State senators are looking for an extra $28 million to give state workers a 4 percent pay raise, but they might have to raise taxes on businesses to do it.
House lawmakers already have approved a 2 percent raise for state workers by adding an extra $28 million to their version of the state budget that takes effect July 1. The House also agreed to spend $77 million to help businesses pay state unemployment taxes, mostly stemming from a $1 billion federal loan the state Department of Employment and Workforce took during the Great Recession to remain solvent.
But Tuesday, Maj. Gen. Abraham J. Turner, who directs the state employment agency that collects those taxes, said his agency will pay back that $1 billion loan to the federal government in 2015, regardless of what lawmakers do in their budget. That prompted some senators to question the need for spending that extra $77 million.
“I am really looking at it,” said state Sen. Hugh Leatherman, R-Florence, chairman of the Senate Finance Committee. “I’m always looking at the budget to see where there is opportunity.”
But eliminating, or reducing, that $77 million would mean businesses — which already face higher unemployment taxes — would have to pay even higher jobless taxes, which go to pay unemployment benefits.
Business advocates argue the state employment agency, which administers those benefits, improperly paid out more than $86 million in benefits last year in addition to $50 million in benefits it paid to workers who had been fired for misconduct.
The S.C. Chamber of Commerce argues lawmakers are asking businesses to pay $136 million to make up for those mistakes. “$136 million paid out for misconduct and for fraud, and our employers are the only ones left holding the bag paying for it,” said Darrell Scott, a chamber vice president. “The business community feels we’ve got good bipartisan support for (business) tax relief.”
But state workers have not had a pay increase since 2007. Meanwhile, average hourly wages for private-sector workers in South Carolina have increased 9.7 percent since 2007, according to the state Department of Commerce.
“That’s not fair,” said state Sen. Darrell Jackson, D-Richland.
Critics of higher pay for state employees respond that those workers do have a pension plan, which they and taxpayers contribute to, while many private-sector workers do not.
“(The pension plan) should count for something; that’s why I’m not advocating for a 9 percent (raise). That’s why we are advocating 4 percent,” Jackson said. “We gave (state employees) our word when we were giving them zeros, we said to them, ‘We have no choice. We have to do this. We’re in dire straits. When things change, we will do right.’
“(State workers) have a right to expect that.”
Lawmakers do have more than $1 billion in extra money they can spend this year, thanks to higher-than-expected tax collections. But that money is going fast.
Wednesday, for example, Leatherman — the Senate’s chief budget writer — cut a deal with state Sen. Kevin Bryant, R-Anderson, one of the Senate’s most outspoken fiscal hawks, to pay $120 million toward the state’s $1.9 billion in outstanding debt.
In return, Bryant agreed to stop blocking a bill that would allow the state to borrow up to $120 million to deepen the Charleston port, a project many say is key to the success of the state’s economy.
It will cost $300 million to deepen the Charleston port so it can begin accepting larger ships that soon will be passing through the expanded Panama Canal. House lawmakers set aside $180 million for the project, all the state is required to pay. The federal government is supposed to pay the other $120 million. However, Leatherman is worried the federal government might back out of the deal. As a result, he wants the state to be able to borrow $120 million, just in case.
If lawmakers are going to pay back $120 million in debt so they can borrow another $120 million, why don’t they just give $120 million directly to the port project? Because, Leatherman said, the actual port construction project is years away. But the ports customers need to know the state is committed to expansion.
“This will give them confidence the port will be deepened.”
Reach Beam at (803) 386-7038.