Richland, other SC counties frustrated, challenged by dwindling state aid

Midlands counties and others around the state are increasingly frustrated with the S.C. Legislature after years of funding cuts and rising mandated costs.

As the state’s counties begin budget discussions in coming weeks, Richland County will have a greater than usual challenge in crafting its roughly $155 million budget for the upcoming fiscal year, having maxed out what council members consider allowable withdrawals from its savings to help balance dwindling state aid.

“It’s a challenge that we face and I’m sure that every county in the state faces,” Richland County Administrator Tony McDonald said. “You’ve got increased demands, costs that continue to go up, many of which you have no control over. And at the same time, your revenue sources are shrinking. ... Many, if not all, counties in the state are beginning to say to the state we really need help with the local government fund because it’s starting to negatively affect what we’re able to do.”

Statewide, counties are receiving $62.4 million less this year from the local government fund than state law requires. Local governments will get an idea this week of how much money they will get in the state budget for the new fiscal year that starts July 1, as S.C. House budget writers meet to start writing a first draft of that budget.

The money allocated by the state to the local government fund is supposed to be 4.5 percent of the previous year’s general fund revenues. The fund is then distributed to counties and municipalities on a proportional basis.

But the General Assembly has not fully funded the local government fund since 2008, before the brunt of the recession hit the state. Since then, the state has suspended the formula for local government fund allocations, shorting counties and municipalities millions of promised dollars.

While property taxes are the county’s largest source of revenue, the state-provided local government fund accounts for more than 9 percent of the money that funds Richland County’s operations. On top of that, counties face a state-imposed cap on how much they can raise property taxes.

For the current year that ends June 30, Richland County should have received $19.7 million from the state-provided fund, which is intended to help offset the property tax burden of state services and functions – including courts, an elections office and veterans’ affairs – provided at the county level. The cost of those state-mandated services amounts to $41 million for Richland County this year, while the local government fund only provides the county $14.5 million.

Over seven years, Richland County has received $23.2 million less in allocations from the fund than required under the lawful formula.

Since the recession, Richland County hasn’t been able to raise taxes enough to cover the shortfall from the local government fund, and the county has had to dip out millions from its reserves each year. Last year, the county withdrew about $2.9 million from its reserves. But now, with $28.8 million remaining in the reserve fund, the county has reached its self-imposed limit on how much it can withdraw and will have to explore other options to close the funding gap, which could mean cutting services.

“We are bleeding money to the state, and they’re not giving us anything in return,” County Council Vice Chairman Greg Pearce said. “Right now, they are choking counties to the point where we are just not going to be able to pay for basic services.

“If you’re looking at the whole Legislature and counties, there is definitely a disconnect there. ... I think you’re just seeing the beginning of the, I don’t want to call it a rebellion, but the counties are mad as heck, and they just don’t want to take it anymore.”

The lack of state aid has caused some counties to sacrifice needed services already.

Lexington County, for example, was shorted $15.4 million in state aid during the past seven years.

With revenue growth from other sources unable to overcome the lack, the county has been unable to add deputies, firefighters and paramedics needed to answer emergency calls quicker and keep pace with an expanding population, officials say

“Our hands are tied,” County Council Chairman Johnny Jeffcoat of Irmo said. “If we had the aid taken away, we’d be able to do some of the things we need to do.”

Some county leaders wanted state-imposed restrictions on local tax hikes relaxed if more aid can’t be provided.

Easing the tax cap is unlikely, some legislators say.

Lexington County is “caught in the crossfire,” said Sen. Ronnie Cromer, D-Newberry. “But I don’t know how we can undo it.”

Meanwhile, Kershaw County lost $2.9 million in the same seven years.

That has led to the denial of requests for more deputies and jail guards as well as no paving of dirt roads, County Administrator Vic Carpenter said.

At least two bills concerning the local government fund have been introduced in the state House of Representatives.

One, co-sponsored by House Budget Committee Chairman Brian White, would delete the current formula for funding the local government fund and require its funding to increase by 2 percent only if state revenues are projected to increase by at least 4 percent. The other, whose sponsors include Richland Democrat Todd Rutherford, would incrementally restore the local government fund to its full level of funding over three years.

“We (Democrats) recognize the inequality and the strain it puts on local governments when we don’t support our local governments,” Rutherford said.

State Rep. Nathan Ballentine, R-Richland, said that, just like taxpaying families, governments have to make tough decisions when the budget gets tight. That goes for state government, too, which he noted is straining to address roads and education needs of its own.

Richland’s McDonald didn’t want to cause alarm by saying that service cuts were a sure thing for the county in the coming year, but they are a possibility. “Nothing is off the table,” he said.

“What are we going to do?” Pearce said, adding, jokingly, “We could start printing our own money. That’s the only thing I could think of.”

Staff writer Tim Flach contributed. Reach Ellis at (803) 771-8307.