THE BUDGET. South Carolina, like most states, faces a budget deficit for the current fiscal year and fiscal year 2010. For fiscal year 2009, SC may realize an $871 million deficit. It is projected that this deficit will be $725 million for fiscal year 2010. Since July 2008, $1 billion dollars has been cut from state spending and the budget has fallen to $6.1 billion. State revenue in January 2009 was estimated to be $80 million lower than 2008. Recent revenue reports forced the Board of Economic Advisors to call for an additional $102 million in cuts to state agencies.
STIMULUS ISSUE. The biggest battle in the General Assembly this year centered on the federal stimulus package. The controversial part of the stimulus package centered around $700 million that will be paid out to South Carolina over a two-year period, with 82% designated to go to public education (K-12 and higher education). A large portion of the remainder of this money was spent for law enforcement. The Governor did not want to draw this money from the federal government unless the state spent an equal amount of money reducing state debt. Ultimately, the issue was decided by the State Supreme Court and this money is being drawn down from the federal government.
FEDERAL EDUCATIONAL TAX-CREDIT BOND IMPLEMENTATION ACT. Approved by the General Assembly, this Bill allows South Carolina's school districts to take advantage of innovative financing programs for local governments that the U.S. Congress included among the many economic stimulus provisions of the American Recovery and Reinvestment Act of 2009 (ARRA). This Act provides for the issuance by local school districts of a new type of obligation bond, the "Qualified School Construction Bond" (QSCB). It is the intent of Congress that QSCB obligations will be issued with an interest rate at or near to zero. In exchange for foregoing interest, the holder of a QSCB obligation will receive a credit against federal income tax intended to provide tax benefits equivalent to the foregone interest payments. SC has been allotted one hundred and thirty one million dollars under ARRA. This legislation establishes criteria for allocating SC's QSCB issuance authority which provide for the allocation of 60% to school districts having the lowest capital financing resources, measured in terms of assessed value per pupil, not to exceed a maximum of $20 million per school district, and 40% to school districts having an ability to expeditiously issue bonds demonstrated through a high credit rating and timely start and completion of a project, not to exceed $10 million per school district.
CAPITAL PROJECT SALES AND USE TAX (PENNIES FOR PROGRESS). Under our current law in South Carolina, our 1% sales tax for local highway development will meet its designated target in the summer of 2010, and the continuation cannot go to the voters until the next General Election which will be in November of 2010. This will cause all of the retailers in York County to take the penny off their cash registers, and, if the voters approve the penny again, it cannot go back on until May of 2011. To avoid this break, a bill has been passed which will allow counties like York County to conduct a referendum for continuing the tax at some time other than the General Election so that if the voters approve, the tax can be continued without having to take the tax off. If the tax is continued, it will be for either two, four, six or eight years, and thus any future continuation can be considered in a General Election without causing there to be any break in the taxation. On the referendum, all of the road projects will still have to be listed in priority order.
SURFACE WATER PERMITTING ACT. Currently in South Carolina large withdrawal of surface water from rivers or lakes do not require permitting, unlike most states, including Georgia, that require permitting. The need for this legislation became apparent during recent droughts, and also due to disputes that we have had with Georgia and North Carolina over allocation of surface water between states. Last year I introduced a bill that would create permitting in this state, and although it did pass out of the Agriculture and Natural Resources Committee, it was never passed by the Senate. Therefore, I introduced another bill this year, and a similar bill is in a position to pass out of the Senate Agriculture and Natural Resources Committee when we return in January. The two opposing forces (industrial groups and environmental groups) have agreed on all issues except for the scientific calculation of “minimum flow”. This represents the amount of water that must remain in a given body of water at all times to insure what is known as a “safe yield”. Hopefully, we can get quick action next year on this legislation. North Carolina is also working on a version of water permitting in their state.
SC vs. NC: CATAWBA RIVER LAWSUIT. The Attorney General's Office continues to be aggressive in pursuing the ongoing lawsuit against North Carolina with the Federal Supreme Court. This lawsuit seeks to halt North Carolina's attempt to establish an Inter Basin Transfer of Water from the Catawba River to the Concord/Kannapolis area. This action has broad ranging implications as to the availability of water for South Carolina that flows over the state line from NC. I am grateful to Attorney General Henry McMaster for taking up this cause. Many municipalities and county governments have contributed large sums of money to this effort.
PAYDAY LENDING. The General Assembly passed legislation regulating "Deferred Presentment Transactions." Under the regulatory terms of this new legislation a borrower is limited to one loan at a time, which may not exceed $550.00, and a loan cannot be granted to a borrower who has repaid a previous loan on the same business day. The legislation limits how quickly a borrower can enter into a new loan by requiring a one-day "cooling off" period for each of a customer's eighth loan during a single year. The legislation requires a "Payday Lending" Provider to offer an extended payment plan, at no additional charge, to a borrower who is unable to repay a deferred presentment transaction when originally due. While engaged in an extended payment plan, a customer may not enter into another loan transaction. This Bill requires the creation of a database to track outstanding loans, and this "Database Provider" must be a single source contracted by the South Carolina Board of Financial Institutions. Also, utilizing database information, the State Board of Financial Institutions must make an annual report to the General Assembly on this Financial Industry.
CIGARETTE TAX. Early this year it appeared a cigarette tax was destined to pass the General Assembly, but when the details of the bill began to show, support of the bill began to wane. Speaker Harrell's bill raising the cigarette tax by fifty cents a pack passed quickly through the House and found its way to the Senate Finance Committee. Here the details of the bill met resistance. The Speaker's Bill called for a major portion of the proceeds to be given as a tax credit to low income citizens to use to purchase health insurance. The Senate Finance Committee disagreed. It voted to raise the tax by fifty cents, but agreed only to create a trust fund for the proceeds and put off spending decisions until next year. Presently, the bill is on the Senate Calendar but is stalled by a coalition of Senators who oppose any new taxes. I am confident that a cigarette tax increase will happen this Session, but how the tax dollars will be used is still to be determined.
TEXTILE REVITALIZATION ACT. In 2004 this Act was passed in order to provide incentives to investors to redevelop old deteriorating textile mill properties like "The Bleachery" and "Celanese." The incentives in this Bill make it reasonable to demolish and redevelop these vacant and deteriorating properties into revenue generating facilities. Examples of how this has worked successfully are "The Cotton Factory" at White Street and Dave Lyle Blvd. and the Old Plej's Factory on White Street. Changes were made to this law in 2006 that diminished its effectiveness. This year I introduced new corrective legislation that returns the law to its original intent. The Bill will not have time to pass this June, so I also added it as an amendment to another bill sponsored by Rep. Herb Kirsh. His Bill has passed the Senate with minor changes. A conference committee, which I chair, has been appointed and is in a position to work out the differences between the House and Senate versions of this bill when we return in January.
STATE PORTS AUTHORITY. The Ports at Charleston have been the finest on the Eastern Seaboard and have been one of South Carolina's principal industries. In recent years competition has been so aggressive that traffic through our ports has dropped precipitously. In order to stem this drain on South Carolina profits in this area, Sen. McConnell initiated legislation that would provide additional legislative oversight, and would restructure the method of governing, management, and planning structure of the State Ports Authority. The purpose of this is to enable our ports to be more competitive with others along the eastern seaboard.
TAXATION REALIGNMENT COMMISSION (TRAC). Our complex tax code is one factor causing the difficulties we are experiencing in revenue collection in the State. Sen. Leatherman was one of the first to propose a plan that will establish an independent research commission to conduct a comprehensive study of the state's tax system. "The TRAC Commission" will look at the effectiveness of the current tax system's structure, as well as the likely systemic impact of any proposed changes effecting tax revenues and investigate the assessment of state taxes currently levied. In addition, the commission will look at a large block of sales tax exemptions to examine which need to be retained, modified or repealed.
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