COLUMBIA -- 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.
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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."
The new rules the State Budget and Control Board approved are meant to shore up the state retirement system.
• Like a mortgage, the state should be able to pay off retirement benefits in 30 years. Currently, the S.C. retirement system could pay off in 29 years.
• The new rules guarantee retirees a 2 percent pension increase every year. Retirees typically receive that much. The average pension is $17,903, so the average increase would be $358.
• But the rules limit the increases to 2 percent unless the state can pay off benefits in 25 years or less, giving lawmakers a reason to reduce costs, add revenue or limit benefits.