COLUMBIA, SC — The state Supreme Court could have the biggest say on the state’s budget, overshadowing lawmakers who return to Columbia on Tuesday for the start of the 2013 legislative session.
The court’s five justices are deliberating two major cases that could overhaul completely how the state pays for public education and how it collects state sales taxes – two of the largest pieces of the state’s annual $6 billion general fund budget.
In the sales tax case, the justices could rule that some – or all – of the state’s 78 sales tax exemptions are unconstitutional, instantly adding billions of dollars of revenue to the state’s budget. In the school funding case, the court could order the state to spend more money on public education.
In each case, the state’s top legislative leaders argue the court has no authority to tell lawmakers how to spend money.
“You could have a constitutional crisis. You could have a situation where the General Assembly just says (to the court), ‘That’s not your area,’ ” said House Speaker Bobby Harrell, R-Charleston. “I believe the General Assembly would protect its area, its branch of government and its authority where taxing and spending is concerned.”
While the legislative session starts Tuesday, work on the 2013-14 budget – which goes into effect begins July 1 – already has started. House budget subcommittees are holding public hearings on budget requests by state agencies.
However, the key to planning the budget is knowing how much money legislators have to spend and where they have to spend it.
The two pending Supreme Court decisions leave both questions in doubt.
“We are definitely concerned about it,” said state Rep. Brian White, R-Anderson, chairman of the House Ways and Means Committee that writes the House version of the budget. “It could be a game changer.”
Both cases center on education funding.
In the sales tax exemption case, Columbia attorney Matthew Bodman argues eliminating all of the sales tax exemptions would add $2.7 billion to the state’s budget – money that could be spent on education.
The education lawsuit, brought by some of the state’s poorest school districts, challenges how the state pays for public education.
“I don’t think the cases are isolated,” said Senate President Pro Tempore John Courson, R-Richland. “How those cases (are decided) will dramatically affect how we operate in the General Assembly this year.”
Last year, House Republican leaders tried to eliminate dozens of sales tax exemptions as part of a series of tax reform bills. The House passed the bill, but the Senate did not debate it.
“I don’t think there is any chance of the elimination of the sales tax exemptions,” said House Minority Leader Harry Ott, D-Calhoun. “I think even if they rule that way, there will be a large group of bipartisan support for putting many of those sales tax exemptions back in place.”
But Ott said any ruling on the school funding case could cause problems.
“Those of us who are supporters of public education would possibly take the side of the court,” he said. “It would be a much bigger fight if my Republican friends tried to ignore a ruling on public education.”
Harrell, the speaker of the House, said he is most concerned about the sales tax exemption lawsuit – particularly, the exemptions for manufacturers that are in place and being challenged.
“These major companies that have located here, who have the ability to go somewhere else, may very well do that,” he said. “I’m probably a little more worried about the sales tax exemption, because of what I think that could do to South Carolina’s economy, if they rule wrong on that.”
State Sen. Vincent Sheheen, D-Kershaw, said he is more disappointed than concerned about the pending court decisions.
Legislators have known of the issues for years – the school case is two decades old – and they have not acted to make the court cases moot, he said.
“Disappointment that the elected leadership of the state has not dealt with these major problems and these major issues,” he said. “Instead, they are coming up before courts, when clearly the appropriate place to deal with tax policy and education policy is elected bodies.”
Reach Beam at (803) 386-7038.