Slower growing SC counties, cities could lose state money

Some of South Carolina’s slowest-growing counties and cities could lose money from the state.

That money, local officials say, helps pay for services and state functions, avoiding higher taxes and fees on local residents.

But the money that slow-growing communities get from the state could drop after the 2020 Census, Frank Rainwater, executive director of the state’s Revenue and Fiscal Affairs Office, told S.C. state representatives Wednesday.

Rainwater said projected population growth likely will cause a “major reallocation” of the money that the state gives local governments – about $222 million a year.

“Faster-growing counties are going to take more from the pot than the slower-growing counties. Same with municipalities,” he said.

The state’s local government fund, created by a 1991 law, makes up a significant portion of the budget of many counties and cities.

That 1991 law also has been the source of near-constant friction between state legislators and local officials. The law calls for local governments to get 4.5 percent of the state’s general fund budget. However, it has been chronically underfunded, with local governments now getting only about 3 percent.

Rainwater said the original formula worked when the economy was doing well.

Under the 4.5 percent formula, counties should receive $58 a person from the state. Now, they are getting about $40. The amount that counties get ranges from $405,000 to almost $18 million.

Municipalities should be getting $33 a person but are receiving about $20. Various cities get from $1,000 to almost $3 million from the state annually.

Without the state money, almost 60 S.C. cities, which do not collect property taxes or have a sustainable tax base, could not pay for services, said Melissa Carter of the state Municipal Association.

Recent natural disasters, including Hurricane Irma, and the growing opioid crisis also are putting an even greater strain on local budgets, she said.

However, some legislators questioned how local governments are spending taxpayer money.

“Help me understand how you (Carter) can make your argument of poverty, when there are specific cities dumping tens, if not hundreds of millions of dollars into special-purpose projects,” state Rep. Kirkman Finlay, R-Richland said, alluding to the spending by the City of Columbia.

Carter said some larger communities do have more money. But, she added, “In the smaller communities ... sometimes, (state money) it’s lifeblood.”

Representatives of local governments told legislators they were willing to give up on the ignored 1991 funding formula.

Tom Winslow, with the S.C. Association of Counties, said instead the state could increase the amount it gives local governments each year by the same amount as the state’s general fund budget increases, up to 5 percent.

But, Winslow added, “I don’t think that’s where they (the Legislature) want to go.”

This story was originally published October 11, 2017 at 8:56 AM with the headline "Slower growing SC counties, cities could lose state money."