An extra $1.4 billion in state spending money for teacher and state worker pay raises, special education programs and Medicaid expansion could be delayed because lawmakers are deadlocked on a proposed $64 million tax cut.
With neither S.C. House nor state Senate budget negotiators giving ground Tuesday, House lawmakers began preparing to keep state government running should budget negotiations fail by July 1, when the state starts its new fiscal year.
House lawmakers introduced a continuing resolution that, if passed, would keep state government running at its current spending level. That means the state could not spend any of the $1.4 billion in new money in the state budget this year, thanks to the recovering economy money for raises and partially to restore the budgets of state agencies, cut by hundreds of millions during the Great Recession.
For several years, Ive heard (a continuing resolution) suggested. Ive never actually seen one seriously introduced, House Speaker Bobby Harrell, R-Charleston, said Tuesday. But this one is definitely seriously introduced.
House and Senate lawmakers cannot agree on a tax cut for small businesses. The House wants to reduce the income tax rate for small businesses including LLCs, or limited-liability corporations to 3 percent from 5 percent.
To do this, House lawmakers need a permanent law change, something senators do not want to do via the state budget because it bypasses the normal legislative vetting process. That practice called bobtailing also has been found to be illegal in the past.
But so far, House and Senate budget negotiators have refused to budge. And Tuesdays continuing resolution indicates members of the Republican-controlled House are willing to delay the new budget as long as it takes to get what they want.
I am very frustrated by it, Harrell said. The House is asking for a modest tax cut in a year when we have $1.3 billion of new revenue coming in. Its not too much to ask.
State Sen. John Land, D-Clarendon, a member of the joint House-Senate budget conference committee, said he opposes the proposed tax cut as weighted to the rich. Specifically, Land says it is unfair to most taxpayers who pay a 7 percent state tax rate and corporations that pay a 5 percent tax rate.
Every dollar that comes out of the (budget) is money that you cant spend on education, that you cant spend on health care, that you cant spend on law enforcement. So thats why I oppose the tax cut in general, Land said.
Land, who is retiring from the GOP-majority Senate after 28 years in the Legislature, said every year lawmakers have talked about delaying the budget because of a deadlock.
But, he added, Weve always passed a budget. And my prediction is we will pass a budget this year.
Even if lawmakers can agree on the small business tax cut proposal, they still have several other issues to resolve, including how to pay for the $300 million Charleston port-dredging project. Both the House and the Senate have agreed to set aside $180 million for the project. The federal government is supposed to pay the remaining $120 million cost.
But with the federal government facing its own budget crisis, state lawmakers want a backup plan.
Senators wanted to borrow the $120 million balance, but the House refused. Instead, the House proposed setting aside $120 million of the $1.4 billion in new money, money the Senate budgeted for other purposes. If it turns out the state does not need that money for the dredging project, the House then would spend that $120 million on other things, including special education.
The Senates chief budget writer called that idea crazy Tuesday.
What kind of crazy idea is that? state Sen. Hugh Leatherman, R-Florence, asked his fellow senators. Well be really firm on that.
If we cant get that out, I may not bring you a (budget) back.
Reach Beam at (803) 386-7038.