The State Budget and Control Board voted Thursday to cut retirement benefits for the state’s 137,500 retired teachers, police officers and state employees – the first shot in what is sure to be an emotional battle over the state’s debt-ridden retirement system.
Retired state workers packed the meeting room, filling every chair and standing several rows deep against a wall, with one retired state worker saying, “If they are going to do this, they will have to look us in the eye.”
But the board, lead by Gov. Nikki Haley, did not flinch.
“From the very beginning, we’ve all known this year was going to hurt,” Haley said shortly before the vote. “What we have all agreed on is we are not going to be the ones to bury our heads in the sand.”
The 4-0 vote, with State Treasurer Curtis Loftis abstaining, reduces the annual raises for retirees, called cost-of-living adjustments, to 1 percent from 2 percent. The dollar amount will vary for each retiree, but retirees get an average of $19,000 a year, meaning a 1 percent cut would equal $190 a year.
The benefit cut comes against the backdrop of concern about the financial condition of the state pension fund.
In 1999, the difference between how much money the state owed its retirees and how much money it had to pay those benefits was about $178 million. Today, that difference is $13 billion.
The difference is so large that if it were treated as a debt, it would take the state 37 years to pay it off. That is seven years longer than accounting standards allow, a problem that could impact the state’s cost of borrowing money.
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