The $12,000-per-lawmaker pay raise proposed earlier this year would have added millions of dollars in benefit costs to the legislative pension system, according to a fiscal impact report provided to the Legislature’s budget-writing committees though never made public.
The Nerve recently obtained a copy of the report, prepared by the Michigan-based actuarial firm of Gabriel Roeder Smith & Company for the S.C. Public Employee Benefit Authority (PEBA).
Depending on the number of legislative pension system members, the increase in projected retirement benefits and administrative costs over a 12-year period would have ranged from $6.6 million to $38.9 million with the pay raise, according to the report.
The report was provided to Travis Turner, the then-interim executive director of PEBA, on June 2, according to an email from the Gabriel Roeder firm. Contacted Tuesday, PEBA spokeswoman Megan Lightle told The Nerve in an email response that Turner sent the report to staffers at the Senate Finance and House Ways and Means committees on June 2 and June 3, respectively, adding that the state Budget Office “may have received the fiscal impact information as well.”
Neither budget-writing committee made the report public.
The House and Senate on June 4 gave final approval to this fiscal year’s $24 billion state budget ($25 billion-plus if projected federal food-stamp payments are added), which included a proviso (91.29) that would have allowed lawmakers to claim an additional $1,000 in monthly “in-district” payments.
Most lawmakers earn an annual base salary of $10,400, plus $12,000 in yearly in-district payments, which are considered taxable income, for a total compensation of $22,400. With the proposed additional $12,000 in in-district payments, their total annual compensation would have jumped by nearly 54 percent to $34,400.
Gov. Nikki Haley vetoed the proposed pay hike on June 11, writing in her veto message, “I don’t believe this is appropriate, nor do I believe the public will see it as an acceptable expenditure of taxpayer dollars.”
On June 17, the House voted to override Haley’s veto, though the Senate sustained it the next day, killing the pay raise for this fiscal year, which started July 1. Lawmakers can again seek a raise when they return to Columbia in January.
A review by The Nerve of the General Assembly’s final votes on Haley’s veto of the proposed pay raise found that six of the Senate Finance Committee’s 22 members, including committee chairman Hugh Leatherman, R-Florence; and 14 of the House Ways and Means Committee’s 25 members, including committee chairman Brian White, R-Anderson, voted for the pay raise. Those budget-writing committees had received the fiscal impact report from PEBA two weeks earlier.
Besides Leatherman, other Senate Finance Committee members who supported the pay raise included Sens. Ray Cleary, R-Georgetown; Darrell Jackson, D-Richland; John Matthews, D-Orangeburg; Floyd Nicholson, D-Greenwood; and Clementa Pinckney, D-Jasper.
House Ways and Means Committee members voting in favor of the raise included, besides White, Reps. Jimmy Bales, D-Richland; Kenny Bingham, R-Lexington; Bill Clyburn, D-Aiken; Gilda Cobb-Hunter, D-Orangeburg; Jackie Hayes, D-Dillon; Bill Herbkersman, R-Beaufort; Lonnie Hosey, D-Barnwell; Dwight Loftis, R-Greenville; Jim Merrill, R-Berkeley; Joe Neal, D-Richland; Mike Pitts, R-Laurens; B.R. Skelton, R-Pickens; and Bill Whitmire, R-Oconee.
Leatherman and White did not respond Tuesday to written or phone messages from The Nerve seeking comment on the PEBA report. Haley spokesman Doug Mayer also didn’t respond.
The Nerve earlier reported that Leatherman, who became the Senate president pro tempore in June, was behind the push for the legislative pay hike, which was first publicly revealed at an April Senate Finance Committee meeting.
The Nerve’s review of the final override votes on Haley’s veto of the pay raise found that at least eight lawmakers who have received legislative pension benefits while in office voted for the raise: Reps. Bales; Liston Barfield, R-Horry; Grady Brown, D-Lee; Jerry Govan, D-Orangeburg; and Hosey; and Sens. Leatherman, Matthews and Glenn Reese, D-Spartanburg. Under state law, lawmakers who receive pensions while in office can’t be paid their annual $10,400 base salary, though they can continue to receive in-district payments.
The Nerve previously has written about the generous pension benefits lawmakers have given themselves over the years. The Nerve in 2011, for example, reported that 350 retired lawmakers or their beneficiaries had received a total of $6.5 million in annual pension benefits.
The state budget proviso that would have authorized the proposed pay hike also would have allowed the increase to be included as “earnable compensation for active members of the General Assembly.” State retirement benefits for lawmakers are determined by a formula that includes “earnable compensation,” which is made up of the annual $10,400 base salary and in-district payments.
The proposed $12,000 yearly hike in in-district payments would have increased the amount of earnable compensation used in determining retirement benefits.
The June 2 PEBA report projected, based on calculations as of July 1, 2013, that if the proposed increase in earnable compensation were limited to current active lawmakers in the legislative pension system (119 members as of July 1, 2013), the total “actuarial accrued liability,” or estimated additional retirement benefits and administrative costs, to the pension system would jump by $6.6 million to $82.3 million, an increase of about 9 percent, over a 12-year funding period.
In addition, the “actuarially determined contribution,” or projected contribution costs, to the legislative pension system would increase by a total of $13.2 million over the 12-year funding period, according to the report.
If all General Assembly Retirement System (GARS) members, including current retirees, benefited from the pension change with the proposed pay raise, the estimated additional retirement benefits and administrative costs would increase by $38.9 million, or more than 51 percent, to $114.6 million over the 12-year period, the report stated. And contribution costs to the system would jump by a total of $67.2 million during the period.
The report also noted that if the proposed pay raise were to take effect and if the retirement benefits change applied to all current and former GARS members, total annual retirement benefit payments would jump to $10.4 million from $6.8 million last fiscal year, a hike of 53 percent.
Assuming the pay raise was enacted and that the legislation pension system had $32 million in plan assets as of July 1, 2013, those assets “may be depleted before all benefit obligations have been satisfied” if the funding period were extended, according to the report.
The legislative retirement system was closed to new lawmakers starting with the 2012 general election, though they can participate in the retirement system for general state employees. The PEBA report found that the proposed legislative pay raise would not have a “measurable impact” on the projected costs and contributions in that retirement system.
Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.