Republican Gov. Nikki Haley has been meeting with some GOP House members — as recently as Tuesday at the Governor’s Mansion — in an effort to merge two competing road repair proposals.
Haley’s plan to fix S.C. roads and a proposal by state representatives had appeared to be on course for a head-on crash. But the two bills soon may become one vehicle, aimed at repairing and maintaining the state’s roads.
In meetings with House GOP caucus members, Haley has indicated a willingness to compromise on gas tax hikes, the size of a cut in the state’s income tax and how to restructure the state Transportation Department.
“She gets a lot of grief from time to time that it’s her way or the highway … but she has shown me a great willingness to work with the Legislature, which is something I haven’t seen in my 10 years in office (from a governor),” said state Rep. Nathan Ballentine, R-Richland, a Haley ally.
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For instance, Ballentine said Haley told GOP legislators that she would accept a slightly smaller income tax cut — to 5.5 percent — than the 2 percentage point cut to 5 percent that she originally proposed.
House Majority Leader Bruce Bannister, R-Greenville, said Haley has been discussing what a roads plan should look like with many House members before a proposal is sent to the state Senate.
“She is advocating for the strongest bill that she can get out of the House,” he said.
‘Are we going to be smart?’
While Haley is willing to work with House members on details, the governor told The State newspaper on Friday that the key points behind her tax-swap proposal must remain.
“What we’ve made very clear, from the very beginning, is: If we’re going to do this, there has to be three components,” Haley said.
Those components are:
• Cutting the state’s income tax rate
• Ensuring the cost to maintain S.C. roads, including fuel taxes, remains competitive for businesses
• Restructuring the Transportation Department, giving the governor more control over the agency
If taxpayers must pay higher gas taxes to repair the state’s roads, Haley says, there must be an offsetting tax cut, and she wants to see a “massive” decrease.
Haley originally called for swapping a 10-cent-a-gallon increase in the state’s gas tax, to be phased in over three years, for a 2 percentage point decrease to the state’s 7 percent income tax rate, to be phased in over 10 years. That proposal was introduced two weeks ago in the House by state Rep. Tommy Stringer, R-Greenville.
Critics say that plan would raid the state’s general fund – which pays for other state operations, including schools, health care and public safety – by $1.8 billion a year, starting in 2025. Meanwhile, they note, Haley’s proposals don’t come close to addressing the added amount needed to repair the state’s roads. The proposals would raisean added $400 million a year, far short of the added $1.5 billion a year needed, according to state roads officials.
Many have questioned whether an added $1.5 billion a year really is needed, since that figure includes the cost of building new roads. And Haley has said the general fund cuts would be offset by growth in the state’s revenues.
The real question, Haley said Friday: “Is South Carolina going to get bloated and grow into all of those revenues? Or are we going to be smart about it ... and give it back to the taxpayers so that they can invest it, and spend it the way they want?”
‘See if these two can get married’
Some House Republicans say they are willing to compromise with the governor.
“Certainly, we’ll work to see if these two can be married,” state Rep. Gary Simrill, R-York, who worked for months to develop the House’s road repair plan.
Simrill said he has met with Haley or her staff at least five times “all in an effort that we would coagulate around a plan and coordinate.”
“That has been my goal,” Simrill said. “That goal has not diminished.”
Haley does not want to include one part of Simrill’s plan – giving counties the option to take over roughly half of the state’s 41,000 miles in roads in return for more money from the state. “The more components you have (in a proposal), the more complex it gets, and the more likely it can get derailed,” she said.
In the past, Haley too has suggested counties take over more state roads. But now is not the time for that debate, she said, adding that the issue should be in a separate bill.
Simrill says local roads have to be addressed now.
The Transportation Department has indicated it will be focusing on repairing highly traveled roads in the future, he said. That means if counties don’t look after local roads, no one will. “That becomes problematic for folks that live on those state roads” that are less traveled, Simrill said.
Meanwhile, Haley has said she could get behind the road funding component in Simrill’s plan.
Simrill has proposed increasing the state’s gas tax revenues by dropping the current 16.75-cent-a-gallon gas tax to 10.75 cents, then applying a 6 percent excise tax at the wholesale level, a cost that would be passed on to taxpayers.
The new gas tax would be capped at the equivalent of 26.75 cents a gallon, the amount that Haley proposed.
That will put South Carolina’s gas tax in line with Georgia’s 26.5 cents per gallon and below North Carolina’s 37.75 cents per gallon, according to the American Petroleum Institute.
Bannister said Haley told GOP lawmakers she would veto the road funding proposal if the 26.75-cent-a-gallon cap were removed.
Haley also told lawmakers she would be willing to compromise on restructuring the state Transportation Department.
That agency currently has seven commissioners elected by legislators and one commissioner appointed by the governor. The governor also appoints the secretary of transportation with the advice and consent of the Senate.
Haley wants the Transportation Department to report directly to the governor.
“We have always wanted a cabinet style of government,” Haley said. “If you look at my agencies ... I’m working with one director, I’m not working with multiple people.”
Simrill’s House plan would create a board structure where the governor would appoint commissioners to a board, who would select a secretary – similar to the Department of Health and Environmental Control.
Haley said as long as she gets some restructuring and the system “won’t be just a free-for-all of commissioners having their pet (road) projects taken care of, then it’s something we’ll talk about.”
‘Hope for one bill’
In her discussions with GOP lawmakers, who control the House and hold a majority of the seats in the Senate, Haley made it clear they must pass a roads plan, said state Rep. Ralph Norman, R-York.
“It’s loud and clear that other industries she’s courting have laid out what has to be done with roads in order for them to come here, so there is a sense of urgency,” Norman said.
Haley and GOP House members want to reach agreement on a compromise because any proposal “will be Senate-ized,” Simrill said. “We definitely don’t know what it’s going to look like coming out of the Senate.”
Senate President Pro Tempore Hugh Leatherman, R-Florence, is among those who expressed concern about Haley’s proposed income tax cut, saying it would force huge cuts in state programs.
Other senators have concerns about changing the Transportation Department’s structure.
For example, state Sen. Larry Grooms, R-Berkeley, grilled Transportation Secretary Janet Oakley on the need to reform the Transportation Department at a recent Senate transportation meeting.
Haley also faces a divided House.
While GOP state Reps. Ballentine, Bannister and Norman all have signed on to Haley’s tax-swap plan, other Republican House leaders – including House Speaker Jay Lucas, R-Darlington, and state Rep. Brian White, R-Anderson, the House’s chief budget writer – are backing Simrill’s plan.
About 20 House members have signed on to both plans, including Freshman Caucus chairman Rep. Neal Collins, R-Pickens.
But, Collins said, with the House GOP Caucus actively working with the governor to try to reach a compromise, “There is hope for one bill.”