State budget

Court cases could overshadow return of SC Legislature

abeam@thestate.comJanuary 6, 2013 

  • On the agenda Some of the key issues that will be before the Legislature, when its 2013 session starts Tuesday: Education. The state now is not spending as much on K-12 public education as required by S.C. law, an issue minority party Democrats want to address. A lawsuit before the state Supreme Court also challenges the way the state pays for education, contending economically poor, rural school districts do not get enough money to provide students with a “minimally adequate” education. Some Republicans also may push for tax credits for parents who send their children to private school. If they do, the battle will be in the state Senate. Election reform. Legislators want to change the way that candidates file their statements of economic interest when declaring for elected office. Last year, more than 250 challengers statewide were tossed off ballots because they filed their paperwork improperly, according to confusing state laws. Meanwhile, incumbents got a pass on the requirement, creating the impression that the rules had been created to ward off challengers. Also, some legislators, including some Republicans, want to pass a law allowing early voting, before an election day, in the state. Ethics. Among the issues to be resolved: Who employs lawmakers? Now, they don’t have to say, making it impossible to determine if their votes are in the public interest or to benefit an employer or group with interests in how the state spends its money. Who is funding secretive groups that buy ads to oppose some candidates? Now, those groups don’t have to disclose their donors, making their agenda unknowable. Also, a federal court ruling removed all limits on contributions to some political groups, making a travesty of state-imposed limits on election finance Hacking. Hackers stole the financial information of millions of S.C. taxpayers from the state Revenue Department this fall. Attempting to plug that breach already has cost the state more than $20 million, including $12 million to buy credit monitoring coverage for taxpayers for one year. That cost could become a recurring line item in the state’s budget. Then, there is the cost of ensuring the state’s computer systems, including those at other agencies, are made less vulnerable to hackers. Health insurance. The cost of insuring public-sector workers – while on the job and in retirement – is rising. Who should pay for those increasing costs? Taxpayers? Or should workers pay a greater portion of the higher costs? A lawsuit before the state Supreme Court is challenging a state budget board decision to have workers pay more. Medicaid expansion. The federal health care reform law, set to go into full effect in 2014, would expand the joint federal-state insurance program for the poor and disabled, allowing more of the “working poor” to join. Democrats, hospitals and their allies favor the idea, saying it would ensure hundreds of thousands of South Carolinians have health coverage and be an economic boon. However, many Republicans, including Gov. Nikki Haley, oppose expansion, saying the state could not afford its future share of the cost. Restructuring. Gov. Haley will continue to press for creation of a state Department of Administration, giving the state’s chief executive control over more areas of the state’s bureaucracy. Roads. One group wants the state to raise its gas tax to pay to repair the state’s crumbling roads and bridges, contending billions must be spent on the state’s infrastructure if it is to remain economically competitive. But tax hikes are non-starters with many Republicans, who control the S.C. House and Senate, and GOP Gov. Haley. Haley proposes using more of the revenue the state gets from the improving economy on roads. Critics say the amounts that Haley proposes to spend aren’t nearly enough to do the work that needs to be done. Tax reform. Calls for comprehensive tax reform – to fix inequities in the state’s taxes – are made annually and, almost as often, the issue is studied. But it’s a difficult task since special interests will fight to protect their tax breaks. Legislators could play “small ball” instead, cutting taxes on manufacturers, flattening the income tax or eliminating some sales-tax exemptions. A lawsuit challenging those exemptions as unconstitutional is before the state high court.
  • More information Staff Reports

— 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.

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