SUMMER NEWSLETTER
2010 LEGISLATIVE REVIEW
Senator Wes Hayes            District #15

The second regular session of the 118th General Assembly ended June 3, and, despite a grim economic outlook for 2010, I am pleased with our accomplishments this year. We successfully, among many other things, established permitting requirements for the withdrawal of large quantities of surface water, reformed the Employment Security Commission, increased the State’s cigarette tax, clarified the Textile Revitalization Act, and closed a loophole in the 2009 payday lending legislation. This Newsletter summarizes some key legislation that was pending in the General Assembly during the 2010 legislative session.

THE BUDGET. With the amount of General Funds available for appropriation down for the fourth consecutive year, the FY2010-11 General Fund budget proved to be one of the most difficult to write. Peak collections were $6.7 billion in FY2006-07 but are expected to drop to approximately $5 billion for FY2010-11, which is the same level of funding available to the State in 2000. The General Fund appropriation base for FY2010-11 is approximately $5 billion after accounting for roughly $52 million in gubernatorial vetoes that were sustained by the House and Senate. Although the overall General Fund budget is down 25% over the last three years, the cuts, thus far, have been targeted instead of being applied equally across the board. For example, recurring cuts to the State’s colleges and universities have averaged 45%, which returns funding for Higher Education back to 1985 levels. While cuts to K-12 public education have not been as severe, these cuts are not without consequences, particularly when considering the gap between mandated and actual levels of funding. According to the Education Finance Act funding formula, the funding for FY2010-11 should be approximately $2.5 billion, but the actual funding available is only $1.5 billion. Fortunately, some of the cuts to public and Higher Education have been offset by the second and final round of federal stimulus funds, which total an estimated $750 million for FY2010-11. Other State agencies also have seen drastic budget cuts, including DNR and DHEC. Fee increases that had originally been proposed to help offset some of these agency cuts were in most cases rejected by the General Assembly. Thus, next year is almost certain to be a challenge as the citizenry’s demand for basic governmental services clashes with a lack of funds and resources to provide these services.

CIGARETTE TAX. Overriding Governor Sanford’s veto, the House and Senate successfully passed legislation this year to increase the State’s cigarette tax by 50 cents per pack, effective July 1, 2010. This increase from 7 cents per pack to 57 cents per pack was the first increase in South Carolina’s cigarette tax in 33 years, and South Carolina became the fifth state to approve an increase in cigarette taxes this year. At 57 cents per pack, South Carolina’s cigarette tax still remains much lower than the average state cigarette tax of $1.41 per pack. The tax increase is expected to generate an additional $135 million dollars annually for South Carolina. Five million dollars of the additional revenue annually was allocated to the Medical University of South Carolina Hollings Cancer Center to be used for tobacco-related cancer research. Additionally, five million dollars annually was allocated to the Smoking Prevention and Cessation Trust Fund, which was created to administer a statewide smoking prevention and cessation program. The remainder of the additional revenue was allocated to the South Carolina Medicaid Reserve Fund and only may be used for restoration and maintenance of the Medicaid program at the time the act becomes effective. These funds cannot be used to expand any component of the existing Medicaid program.

TEXTILE REVITALIZATION ACT. The General Assembly passed corrective legislation this year that I sponsored to clarify the Textile Revitalization Act of 2004. This Act provides tax incentives for investors to redevelop old, deteriorating textile mill properties, such as the “Bleachery” and the “Celanese,” into revenue generating facilities. However, several ambiguities in the Act, subsequent amendments in 2006 and conflicting interpretations from the South Carolina Department of Revenue diminished the effectiveness of the Act and forced many developers to put these projects on hold. I recently was made aware of at least ten pending textile revitalization projects in South Carolina, including the $65 million Woodside Mill project in West Greenville, that were idle or placed on hold until the uncertainties with the Act were resolved. This corrective legislation restores the original intent of the Act and clarifies the conditions for claiming a credit against income, property or insurance premium taxes. I am hopeful that it will stimulate the development of other abandoned textile mill sites in South Carolina.

SURFACE WATER PERMITTING ACT. The General Assembly passed legislation this session that requires anyone withdrawing monthly more than three million gallons of South Carolina’s surface water to first obtain a permit from DHEC. The need for this legislation became apparent during recent droughts and South Carolina’s disputes with Georgia and North Carolina over the allocation of surface water flowing between the states. I introduced similar legislation in 2008 and 2009, but those Bills stalled in the Senate. This legislation utilizes the 20/30/40 approach to setting instream flow levels. This approach, developed by the Department of Natural Resources (DNR), requires that a minimum of 20%, 30%, or 40% of the mean annual daily flow of a stream must remain in the stream to support fish health and recreation. DHEC will determine the minimum instream flow requirement at the point of the proposed withdrawal, as opposed to establishing a single flow requirement for an entire body of water. The penalty for violating the Act is $10,000 for each day that a violation occurs.

SC vs. NC: CATAWBA RIVER LAWSUIT. 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 North Carolina. The substantive issue relating to the allocation of the Catawba River’s water was assigned by the United States Supreme Court in 2007 to a Special Master. Subsequently, the City of Charlotte, the Catawba River Water Supply Project and Duke Energy Carolinas LLC filed motions to intervene as defendants in the lawsuit. The Special Master granted all three motions, and South Carolina appealed the Special Master’s rulings to the Court. The Court heard oral arguments last October solely on the issue of whether the interventions were permissible. The Court issued its Opinion on that issue in January and held that the Catawba Project and Duke could intervene but denied the City of Charlotte’s request, because the Court found that the City of Charlotte’s interests were adequately represented by the State of North Carolina. Discussions remain ongoing among the parties to resolve this matter.

PAYDAY LENDING - LOOPHOLE CLOSED. In 2009, the General Assembly passed legislation regulating “deferred presentment transactions,” better known as payday lending. Under that legislation, borrowers are limited to one outstanding loan not exceeding $550, and loans cannot be granted to a borrower who has repaid a previous loan on the same business day. Additionally, that legislation established a database to track payday lending transactions. In an effort to avoid these requirements, some payday lenders registered as lenders of “supervised loans,” as opposed to deferred presentment transactions, because supervised loans were not impacted by the 2009 legislation. To close this loophole, I sponsored a Bill, which was later attached as an amendment to a House Bill, that amended the definition of “supervised loan” to exclude payday lending transactions. Governor Sanford vetoed this Bill, but the veto was overridden by the House and Senate. Therefore, payday lenders now will not be able to register as lenders of supervised loans to avoid the payday lending restrictions imposed by the 2009 legislation.

EMPLOYMENT SECURITY COMMISSION REFORM. In March, Governor Sanford signed into law legislation sponsored by Senator Greg Ryberg that reformed the South Carolina Employment Security Commission (ESC). This legislation established the Department of Employment and Workforce and authorizes the governor to appoint or remove the Director of this new Cabinet-level Department. The law also terminated the ESC Commissioners, established new elections for appellate panel members and restricted payouts for employees fired for gross misconduct. Governor Sanford selected John Finan, a retired Brigadier General from the Air Force who previously served as a Chief Financial Officer for the Air Force and budget director for the Air Force Academy, to serve as the Interim Director of the Department of Employment and Workforce.

CLINICAL TRIALS FOR CANCER PATIENTS. Last year, I introduced legislation that would require health insurance plans, including the State Health Plan, to provide coverage for an insured who is referred for participation in an approved clinical trial for cancer treatment. This Bill passed the Senate and was pending in the House when a voluntary agreement was reached between the South Carolina Cancer Alliance and the South Carolina Alliance of Health Plans that ensured coverage for routine patient care costs for patients enrolled in phases II-IV cancer clinical trials. This coverage begins July 1. Currently, 33 states and the District of Columbia have this coverage through legislative mandate or voluntary agreements between insurers and providers.

CARD CHECK CONSTITUTIONAL AMENDMENT. A Joint Resolution sponsored by Rep. Bedingfield proposing a referendum to amend the State Constitution to expressly require secret ballot voting for unionization elections easily passed the General Assembly this year. A question will appear on the ballots for the general election in November asking voters whether the State Constitution should be amended to provide that an individual has a fundamental right to vote by secret ballot to designate, select or authorize employee representation by a labor organization. If a majority of the voters answer the question affirmatively, then the State Constitution would be amended accordingly. Such amendment potentially would nullify the federal Employee Free Choice Act (EFCA) if it is ever enacted by Congress. The EFCA proposes to allow labor unions to be certified by the National Labor Relations Board if a majority of workers sign cards designating such union as their bargaining representative. Under the EFCA, union elections would no longer be required. This constitutional amendment is important, because it potentially would invalidate any federal attempt to allow labor organizers to make unionization possible without a secret ballot vote. A secret ballot vote insures that employees can make their choices in absolute privacy and be insulated from intimidation and retaliation.

VOTER ID/EARLY VOTING. Last year, Speaker Harrell introduced a Bill that would have required voters to present photo identification before being allowed to cast a ballot in an election. An amended version of the Bill also would have established an early voting period that would have allowed voters to cast a ballot without excuse within a limited number of days before an election. I supported this Bill, but, unfortunately, the House and Senate were unable to agree on a final version before Session ended.

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