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Public pensions

Posted: December 15, 2011 11:05 a.m.
Updated: December 16, 2011 5:00 a.m.

Public pensions have been much in the news since the economic downturn began, especially during the last year. The battle in Wisconsin over public employees’ collective bargaining rights and pension plans has been the most publicized, but the same arguments have been occurring across the country. The South Carolina General Assembly has now taken the first step to deal with a $13-billion deficit in the state retirement pension fund, and though it involved difficult decisions on the part of a House subcommittee, it was the right thing to do. The recommendations still must go to the House Ways and Means Committee and from there through the legislature.

Nobody wants to see the benefits of public employees cut. But the deficit created by the state’s retirement rules has to be addressed or the entire fund could sink slowly into a pool of red ink. Under the new rules proposed by the committee, employees will have to increase the share of their wages they pay into the system by 1 percentage point, from 6.5 percent to 7.5 percent. But perhaps the biggest change will be that employees must work at least 30 years and be at least 62 years old before retiring with full benefits. Currently, a state employee -- and this includes teachers -- can retire after 28 years, regardless of their age. A person who begins working at 22 can retire at 50 with full benefits at the present time.

Many years ago, generous public pension plans helped offset the fact that government employees often made much less money than their private-sector counterparts. That difference has largely vanished. As salary levels have evened out, the unsustainability of some plans has become evident. It’s certainly no knock on state employees that this action is being proposed, but rather a necessary move in the face of impeding financial doom in the retirement system.

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