Mr. Speaker, Mr. President, Ladies and Gentlemen of the General Assembly,Constitutional Officers and my fellow South Carolinians:
It’s an honor to be with you tonight to deliver my view on the state of our state, but asI’ve done in the past, I’d first ask that we pay tribute to the South Carolinians who diedfighting in the Middle East and Afghanistan over the last year. Their deaths are areminder to everyone of us of how short and fragile life can be – and beg of us the largerquestion of what are we doing to both honor their sacrifice, and to live the gift of lifeeach of us has been granted.
Their service is also a reminder to all of us, particularly in these trying economic times,of how important it is that we look for ways to serve others – whether in the local church,the area soup kitchen, the food bank, or through national organizations like the Red Crossor Salvation Army. Many families across our state and nation are indeed hurting in theseeconomic times, so there is a lot of need out there – and every one of us can follow thesesoldiers’ examples in looking for ways to serve.
Finally, the fact that each of them died in service to their country is again a reminder thatfreedom isn’t free. This year’s list of heroes is as follows:
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SGT Shawn HillSGT David LeimbachMSG Danny MaybinSSG Matthew TaylorSSG Ronald Phillips, Jr.Captain Richard Cliff, Jr.
While I’m at it I want to thank a few other people as well:
First, I’d like to recognize a state worker who is representative of so many who do theirwork without recognition. I’m a frequent critic of South Carolina government’s growthand structure, but Al James – a park ranger for Parks, Recreation and Tourism – is anexample of many who go beyond the call of duty in their work. In his case, this pastsummer he rescued kayakers on the Catawba River and he put himself in harm’s way todo so. Al, please stand up and be recognized.
We’ve also been joined tonight by Carter and McCaleb White. They’re both remindersof the ways in which every one of us can make a difference in South Carolina if we sochoose. We don’t have to wait for a government program – we can just do it – as theydid. Tragically both of their grandfathers were diagnosed with cancer and as these boysvisited the hospital and watched the monotony that came with hours of chemotherapy –they decided to do something about it. They put together a gift drive and collectedeverything from DVD players to stress balls and puzzles to help those afflicted withcancer in the waits for, during and after treatment. Hundreds of patients have now beenhelped, and so please give these young hometown heroes a round of applause for boththeir initiative and the difference they’re making in others’ lives.
Given the economic times that we live in, I’d also like to single out one of the FirstLady’s many efforts. When we got here the Lace House sat empty and the Waring Housewas kept open and used by the Governor for only a few weeks out of the year. Jenny andher team ended this practice of allowing these properties to sit and raised private moneyto renovate the Lace House and then began a rental program. These efforts wereduplicated at the Waring House and now both properties are rented and hundreds ofthousands of dollars have been generated to go to their maintenance rather than have allthese costs borne by the taxpayer.
I tell that story because I think it’s an illustration of how every one of us tied togovernment can follow the lead of working South Carolinians in being creative in findingways to do more with less. Whether in Dillon or Grey Court or Yemassee, doing morewith less is what families across our state are indeed doing everyday – and those of uswho work in government should find ways to honor these daily decisions being made bythe people who pay for government.
With all that being said – the state of our state is that we have both enormous challengesand opportunities before us. They will necessitate us doing what was suggested in arecent email that came my way that said simply, “We have to be doing things we shouldhave been doing a long time ago.” My question to every one of you is indeed can wemake this the year that we make the changes that we should have begun long ago. Wecan’t do anything about the “long ago,” but we can do something about bringing changethis year.
In Washington it was that spirit that in part gave us a new administration. We all saw acampaign based on the concepts of change and the resounding theme of “yes, we can.”As an American I would wish the new administration success in deliberately workingthrough many of the challenges facing this country, but as a South Carolinian I wouldsimply ask that we take up the same mantle of “yes, yes we can” in overcoming so manyof our state’s challenges.
Can we commit to the notion of “yes, we can” on just a couple of things this year key tobettering the lives of so many here in South Carolina? Because after all it was thisthinking of “yes, we can” that led to the shattering of a glass ceiling that has hung overour nation for the last 200 years. Given this example alone, can we break the glass ceilingof an outdated governmental structure that has hurt the people of our state for more than100 years?
I think that with the right approach there can be opportunity in the economic crisis beforeour state and country. We face economic conditions in our country, and by extension ourstate, the likes of which we have not seen since the 1930’s. As most of you know, I have believed for a very long time that this day would come, and as a consequence I havefought with many in your leadership on spending.
I didn’t have a crystal ball on economic trends; I simply heard from a lot of SouthCarolinians on common sense principles that they believed ought to apply to government.Trees don’t grow to the sky, winter follows summer and accordingly cattlemen fromPickens to Saluda put hay in the barn to be ready for winter’s arrival. Even the Bibletalks about the Pharaoh’s dream and seven fat cows coming out of the Nile followed byseven skinny cows – so the notion of ups and downs, and of business and economiccycles, represent thinking that has been around for a very long time. Unfortunately as anation, and as a state government, this idea has been forgotten by too many for too long.Debt has grown three times faster than the national economy over the last fifteen years.Its dangers are something I described in detail at this very State of the State four yearsago, yet this proliferation of debt has occurred in government, in business and withinhouseholds across the country. The unsustainable march we were on has now come to anend, and so the bottom line is that as a nation, and again by extension as a state, we willface a tremendous deleveraging. There is no way to avoid this reality.
Other than possibly doing very harmful things to every dollar held by South Caroliniansacross this state, and most certainly leaving a frightening invisible federal mortgage toevery taxpayer – the bailouts in the end will not change this and will do nothing to betterour economy over the long run. I think as policymakers it’s exceedingly important thatwe really comprehend that, because what’s happening in the national economy isobviously going to very much impact us here in South Carolina.
In a typical recession caused by an excess in production or inventory, the tact that federalpolicymakers are taking with stimulus can work because the objective is to simply get theconsumer buying again. We face something very different today after a 20 year run-up inspending and debt. This is a balance sheet-driven slowdown, and in these cases whenpeople or businesses get stimulus monies they don’t rush out to spend it – they work quitelogically to get their balance sheets right. That’s why the stimulus checks of last springfrom the federal government were not spent and instead devoted to paying down debt.It’s also why a lot of the financial institutions have not turned around and lent money as itwas received but have instead worked to better the balance sheets that they know havemany more non-performing loans still to come.
Where does all this leave us? With the simple truth that anybody who says that thiseconomic slowdown will be short-lived I don’t believe is telling the truth. I also believethat anyone who suggests that it won’t get a whole lot worse before it gets better hasmissed how high the forest of debt and spending has indeed grown over these 20 years.The differences between my views and the views of many in this room on mattersinvolving budgets and spending have been widely documented and are well known. Theyneed not be reviewed here tonight, and there is no satisfaction in vindication on budgetmatters when the people of our state are suffering under the difficult economic times welong believed would come. Though people will be hurt, there’s nothing we can now doabout what didn’t happen in the way of fiscal restraint in Columbia, and so we must lookforward. Our differences are in the past, and from my perspective, bygones are bygones– and all that matters is what we do from this day forward.
We’ve talked for six years about bringing change to Columbia in the way that decisionsare made and in the outcomes that impact the lives of so many in our state – and thereforecan change begin today? It is my hope that these jolting economic times force us tomove South Carolina state government into the twenty-first century – and if they indeedforce the change long overdue – they will prove to be a blessing many years down theroad.
In some ways change has already begun because in last year’s campaign, the winds ofchange swept across our country. Those winds will soon be felt in Washington, but SouthCarolina was not bypassed, because in this Capitol tonight, I am pleased by all the newfaces I see. Eighteen percent of the House and 20 percent of the members of the Senateare new this year – nearly 1/5 in each body. My message to all the newly-electedmembers of the General Assembly, whether you’re Republican or Democrat, is simplythis: stay true to what you said when you were talking directly to the folks back home.Your obligation is not to me, or to your leadership, or to your political party – it is to thepeople who sent you here and to the ideas and principles that propelled your candidacy.You were sent here to make a difference and to fight for what you ran on as you stoodbefore the people of your district – and in this light I look forward to working with all ofyou on achieving your goals.
It was in this spirit that this administration and the General Assembly have been able tocome together over the years as we cut the top marginal income tax rate for the first timein state history and passed the state’s largest ever recurring tax cut. We came together aswe passed comprehensive tort reform and workers’ compensation reform, and thosechanges are in part evident in the more than $4 billion in capital investment brought toour state last year, and the 132,000 more people working than in 2003 – which ranks 16thin the nation in employment growth in this time frame.
We’ve also taken steps toward improving government structure with the Department ofMotor Vehicles and the Department of Transportation. I want to particularly thank eachmember for your work last year in passing DUI reform, immigration reform, and thesmall business health care bill. We had other successes that ranged from the Jasper Portbill, that will ultimately bring to fruition hopes and dreams for better economicopportunity to finally ending the so-called Competitive Grants program. As a result ofDUI reform the quality of life for people in our state will be made better. There is morethat can be done on this and many other fronts, but it’s a reminder to all of us that wherethere is a will there is always a way, and I’m here to humbly ask for your will and workon just five areas this year.
First, given the economic times in which we live, and given the global competition thatwe’re in for jobs, capital and way of life, we need to do things each year to make ourbusiness climate more competitive.
At the top of the list on this front is the tax reform proposal that we rolled out last month.It was premised on not waiting on Washington, D.C., for an economic stimulus packageor a bailout, and instead focusing on the things that we can do here in South Carolina togrow our economy - and the opportunities that will come with it.
People are hurting in our state, and they rightly expect action to be taken. But whatshould we do? We can sit around and wait for the next bailout from Washington thatpiles ever more debt on our children and forces South Carolina taxpayers to pay forwasteful state government spending in California and New York. That, as you know, isnot what I think we should be doing to better our economy.
Instead, we’ve proposed doing what anyone should do during financially hard times,namely, be very careful on the spending side, and try to improve our state’s economicclimate on the tax side. Lasting jobs and economic growth will never come from agovernment bailout. They will come from a tax and regulatory structure that rewardshard work, savings and enterprise – and in this vein we ought to be as competitive aspossible in the global arena in attracting capital for the way that investment ultimatelyraises productivity and, in turn, people’s wages and standard of living.
This tax proposal is also premised on the belief that government shouldn’t be picking thewinners and losers in the business marketplace and, therefore, government should treatbusinesses the same.
Too often government will hand incentives to the new business in town, but offer no helpto the business producing the exact same product while that business has been payingtaxes for years here in the state. Too often if you’re a big business you get the red carpetrolled out in incentives, but if you’re a little business you get nothing.
This was the case in the special legislation that offered $9 million for Cabela’s to come toSouth Carolina. I’m a hunter and would love for them to expand in our state, I just don’tbelieve that little businesses who have been here for years selling the same kinds ofthings should be forced to subsidize them coming here. As much as that legislationwould add one store, it would wipe out many more small ones that have been here foryears. It turns out there are a fair number of special exemptions that have long outlivedtheir usefulness, and our proposal takes what we spend on those incentives and redeploysthese monies to phasing out the corporate income tax.
The second leg of what we have proposed to stimulate the economy is a flat tax of 3.65percent in one’s individual income tax return. Every South Carolinian would have thechance each year to pick between paying our current seven percent income tax rate, orforgoing their exemptions and paying a flat 3.65 percent. A report by the Atlanta FederalReserve Board said that “relative marginal tax rates have a statistically significantnegative relationship with relative state growth.” In everyday English that means highincome tax rates slow the growth of people’s paychecks and low rates raise them.
To pay for this part of the tax cut, we would raise our lowest in the nation cigarette taxfrom seven cents to 37 cents. We would concurrently raise our state’s tipping fee ongarbage because last year 30 percent of all the garbage buried in South Carolina camefrom other states. There is something wrong with mega dumps being proposed inCherokee, Williamsburg, Marlboro and other rural counties across our state to handlegarbage from places like New York and New Jersey.
Not all taxes are the same, and in taxes and fees associated with cigarettes and garbage,we are lowest and low, when measured against other states. There is a real cost in healthcare and the look and feel of our state that goes with not changing anything.
The net effect of these changes is that South Carolina’s ranking on the state business taxclimate index would be that we would move from 25th to the 6th most competitive state inthe country. We’ll never really outpace other states in growing our economy if we’re butaverage in our tax policy – but I think we would, if we were 6th in the country. I ask foryour help in passing this jobs-creating proposal.
The second change we think essential to bettering the lives of South Carolinians isrestructuring our government. Government in South Carolina costs 140 percent thenational average, and given the budget challenges our state faces we can simply no longerafford our inefficient, unaccountable government structure. It represents the ultimate testin whether or not we are willing to meet the challenge represented in the email thatsuggested that “We have to be doing things we should have been doing a long time ago”.I have come to fully understand how difficult full-scale change is in our state, andtherefore I ask for just three steps toward the promised land of getting us out of the trapthat locks us into doing things the way that they’ve always been done in state governmentand yet expecting a different result.
Last year, a Department of Administration bill passed the House unanimously beforestalling in the Senate. Representatives Jim Harrison, Garry Smith and Laurie Funderburkreintroduced this measure on the House side this year, and Senators Larry Martin, ChipCampsen and Vincent Sheheen did so in the Senate. We believe passage of that billshould not only be one of the first orders of business for both the House and Senate thisyear, but I am thankful that representatives like James Smith have personally offered theirhelp in the process.
I am also encouraged to see that the business and environmental communities are nowbehind DHEC restructuring. This change should happen this year.
Another small step toward a restructured South Carolina government lies in simplyletting the people of South Carolina decide on whether a host of constitutional officersshould instead be appointed rather than elected. To me it makes no sense to have agovernor elected by the people, and yet have his first check on delivering promises madeby, not the legislative or judicial branches of government – but the Lieutenant Governor,who in our state could be of opposite political persuasion and party. Would it make anysense to have the president and vice president in Washington elected with opposingagendas and wanting to go in opposition directions? I don’t believe it would, and I thinkthe people of South Carolina deserve the right to vote on this.
Finally, if there was ever a year to eliminate the costs that come with two agenciesperforming overlapping functions, this would be the year. The proposals we laid out inour budget in consolidating health services alone represents $15 million in savings thatcould go from the administration of health care to actual health care for SouthCarolinians. Ultimately, each of these proposals is about better coordinating servicesbecause, for instance, in the example of health – a person can never receive good healthcare from a system that simply looks at the parts, rather than the whole, of one’s healthcare picture.
The third area where “we have to be doing things we should have been doing a long timeago” lies in more fully opening up the workings of our state government so that ourcitizens can better understand not only what happened when a change is made – but whyit happened.
That’s why it is so important that we act on the issue of transparency that has beenbrought to the attention of South Carolinians by the leadership of Reps. Nikki Haley andNathan Ballentine. I know that Senator Harvey Peeler and others have committed topushing for similar reforms on the Senate side. This change is essential because leavingthings as they are would perpetuate the mistaken notion that those in any political bodydon’t need to explain all their votes and that weighty decisions on matters of publicpolicy can be made without permanent record.
The scab that covered this issue was brought to light last year when there was a COLAbill up for a vote in this chamber. Attached to it was a legislative pay raise that passed ona voice vote. To this day we still don’t know who voted in favor or against this proposal,and all this illustrates how awkward and unaccountable a legislative system can bewithout more in the way of recorded votes.
I think all this boils down to a simple concept – and that is that if an idea is importantenough to be voted on by the General Assembly of South Carolina, it’s an idea importantenough to be recorded.
That concept is rooted in the principle of accountability. We all need it. If no one everknew whether or not you in fact showed up for work, wouldn’t you on occasion find daysto do something else? The same holds true in the political process. In concrete termspeople need to know whether you voted for or against an idea because only then can theconversation begin on its merits, demerits and how change might be made.
We’re also joining great groups like the South Carolina Policy Council in asking forlegislation that would force real earmark disclosure, local government spendingdisclosure, a ban on taxpayer-funded lobbyists, public officials’ income disclosure, andexpanded open records laws. Some of these ideas we have talked about for a while asRep. Jim Merrill has long been an advocate of ending the practice of some in governmentof taking public money to lobby for yet more public money.
Other ideas are new in our conversation like public officials’ income disclosure, but comeas a result of seeing some of the inner workings of our state government. Sadly,investigative journalists have uncovered several instances wherein a member of theGeneral Assembly benefited from the very entity that they procured public funding for.It shouldn’t take an investigation to find this; it ought to be openly disclosed. In othercases some members fought against a concept like workers’ comp reform, but those of uswho were advocates of this change never could connect all of the dots between thosebenefiting from the current system and those who fought against reform.
This is not to say that these two descriptions fit the character or conduct of most in thischamber. Transparency is a way of ending any suspicion that would wrongly cloud ortaint the motives of so many here who simply work to advance ideas that they believerepresent the will of their constituents. It really is nothing more than good housekeeping,and it worked well when I myself was a legislator, as each member of Congress has todisclose all their income sources. Members of the General Assembly should do the same.
If there has been any lesson learned as a consequence of the financial crisis that sparkedthis fall in the financial markets, it is that disclosure is vital. The problems of Freddieand Fannie, of credit default swaps and derivatives would not have come our way if therehad been adequate financial disclosure – and we can avoid problems within our politicalsystem with greater disclosure and transparency.
The fourth key to making our state more competitive and indeed doing things we shouldhave been doing for a long time lies in instituting spending limits. They are vital. Inrecently talking about the California budget, Governor Arnold Schwarzenegger said, “Isay enough is enough, California has been put through this roller coaster ride too manytimes.” We all know what he’s talking about because here in South Carolina every fewyears we overspend when times are good and then cut past muscle and right into bonewhen times aren’t so good.
This leads to starts and stops in government programs that don’t serve well those whomost need help from government, and it’s a very expensive way of doing business for thetaxpayer. As South Carolina government spending grew by about 40 percent over theprevious four years, it didn’t take an economist to know that it was not sustainable.Spending limits simply keep government from getting ahead of itself in the good timesand force policymakers to follow the lead of cattlemen across our state as each year theyput hay in the barn over the summer to be prepared for winter. We should do no less ingovernment, and if we had held government’s growth since this administration started topopulation plus inflation – we could have had more than a billion dollars available tomeet this year’s economic winter.
Measures to do this have passed the House numerous times, and a similar measuresponsored by Senator McConnell was narrowly defeated in the Senate just this past year.I would ask for your passage of a bill that limits government’s growth to population plusinflation and then allocates everything beyond this to first paying down unfundedliabilities and when this is done to then either set money aside for a rainy day or return itto the taxpayer.
In this same vein, last year we passed Representative Kirsh’s bill to address the more than$20 billion in unfunded retiree and health care promises owed by South Carolinagovernment. It created a vehicle to fund these promises, and it’s incredibly important wenow begin to do so because we are headed to a disaster on the retirement side given theunrealistically optimistic return projections. What is happening here I believe is nearcriminal. In his 2007 letter to shareholders, Warren Buffett wrote about pensionmanagers projections of eight percent returns, “If they’re wrong, as I believe they are, thechickens won’t come home to roost until long after they retire. Public pension funding iswoefully inadequate. Because the fuse on this time bomb is long, politicians flinch frominflicting pain, given that problems will only become apparent long after these officialshave departed. Promises involving generous cost-of-living adjustments are easy for theseofficials to make – those promises will be anything but easy to keep.”
Finally on spending, let’s do as Florida and other states have done in prohibiting one-timemoney from going to start, or fund, recurring programs.
Each of these things is a step away from a government of fits and starts and toward moresustainable spending and thereby a more competitive economy. If anything has beenproven in states across our country it is that there is no “Terminator” when it comes tostopping government spending. With many allies in this chamber on spending restraint, Imyself have at times felt like more of a speed bump in the fight to slow government’sgrowth, and it underscores how we cannot get to sustainable spending without structuralchange.
The fifth step that I believe we can take this year to better life and opportunity for SouthCarolinians rests in bettering our educational system. Everyone understands well howeducation is a lynchpin to success in today’s world. What we find less agreement on ishow to get there. Too often people simply consider money as the key to betteringeducation, though one look at educational performances around the world proves howwrong this notion is. Accordingly, I think it’s vital we look for ways to ensure oureducational system has plenty of choices that reflect the individual diversity found in themore than 700,000 students in our state. We also need to find ways to better spendmonies currently in the system. That’s what competition does, unlike monopolies thatare never good for the consumer – much less innovation and the performance that cancome with it.
Accordingly our four goals on this front are as follows:
One, let’s enact education funding that indeed follows the child. I don’t think it makes alot of sense to have a large part of one’s opportunities in life defined by the geography ofwhere you were born in our state. Whether a student moves across town, or from thefoothills to the coast, it makes sense for the money to follow the child.
Two, lets pass a Charter School Parity bill. Two years ago we passed a groundbreakingcharter school bill that allowed for more choices within public education. Too often thatchoice has proven to be “in name only” as local school districts fight to keep thosecharter schools from getting the funding they are due. Rather than penalizing the effortsof concerned teachers and parents, we should be rewarding it – and for me that’s what aparity bill is all about.
Three, if we limit choice to simply a monopoly of public schools we will never have realchoice. For whatever the reason, if a school isn’t working for you and your child Ibelieve, along with so many across this state, that you ought to be given the option to goto the place that works best for you. No one loves their children more than the parentsand, accordingly, the notion of two systems of school choice to me is morally wrong.That’s what we have now. If you can afford the right house in the right neighborhood thechoice is yours for either great public or private education for your children. If you cannot, you are mandated to attend a certain government school in your district. If you’vegot political connections or an exceptionally bright child on occasion you can changethis, but this is the reality for the overwhelming bulk of children within the system, andwe can never thrive educationally until it changes.
This central flaw impacts an amazing number of things even outside of education –whether that’s rural economic development, or the unrelenting increases to property taxbills in too many areas across our state.
Finally let’s link the price of higher education to its cost. By capping its increase wewould force coordination – which is key to preventing higher education from continuingto spiral out of the reach of working families.
There are certainly other things that can be done in the arena of education that range fromconsolidating school districts to the building of true neighborhood schools, but the fourjust-mentioned points represent this administration’s major goals on education for theyear.
There are many other things that we could do this year to better people’s lives in ourstate, but I have attempted to keep my list of goals for this legislative session short andspecific. Inasmuch as there is time for other priorities I would encourage your work inseveral areas.
In bettering people’s employment opportunities, it’s vital we update the EmploymentSecurity Commission. The forthcoming audit I believe will show significant deficienciesthat need to be addressed so that we better marry the unemployed with job opportunities.To me it makes no sense to have an unemployment rate that is higher than we would like- while at the same time there were more than 50,000 unfilled job postings across thestate.
On health care, I think it’s vital that businesses and individuals alike have the opportunityto buy scaled-down health plans without mandates. Mandates price health care out of thereach of many working families. In essence they dictate that people buy a Cadillac whenall they need is a Chevy.
On quality of life, I don’t believe we will see many chances better than today to be settingaside open space in a South Carolina that will increasingly see less of it. Now is not onlythe time to take advantage of the buying opportunities that exist, but if nothing is done inthe budget this year, our state will not be honoring contracts currently in place on openspace. For these reasons, we redirected some money in the Executive Branch budget on atemporary basis for open space, and we ask you do the same.
I had better stop as I’m starting to go down a much longer list and my goal as mentionedearlier is to keep this year’s wish list of legislative accomplishments indeed short and tothe point. So, let me instead end with this quick story.
Our boys have long loved movies and particularly liked the movie Remember the Titans,which came out a few years ago. It’s the true story of two coaches, a sports team and thethen racially charged T.C. Williams High School of 1971 in Alexandria, Virginia.
Integration of the school in earnest had just taken place as several schools had beenfolded into one – this presented a new challenge for coaches and players in figuring away to come together despite their many differences and play as one team. Unite theydid though. Despite what critics had considered impossible – they so ably moved pasttheir differences and found ways to work together – that they went 13-0 for the season,and ultimately won the State Championship.
The consequences of our actions in this legislative year are far greater than the outcomeof a football game, and so my hope and prayer is that we will find ways as Republicansand Democrats, as representatives from the Coast, Midlands, and Upstate – as SouthCarolinians – to come together to better the lives of people in our state.
Thank you and good night.