There is no quick fix to state’s pension plan that is underfunded by $20 billion.
“It’s going to take money and it’s going to take money that we don’t necessarily have right now,” State Sen. Darrell Jackson D-Richland, said in a joint House-Senate committee meeting last week, “Last time I checked, there was no big pot of money that the state has, that we can tap into.”
State Rep. Jeff Bradley R-Hilton Head, asked the committee to come to a quick decision because the pension fund loses money everyday.
“$4,109,00 a day that goes into your hole by waiting to find a solution for this,” Bradley told his counterparts. “Characterized differently, that’s $150,ooo an hour.”
The deficit will likely continue to grow because of a process called negative amortization. Negative amortization occurs when missed payments on interest due later add costs to the overall principal of the pension plan. To combat these losses, senators and representatives proposed directing money from the state budget’s General Fund as well as potential increases in the rate employees contribute from their monthly salary.
“Currently our required employee contribution rate is 11.56 percent and is below the national median,” Committee Chairman State Rep. Bill Herbkersman, R-Bluffton, said. “The bottom line is: the more money that is directed to our pension system and the sooner these funds are injected, the sooner our amortization period and unfunded liability will drop.”
Committee members expect that money from the General Fund will be needed to help pay off the debt. State employees may also have to contribute more any plan would have to be approved by the legislature next session.
The committee did not come to a decision on how to fund the pension system last week, but they plan to meet again during the first week of the legislative session to come up with a potential bill. The state’s Public Employee Benefits Authority (PEBA) has until January to draft recommendations for the committee.
PEBA provides retirement benefits to nearly 160,000 people in South Carolina’s workforce.