At the same time, the state might be forced to shift resources from areas such as education and transportation to the retirement system to help close that gap, pension experts said.

It's South Carolina's retirees. Not the ones who retired from Lockheed Martin up north and built monstrosities overlooking their sailboats on the bay, not the ones who think Cracker Barrels are so quaint and rustic, not the ones who can't eat grits.

I mean the ones who spent their careers in the public service of South Carolina and its municipalities -- the teachers, the emergency response personnel, the city maintenance guys, the lunch ladies, the bus drivers, the civil service workers and magistrate's secretarial pool, the town clerks, the police dispatchers, the state parks interpreters, the firefighters, the folks at the water department, the prison guards, the folks who salted the roads before an ice storm and who cut and carried away the fallen trees afterward.

They're all the bad guys.

They're greedy, and they're stealing from the rest of us to pad their twilight years with luxury.

Right?

Maybe not so fast, crime fighters. Let's review a little history.

Back in the day -- let's take the mid-twentieth century for starters -- public employees didn't earn much money. They were low on the economic totem pole. A public service job was good for only one thing: employment. So long as you did your job, kept your head down, didn't break any expensive public property and were johnny-on-the-spot when an emergency broke loose, you kept your job for a solid 30, often longer.

Then came the economic boom times of the 1950s and 60s, when citizens' expectations of government grew, so the state added workers to meet those expectations. You wanted to have enough law enforcement to prevent any stir. You needed enough firefighters to protect the new city neighborhoods and suburban developments. You wanted enough public health workers to answer the questions when the baby was colicky, and enough teachers to keep up with the bulging elementary school enrollments. Et cetera, et cetera.

But excited new public employees weren't excited by the permanently low wages, so our elected leaders offered a grand bargain: Take these public service jobs at low pay, said our leaders, and we'll do two things: We'll invest in health insurance and retirement plans for you, and we'll increase your wages when we can.

Public workers took the grand bargain. After all, they too had children who needed a doctor visit once in a while, and they too dreamed of retiring while they still had some life to live, just like the swells.

That worked a while. Life was good, relatively speaking. Raises didn't come often, and when they came, they were meager. Still, you had the promise of employment, a guaranteed paycheck.

Soon enough, however, it was crystal clear that workers in the private sector, who might be doing the same or similar work, with the same or similar education and experience, were getting along a bit better. Public employees, to the extent that they organized themselves at all, asked for better pay.

Their elected leaders were pressed from both their public employees, with their low wages, and their private-sector pals, who suppressed their own employees' wages to just a shade above public employment. If you raise public employees' wages, said the private-sector leaders to their elected pals, then we'll have to raise ours, and that's gonna cut into our affection for your candidacies.

So our elected leaders came back to their public employees with a grander bargain: We can't afford to raise your wages, they said -- we don't have that kind of money -- but what we can do is to improve your health insurance plan a little bit each year, and to invest more in your retirement accounts each year, so that when you retire, you'll have security and can live just like the swells. You can take your family for weekends on the lake, babysit your grandchildren, and shop for the tykes at Christmas and Easter just as well as the fat cats at the country club.

And it was a great bargain. Thanks to promising markets stretching to the horizon, a little more investment in those days would yield a reasonable reward when retirement day came. Public employees understood the concepts of simple interest and smart investments. And they accepted the deal.

Year after year, through the 1970s, the 1980s, and into the 1990s, public employees accepted artificially low wages in exchange for the promise of good health care and retirement security. They saw others fly by them on the ladder of upward mobility, and they kept working. They scrimped, saved and clipped coupons to tend their own families, as the families in the newer neighborhoods seemed to get ahead without trying so hard. Still, our public employees kept working.

And some reached their goal: The full 30, the alleged gold watch, and the little camper at the lake. They collected their retirement check and it kept them ahead of bill collectors. The lucky ones paid off their mortgage at just the right time, so theirs was theirs.

Those who'd come after them kept working, seeing the first waves of those old promises paying off. So it seemed it would for them, too, and for those who'd come along even later.

But a day came in the 1990s when the tide turned. Those old-guard electeds who'd cut the first grand bargains were fading out, and the next guard behind them didn't share their old sense of commitment. Through the 1980s and early 1990s, when lawmakers wanted to pass tax cuts, they still found the money to honor their commitments to their longsuffering public employees. Now, it seemed, there wasn't enough money to do both. Lawmakers chose tax cuts, and they began wearing away at the old grand bargain.

One year, it was not enough money to fund a cost-of-living adjustment for retirees. Another, it was not enough money to continue one particular feature of the state health plan. Another year, maybe it was both. Later, maybe public employees would have to accept an increase in co-payments for doctor visits, or a higher prescription drug rate, or another increase in the out-of-pocket maximum.

Lawmakers cut taxes some more and approved sweetheart deals to exempt corporate giants from paying income tax. Well, that meant they couldn't afford another tick upward in the employer contribution to the state retirement system, so they raised employee contributions.

To employees in their second and third decades of service, still shy of retirement and now with one or two sons or daughters in college, these were bitter pills to swallow. Promises had been made. Wages paid to them had been kept low purposefully, with the guarantee of better benefits to come.

Unfortunately, as we all discover in our interactions with our legislature, what is written can be unwritten, what is done can be undone, and what is promised is never really promised.

Public employees who have remained in public service through the past decade have learned this lesson again with each monthly. Not only has the tide turned decidedly out, but our public employees and retirees find themselves blamed for the alleged instability of the state retirement system, and more generally for the sorry state of our budget priorities. Wages are still pathetic. State health care provisions -- what is left of them -- are so cost-prohibitive that workers are loathe to use them, but for emergencies. And pension security? The only people assured of pension security are the white-collars collecting fees for every stock trade in the foreign and domestic markets. Lawmakers champ at the bit to rewrite state retirement rules -- "reforms," they call it -- and they betray no lack of malignant creativity.

So, what pension security?

Now comes the media, wrapping up matters in the tidiest narrative: Greedy public employees, goes the tale, have leveraged their weight to bilk the state for years, pumping up their fat retirement benefits at the expense of necessities -- education, transportation -- and mortgaging their children's and grandchildren's futures for their own comfort and joy. Cue the scary music.

State lawmakers in recent months have discussed reforms, but those efforts might not be enough to fix the crisis, the experts said.

State and local governments contribute a percentage of public employees' wages to the South Carolina Retirement Systems' trust. That rate has ballooned over the last seven years as state officials enacted four increases in an effort to shrink the pension debt.

In 2005 public employers contributed 7.7 percent of wages for most pensioners; they now contribute 10.6 percent. Over that time, the Legislature raised employee contributions a half-percent to 6.5.

They ripped us off, cry the media.

To hit high return rates, South Carolina's Investment Commission in 2008 approved making riskier investments that can have big payoffs. But those big risks can come at a cost. After the stock market crashed that year, the state took a $7.6 billion loss. It has recovered somewhat since then but remains below pre-recession levels.

Other issues have amplified the retirement system's funding crisis over the past decade:
The Legislature passed measures that pumped up employees' benefits.
Baby Boomers began to retire and draw down pension reserves.
State data shows retirees are living longer than ever.

This all means that the system is paying out more money but taking in fewer contributions.

Look again at the issues that have "amplified" the "crisis."

First, lawmakers passed measures that "pumped up employees' benefits," we're told without any historical context.

Second, Baby Boomers are retiring; and, notice that instead of "collecting their earned benefits," they are "draw[ing] down pension reserves." As if they're thieves. As if they haven't delivered their years of service and earned their legitimate pension benefits.

Third, and worst of all: "State data shows retirees are living longer than ever."

What should be the alternative? That they should respectfully forego their benefits, go home to their Barcaloungers in the dark, and will themselves to die, so as to reduce the economic burden left for the rest?

What a callous and hard-hearted soul who contrived these talking points, these themes, these excuses for legislative treachery and neglect.

This is no hyperbolic reaction to the narrative offered by the Post and Courier of Charleston. Look at its next lines:

Taxpayers make up the difference for what investment income doesn't cover, pension analysts said.

"If the risks don't pay off, you're going to be in trouble," Biggs said. "The person getting screwed is going to be the taxpayer."

Innocent taxpayers, screwed by conniving, elderly town clerks and librarians who had the temerity to live past the actuarial projections for their life expectancies. It's their fault that the state retirement system is under water. Lawmakers who could have honored their commitments and appropriated millions more dollars during the past 15 years bear no responsibility for the state of things, no. Those old tax cuts upon tax cuts were necessary, right and proper. Political favors demand repayment. So those old commitments to invest in the system were dead weight; they had to go.

Pension experts including David Draine, a senior research associate at Pew Center on the States, said South Carolina should be worried. Some states over the past decade have "failed to operate their retirement funds in a financially responsible manner."

"South Carolina is one of them," he said.

Retired public nurses, living now in assisted living facilities -- it's them to blame, folks. They bled you dry and kept coming back for more.

South Carolina's pension fund has a reported $25.4 billion in assets, according to the July 2011 Comprehensive Annual Financial Report. It also has $38.8 billion in liabilities, the amount of pension money it will owe about 500,000 public workers, retirees and their beneficiaries in the system.

That means its so-called "unfunded liability" is about 65 percent. A Pew report from April put South Carolina near the bottom third of states nationally, ranked by funding level.

Retirement systems can operate safely without being fully funded. But experts recommend systems be at least 80 percent funded, according to the U.S. Government Accountability Office.

Keith Brainard of the National Association of State Retirement Administrators compared state pension systems to mortgages. Even if they don't have all the money up front, financially secure homeowners can afford a house if they pay for it over 20 or 30 years.

Likewise, fiscally sound retirement systems will be able to cover pensions for employees whose expected retirements are decades away.

But South Carolina's system is not financially sound, according to the Pew Center report, which said the state's long-term pension liability is "cause for serious concern."

Look not to the proposals of the powerful for the past decade and a half. Look not to the budget writers in the House and Senate for culpability. It's your old first-grade teacher who put you in this mess.

And that unfunded liability actually could be much higher than the state has reported. Economist Joshua Rauh of Northwestern University's Kellogg School of Management said in a 2010 report that states across the country, including South Carolina, drastically have underestimated their liabilities. South Carolina's pension debt is as high as $53.5 billion, he said.

"Employers don't want to hear that because they don't want to pay more, and elected officials don't want to hear it because they don't want to raise taxes," Biggs of the American Enterprise Institute said.

You see, we have no way yet to know the extent of the damage done by those old crooks who swilled black coffee to drive municipal utility trucks across ice at four in the morning, all those years ago. How could we have known that the old firefighters who saved our homes were destroying our neighborhoods by other means, all the while?

No matter. The damage they did is slowly being discovered. Never mind that lawmakers could take other steps to shore up the system, like hiring more public employees and reinstating those old commitments to strengthen and protect their retirement security. Nope; those left in the system will be charged for the bill. Increases in their employee contributions to the system are already being calculated, with the least additional harm to already damaged taxpayers.

The state expects the system to be fully funded in 30 years, contingent on "a sufficient employer contribution rate" -- that's the amount state and local taxpayers contribute -- among other assumptions.

"It could be a lower rate, or a higher rate, but until the future gets here and the actual plan results are evaluated against the previously projected results we won't know," Lindsey Kremlick, a spokeswoman for the state Retirement Systems, said in a statement.

And they won't be the only ones to suffer. All of the public services provided by these public employees will take their share of the medicine, too.

Beyond increasing contribution rates, strained governments also might be forced to shift existing resources, said Josh Barro, a fellow at the Manhattan Institute. State funds that ordinarily would have paid for road repairs and education could be diverted to the pension system in the future, said Barro, a pension expert at the conservative think tank.

That means children will suffer, and the roads that take them to and from their schools will accept their neglect.

Thankfully, no tax cuts will be rescinded; now wouldn't be the time for that. Corporate South Carolina will be appropriately protected from economic harm. After all, it wasn't corporate South Carolina's fault we're in this mess.

It's all our public employees' fault.

South Carolina's unfunded liability trailed most other states in the boom years of the late 1990s and early 2000s, when many retirement systems flourished. In 1999 the system was 98 percent funded, Draine of the Pew Center said. But at that time many systems had surpluses, he said.

Part of the problem then was that South Carolina constitutionally had been forbidden from investing in stocks until 1999. All its funds were in cash and bonds, even in the stock market's boom years.

In 2005, the state established the Investment Commission to manage and diversify the state's investment portfolio in hopes of reaping stronger returns. The state hired a chief investment officer -- Robert Borden, a $485,000-a-year employee who resigned in December -- and set up a six-member panel of political appointees to vote on investment strategies.

The group began making so-called alternative investments in hedge funds and private equity in 2008 -- the same year the stock market crashed. Such bets can deliver higher returns than more conservative investments, but they also carry higher risk.

In the years since the state only has increased the amount of money it puts in alternative investments.

The pension system's critics, including Investment Commission member Loftis, have said the state has put too much money in high-risk bets. Loftis also has said the state has paid too much in management fees, which topped $343 million last year.

Borden couldn't be reached for comment. Commission Chairman Allen Gillespie and Vice Chairman Reynolds Williams did not return requests for comment.

The investment losses were compounded by policy decisions that added to the unfunded liability. In 2000 the Legislature lowered the number of service years needed to retire from 30 to 28. Pension recipients have received annual cost-of-living raises of up to 3.5 percent all but one year since 1999.

"States that are in trouble now have kicked the can down the road and haven't set aside contributions," Draine said. "They've raised benefits without figuring out how to pay for them."

I hope we've learned our lesson.

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.

'Haley Public Employment Tax' levied on public employees

From the beginning of her political career -- seems like only months ago -- Governor Nikki Haley has made it clear that she thinks taxes are too high and should be cut.

Which made it stunning news last week to hear that she had initiated, supported and led passage of a brand-new tax on public employees. Apparently, some taxes are good and fine, depending on who is subject to pay them.

This is a tax that only affects public employees, so it is appropriate to call it a Public Employment Tax.

And, as Haley was its inventor, it's entirely appropriate to call it the Haley Public Employment Tax.

It will be interesting to hear Haley deny that it's a tax of her invention; I understand that the proposal came to the Budget and Control Board as an agenda item from her board staff, she gives final approval to the agenda, she chose the director of the board, and she chairs the board. Therefore, it's her proposal, and she led it through to passage by the board.

So the Haley Public Employment Tax is hers to own.

I've read and re-read the coverage by The State to understand this tax:

Families covered by the state’s health insurance plan will pay $143 a year more for health insurance under a new plan approved Tuesday by the State Budget and Control Board.

The 9 percent increase will be spread equally between employees and employers, with each paying 4.5 percent more.

But why was nine percent necessary? According to the board's consultants, only 4.5 percent was necessary, and that was fully funded in the budget this year. Why was it necessary to tax public employees another 4.5 percent out of their pockets?

“We have never increased rates unnecessarily. This is the first time. It is unprecedented in state government,” said Sam Griswold, president emeritus of the State Retirees Association. “To me, you are building a profit into the system.”

Haley denied the system was turning a profit, saying any money left over automatically goes to pay down state pension debt.

Pension debt? Has anyone ever heard of this? If the system is fully funded and healthy, there shouldn't be any such thing as pension debt, should there? Which means that the additional 4.5 percent tax on public employees' salaries is, in fact, a profit to the system.

The insurance plan insures 408,605 people, close to 10 percent of the state’s population. That includes employees, retirees and their families. In addition to state employees, the plan also covers teachers and some employees for local governments and school districts.

Employees covered by the plan were hit with huge increases in the mid 2000s, including a 39.6 percent increase in 2003, according to the Budget and Control Board. Historically, employers – the state, city, county or school system – have borne the brunt of premium increases, with nine increases since 1999. Employees’ costs only have been increased five times since 1999, the last one coming in 2005.

Only five times since 1999? That's five times in 12 years, or, an average of slightly less than every other year during that period.

Henry Price, a retired USC journalism professor, attended Tuesday’s meeting to hear for himself the future of his health insurance premiums. He said he pays about $250 a month for his and his wife’s health insurance, and the increases will add an extra $120 a year to his bill.

“I think 3 1/2 (percent) covers the problem. Four-and-a-half is adding extra money into the system,” Price said. “You can say, ‘Well, it’s just pennies.’ But pennies mount up.”

Quite right. And the net result is going to be that next legislative session, when budget writers see that the health plan is now receiving a profit thanks to the Haley Public Employment Tax, they're going to feel compelled to take back some of the state's employer contribution. Mark my words.

Well, that was The State's coverage, but I trust what Sam Griswold says about public employment and employee benefits. He's the president emeritus of the Retired State Employees Association, and beyond that, he's neck-deep in experience working with the Budget and Control Board and the state treasury.

"The premise of our concern with the increase in health insurance premiums of 4.5% is that they were not needed to fund the program and were thus unnecessary," Sam wrote in a message to retired state employees and others last week.

Sam is so well-versed in this business that he prepared data to present to the Budget and Control Board last week -- but his data never made it into the agenda materials given to the board members, and were not posted on the board's website.

Want to see his data document for yourself?

Enjoy:
Griswold PageAnd here's his explanation of it:

I will explain this page to you and show you why this increase was not needed.

Focus on the two columns labeled Scenario 1 and Scenario 2 (s1 and s2). S1 assumes the imposition of the 4.5% employee rate increase. S2 assumes NO rate increase. The program is required by law to maintain a reserve fund to pay claims for up to 45 days in case an epidemic occurs or some other projection of claims costs is in error. The first line is the amount of that reserve fund being carried over from 2011. The second line is the amount available to pay claims. The difference between the two columns is $19 million and represents the increase of 4.5% from employees in s1.

The third line is interesting. This line transfers $158.9 million out of plan income to the Other Post Employment Benefits Trust Fund. This Fund was set up a couple of years ago to conform to new government accounting standards requiring that the projected cost of providing health insurance to retirees be included in the State's liabilities on its balance sheet. This fund was set up to reflect that the State acknowledged this liability. The law states that each year any funds not needed to run the insurance program will be transferred into the OPEB fund. Last year the transfer was $16 million. So this year, 2012, in this particular line, is $158.9 million not needed to run the insurance program.

Go to the last line in the top box. This is the amount we have available in 2012 to pay claims. S1 is $19 million larger than s2. Your increase.

The second line in the second box shows how much we expect to pay in claims. Subtracting the claims from the revenue ends up with Projected Ending Claims Reserve at 12/31/2012. That amount is $233 million in s1 and $214 million in s2 (your $19 million showing up again and it has NOT been spent). This is the amount of the operating reserve that is supposed to be able to fund an additional 45 days of claims payments if needed.

Now the fun part: go to the bottom line of the third box. This line tells you how many days of reserve we have and the excess days that are funded. Under s1, we see 51.8 days which is 6.8 days more than the 45 day reserve required by law. Under s2 (remember this is the figure with NO rate increase) we see 47.6 days which is 2.6 days more than the 45 day reserve needed.

THE CONCLUSION: Had no increase been imposed on employees/retirees, the program would have had enough funds to pay every claim, maintain an operating reserve that complies with state law--even exceeds it, and still transfer a record amount of $158.9 million into the OPEB Trust Fund. The 4.5% increase on employees/retirees was not needed.

Sam Griswold is no joke.

The same cannot be said for those occupying our seats of power.

So, I wondered if my interpretation of the Haley Public Employment Tax was accurate. And Sam said, "It was an increase not needed by the program to operate at full funding. It is the imposition of a tax."

So there is a tax that Haley has found she can love and can raise. It happens to be levied against all the men and women who do the state's work for meager compensation, and pray daily not to get sick and require health care provided by the state's ever-more-costly, ever-weakening health plan.

Why are working retirees disappearing at Spring Valley High School?

Early this week, The State published an item about parents' disenchantment in the Spring Valley High School community.

It reported that Sally Tryon, a parent and president of the Spring Valley High School Student Improvement Council, "was one of the first parents to raise concerns about the departures of working retiree teachers at her children’s school."

When veteran teachers -- especially ones who have dedicated their entire active careers to teaching, then return at lower pay to give years of their retired time to teaching too -- are pushed around, it bears noticing by all of us.

The controversy seems to come from an "effectiveness and efficiency" study commissioned by Richland 2 Superintendent Katie Brochu and conducted by Evergreen Solutions of Tampa, Florida -- yet one more out-of-state business interest profiting from South Carolina's public education budget -- that recommends baldly to "phase out" the 145 working retirees who are giving extended service to students at Spring Valley High and elsewhere.

I have a feeling that "phase out" is a euphemism for "fire." And apparently, I'm not the only one sensitive to it. Because they're officially retired, working retirees are at-will employees anyway; they work for less pay than active teachers, they have no employment rights and they are only hired year-to-year.

But according to The State's report, working retirees aren't the only targets of the efficiency experts' study: "About 140 other positions also would be eliminated, including assistant principals and school administrator positions, if the school board agreed to the bulk of the 161 recommendations in the task force study. The Evergreen study estimated about $57 million in savings over five years if all were implemented."

Active parents are ready to speak up about the proposed changes to their children's schools.

“I’m getting more and more concerned because of the way it was done and the way it was presented,” said Sally Tryon, president of the Spring Valley High School Student Improvement Council.

Lynn Roth, another Spring Valley parent concerned about the study, said she is urging more parent representation on the task force. If that does not work, she and others plan to create their own shadow panel. “I think we will go through every one of those recommendations and make our own recommendations,” Roth said.

Roth, Tryon and other parents are particularly incensed that site-based management would be eliminated at schools, ending what has been a longstanding tradition of developing distinctive programs and climates at the district’s 36 schools and centers.

“These changes so far do not give us student improvement or school improvement,” Tryon said. “It has taken us in the opposite direction.”

She and members of her SIC were never consulted during the period in early 2011 when the Evergreen consultants made visits to the district’s schools and Tryon believes no other SICs had input into the study.

Who are the people making these recommendations? What do we know about them except that they come up here from Florida to help us South Carolinians figure out what we can't understand on our own?

Google shows that Evergreen Solutions is a sophisticated enterprise, with a lot of business and municipal clients. Clients all over the country have hired and paid them tens, even hundreds of thousands of dollars to conduct focus groups, send out surveys, interview people and publish colorful reports, full of recommendations. A lot of those clients have been so impressed that they've posted the reports and recommendations online, where everyone can read them.

And because many of their clients are public agencies and municipalities, those reports and recommendations become public information anyway.

It only took a few minutes of Googling to learn that when a school district hires Evergreen Solutions to conduct its "effectiveness and efficiency study," people are likely to lose jobs. At least, that's one popular recommendation that surfaces time after time in the studies prepared for school districts since 2006.

In 2006, it was Evergreen's study for Monroe County, Florida, that recommended "Based upon staffing allocations and enrollment trends, MCSD should eliminate some assistant principal positions." And, "MCSD should eliminate some staff support positions to schools."

In 2007, Evergreen told the four local governments of Alleghany County, Virginia, to cut one assistant principal and 14 teacher assistants, to abolish annual contracts for classified employees, making them at-will employees without any job security, and to cut paid working hours for bus drivers.

In 2008, blogger Ernest Brown of Lithonia, Georgia, attended a meeting to hear Evergreen's recommendations to his leaders in DeKalb County. Brown writes that Evergreen's president, Linda Recio, delivered the recommendations in person, which included cutting salaries, eliminating up to 42 personnel positions in the district office, and "targeting" the 170 employees in the district who had at least 30 years' experience with an "early retirement incentive option."

When efficiency experts come offering an "option" to veteran educators extending their terms of service to their students, I get a little anxious.

The same year, Evergreen recommended lowering the boom in Needham, Massachusetts, on a number of support staff, declaring that "Needham had more full-time equivalent support staff members than any of the other communities at the elementary, middle school levels, and was only surpassed by Natick at the high school level," and apparently, that was unacceptable.

One area parent who blogs didn't share the efficiency experts' sentiments. Boston Kayak Guy wrote then, "Parents have come to rely on a certain level of 'customer service' and staff reorganization and elimination of positions will almost certainly impact parents' perception of "service'."

By late 2009, Evergreen had made inroads into the Carolinas. It delivered a study to the Burke County School Board and Board of Commissioners to consolidate "four elementary schools into two and two alternative high schools into one," and these decisions by the board led to more unpleasant ones, according to the superintendent's annual report of 2009-2010:

As the board attempted to ratify the budget by May 15 it was determined that the district had reached a point where job cuts were necessary. Every effort was made to reduce the list of those being laid off and ensure it was the absolute minimum. The administration started with a list of 126 employees that were to be laid off, they narrowed that down to 70 who received notices, and have since been able to rehire 48 (subject to continual change) employees at some level. From teachers going back to school or taking jobs elsewhere, only nine teachers were left.

The local newspaper covered the meeting where school board members agonized over Evergreen's recommendations and their outcomes:

The board clearly wants more data before eliminating people's jobs. Members voted 5-2 to rescind the board's previous decision to cut the number of instructional coaches from 15 to five (the board last week voted to postpone the decision until it had more facts).

The board also voted 5-2 to stop advertising 13 job openings, including seven for content coordinators in a new table of organization the board adopted based on recommendations from the consultant, Evergreen Solutions.

"We have to focus on keeping teachers, not adding Central Office administrators," insisted Susan Stroup.

However, Tim Buff said Stroup's motion seemed to him to be the kind of micromanagement "that SACS CASI ripped us for" — referring to the schools' accreditation council.

"The Evergreen (Solutions) report brought us a bunch of recommendations," Buff said. "There's a person, people, jobs and the education of our school children behind every one of those recommendations. I don't want to see one person lose a job. But we're facing some big decisions."

The same spring, Evergreen made its way to Rock Hill.

The Rock Hill School Board heard Monday night that current revenue projections for the 2010-11 school year, best case, will be around $1.5 million dollars short of the cuts already approved by the board. This could mean an additional reduction of 16 positions. Final numbers will not be known until the legislature finishes up - probably in June.

Dr. Linda Recio representing Evergreen Solutions made a report on their findings of the school district's Operations Department. She presented a number of recommendations which the administration will review and report back to the board in a couple of months. Some significant findings were:

District owns unnecessary equipment (should be rented instead)
District has too many custodians and not enough employees for grounds maintenance (both should be outsourced)
Energy costs are excessive (compared to other districts)
External communications need to be improved
Cleanliness of the schools and facilities management were some of the best seen

After an executive session for personnel discussions, the board voted 5-0-1 (Douglas abstaining and Silverman absent) to approve the administrations recommendations for Reduction in Force (RIF). The administration will now begin notifying employees who will not be returning next year because of revenue reductions.

A column in the Rock Hill Herald put it more bluntly:

Cut down on custodians, hire private grounds crews and get rid of your dump trucks, a cost-cutting expert told the Rock Hill school board Monday night.

Custodians emerged as a key focus on a list of suggestions to help school officials deal with a massive budget shortfall that could bring 100 job cuts, fewer programs and other changes.

Rock Hill could reduce its custodial staff by 43 full-time positions and still remain above the national average for custodians per square foot, said Linda Recio of Florida-based Evergreen Solutions. Currently, 95 custodians clean halls, classrooms and bathrooms, in addition to more hired through private contractors.

"Custodians is an area where you are significantly overstaffed," Recio said.

And in a final example from early this year, Evergreen's Recio herself returned to Massachusetts to tell the leaders of Hamilton-Wenham to cut teachers, to increase the teacher-to-student ratio, and to cut the remaining teachers' planning periods.

According to the Hamilton-Wenham Patch,

Recio also said the district could save $100,000 annually by reducing the amount of teacher planning time.

“It’s extensive, it’s probably double what it should be and it’s not coordinated,” Recio said about teacher planning time.

High School senior Brad Kippen, who is the student representative to the School Committee, said teachers often spend planning periods working with students.

No matter, Brad. It's inefficient. It costs money. Students can work with one another. Hallways can keep themselves clean and lawns can keep themselves mown. Teacher-to-student ratios can rise to unimaginable heights, if necessary. You see, it's all about the bottom line, and what doesn't make money, costs money. Teachers cost money; teacher assistants cost money. Custodians and secretaries and assistant principals all cost money.

And working retirees at Spring Valley High School, despite collecting lower pay than active, full-time teachers, cost money.

Efficiency experts cost money too, and they don't get paid to tell superintendents how to spend more money; they get paid to tell superintendents how to spend less money while getting the same results.

It doesn't surprise me that an efficiency expert has recommended cutting jobs to save money. This is South Carolina, where no administrator needs an efficiency expert to exercise that right. We're a right-to-work-for-less state, after all.

What surprises -- and impresses -- me is that a group of concerned parents is organizing themselves to fight it.

More power to them.