South Carolina Gov. Henry McMaster (R) approved changes to how the South Carolina state government’s five public pension programs operate.
In April, both legislative chambers approved House Bill 3726, legislation to increase taxpayer payments to government employees’ pension funds by about $826 million over five years.
McMaster signed the bill on April 25.
South Carolina’s taxpayer-funded pension programs’ total liabilities exceed available assets by at least $16.8 billion, or $7,909 per taxpayer in the state.
‘Big Bailout Dollars’
Ellen Weaver, president and chief operating officer of the Palmetto Promise Institute, says the legislation will force the state’s taxpayers to correct past mismanagement.
“The big bailout dollars come from incremental increases in contributions from taxpayer-funded government entities and worker contributions,” Weaver said. “This legislation puts taxpayers on the hook for the majority of the cost, an additional $826 million annually by 2023, while workers would contribute an additional $40 million annually in the same time frame.”
Weaver says the state urgently needs real reforms, such as moving from defined-benefit plans, which guarantee employees a set payout amount, to defined-contribution plans similar to those enjoyed by many private-sector employees.
“‘Hurricane Gray’ is moving toward South Carolina,” Weaver said. “Currently, 59 out of every 100 people in our state are under 18 or are over 65. By 2030, the U.S. Census Bureau predicts that number will be 79 out of every 100. With fewer taxpayers shouldering these looming burdens, we don’t have the luxury of time: South Carolina needs to bite the bullet on big reforms, like transitioning to a defined-contribution plan, now.”
Crowding Out Current Services
Gilroy says diverting current taxpayers’ money to retired workers makes it difficult or impossible for government to fulfill its duties to the public.
“You have jurisdictions that have seen massive and rapid increases in what they’re putting into public pension systems every year,” Gilroy said. “It basically starts to crowd out the ability to put those resources to other uses. … an increasing amount of money [is] going to pay for the ‘Department of the Past,’ when you have all sorts of needs for current citizens and taxpayers and service delivery expectations that are either not being met or are at risk of not being met. As more money goes to pensions, less money can go to things like parks, police, and payroll.”