COLUMBIA, SC — When state lawmakers meet today to begin debating the state’s $22.7 billion budget, they once again will break their own rules.
SC law requires the state to give local governments 4.5 percent of the general fund revenues that the state collected the previous year. The idea is that local governments are administrative arms of the state and provide support to state agencies, therefore the state should help pay their budgets.
But the state is doing a poor job meeting that obligation.
Last year, a joint study by the University of South Carolina, and Clemson and Francis Marion universities found that local governments spent $624 million on state-mandated programs and services but received $494 million in state aid — a shortfall of $130 million.
By law, the state owes local governments $217.2 million during the fiscal year that begins July 1. But the House budget includes only $182 million for local governments. Lawmakers can do this because they passed a law suspending the law that requires them to pay local governments $217 million.
State Rep. Jim Merrill, R-Berkeley, chairman of the House budget subcommittee that oversees the local government fund, notes the state budget is based on a prediction — how much money state economists think lawmakers will collect in taxes next fiscal year. The local government fund is the only part of the budget that is based on money lawmakers already have spent. “It makes no freaking sense,” he said.
Merrill is also leading a special House subcommittee investigating the issue. That panel plans to introduce legislation later this year that fundamentally would change how the state pays for local governments. The committee still is discussing ideas, Merrill said, but ideas include tying the local government fund to certain economic indexes, like the Consumer Price Index.
Another idea, Merrill said, is to give local governments a percentage of state revenue based on an average of the past 10 years of government spending, not last year’s general fund spending. That way, the funding won’t be subject to a recession -- like 2009, when lawmakers had to make serious budget cuts -- or the windfall of a recovery -- like 2012, when lawmakers had more than $1 billion in new money to spend.
Most of the state’s local government fund, more than 80 percent, goes to counties. The rest goes to cities. The state money has a greater impact on smaller, rural counties because it comprises a larger percentage of their budgets.
“It’s hard for counties ... to plan what their costs are going to be if they can’t depend on us to pay what we say we are going to pay,” said state Rep. Harry Ott, a Democrat on the special local government subcommittee who represents rural Calhoun County. “I just think there should be a number in place they can use ... with their budgets knowing full well we are going to do our part, whatever our part is.”
Robert Croom, deputy general counsel for the SC Association of Counties, said counties do not want lawmakers to change the law. Instead, they want lawmakers to follow it -- giving counties 4.5 percent of the previous year’s revenue.
“In order to support services, we need that revenue,” he said. “I don’t particularly see the current formula as broken.”
Local government fund
Q. Why should local governments receive any state money? Don’t they levy their own taxes?
A. Yes, local governments levy their own taxes. But they also have to implement lots of state-mandated programs. A study by the University of South Carolina, Clemson and Francis Marion universities found that local governments spent $624 million on state-mandated programs last year but only received $494 million in state aid — a shortfall of $130 million.
Q. How much of the state’s revenue should local governments get in the 2013-14 fiscal year, according to state law?
Q. How much money have House lawmakers put in the budget for local governments in the 2013-14 fiscal year?
Q. How can they do that? Isn’t that against the law?
A. No. Lawmakers passed a law suspending the state law saying local governments must get more. Also, legislators don’t like the formula used for determining how much should be paid to local governments.
Q. What happens now?
A. A special House subcommittee is studying the issue and plans to introduce legislation later this year to fundamentally change how local governments are funded.
Reach Beam at (803) 386-7038.