S.C. Gov. Henry McMaster talks about economic growth in South Carolina
One wants to continue recent job gains through lower taxes, less regulation and expanded workforce-training opportunities.
The other says he will expand the state’s skilled workforce through a renewed focus on public education, and lift up impoverished rural communities by fixing crumbling roads and bridges, and replacing unsafe, outdated water and sewer lines.
Republican S.C. Gov. Henry McMaster says he wants to position the state for an economic explosion.
But McMaster’s Democratic challenger in the November election for governor, state Rep. James Smith, contends failing infrastructure and inadequate support for education are holding the state back.
Jobs up, workforce down
McMaster opened his first State of the State with the promise of a “new prosperity” for South Carolina.
Since taking office in 2017, the governor has announced that companies plan more than 22,000 new jobs and more than $7 billion in new investment in the Palmetto State. Meanwhile, the state’s jobless rate has dropped to its lowest point since the turn of the century.
“(W)e are situated right now to have a great economic expansion and growth that will take care a lot of our problems,” McMaster told a group of about 40 business leaders gathered Wednesday at the Palmetto Club for a meeting of the Columbia Capital Rotary Club. “People are working. They have jobs, and they’re happy.”
But while jobless levels are at record lows, the state’s workforce continues to shrink. And wages, though rising, lag behind the region and nation along with household incomes.
The seasonally adjusted jobless rate in the Palmetto State fell to 3.4 percent in August, down from 3.6 percent the month before, according to the S.C. Department of Employment and Workforce.
Nationally, the unemployment rate was 3.9 percent, unchanged from July.
But while unemployment fell by 3,923, the state’s labor force shed 3,606 workers, a result of retiring baby boomers leaving the workforce and increasing educational demands for would-be workers seeking jobs, among other factors.
The percentage of South Carolinians either working or looking for work declined in August for the sixth consecutive month, to 57.4 percent, according to the latest data from the U.S. Bureau of Labor Statistics. That’s the fourth-lowest workforce-participation rate in the nation and down from 61.1 percent at the start of the decade.
Nationally, labor participation stood at 62.7 percent in August.
At the same time, S.C. manufacturers are having difficulty finding skilled workers in the state.
Democrat Smith notes the effort to entice major employers to the state has been bipartisan.
“We led bipartisan efforts to deliver the type of environment that attracted industries like Boeing and Volvo, and also grow our smaller businesses,” Smith said in an interview with The State, referring to himself and his lieutenant governor-running mate, state Rep. Mandy Powers Norrell of Lancaster. “But there’s more that needs to be done.”
“You cannot be the jobs governor if you’re not first the education governor,” Smith said.
If elected, Smith pledges to:
▪ Expand partnerships with businesses to train workers for available jobs.
▪ Create special programs to match veterans with employment opportunities.
▪ Require schools to offer more technology courses and address the stiflingly high costs of higher education.
“We’re doing a real good job selling South Carolina,” Smith said. “(But) we’re having a hard time filling our end of the bargain on delivering the educated workforce.”
Developing S.C. workers
South Carolina used to have workers searching for jobs. Now, the state has jobs in search of workers, with 60,000 jobs available throughout the state.
To meet those needs, McMaster said he would:
▪ Incent businesses to take part in apprenticeship programs with local high schools.
▪ Increase workforce scholarships and grants at technical colleges.
▪ Expand workforce-training opportunities for inmates who have completed their sentences and are re-entering the community, lowering recidivism and crime.
The governor’s proposed fiscal year 2018-19 executive budget included $3 million for workforce scholarships and grants so that more students can obtain certificates and associate’s degrees at S.C. technical colleges. It also included $5 million to help technical schools and public schools form partnerships in rural communities.
Last month, the governor signed legislation permitting Greenville Technical College and the state’s other technical colleges to offer an applied baccalaureate degree in advanced manufacturing technology.
McMaster said one of the main factors cited by executives of larger manufacturers locating or expanding in South Carolina — from BMW to Boeing to Volvo to Mercedes Benz — is the state’s ReadySC program. The program pairs start-up companies, or those expanding or moving to the state, with workforce recruiting services, customized training and curriculum, and project management.
The governor also touts close collaboration between the state’s research universities and large employers that are “producing inventions, innovation and commerce.”
Last Thursday, for example, McMaster joined the University of South Carolina, IBM, Samsung, Siemens and Yaskawa for the opening of USC’s new Digital Transformation Lab and the announcement of several new research partnerships.
“When you get that kind of academic power, free enterprise, innovation, motivation, ambition and resources together, you can make great strides,” McMaster told The State. “What I’m doing, and have been doing, is to enhance this collaborative effort ... and focusing with those institutions on the strength and power of our people. ... I call it ‘Brain Power USA.’ ”
USC hopes the 15,000-square-foot facility will become a world-renowned research showplace with an array of real-world industrial and consumer applications, from robotics to autonomous drones to smart home appliances, USC president Harris Pastides said. “(S)tudents (will) work alongside faculty to gain critical exposure to leading-edge technologies that make them more employable.”
To find more workers, Smith has proposed creating a cabinet-level state secretary of veterans affairs to help guide military veterans and retirees into civilian jobs. He also says he would expand the “Troops for Teachers” program, which helps service members and veterans begin new careers as K-12 school teachers, and oversee a “Helmets to Hardhats” program.
“There is a major skilled workforce out there within the veteran community that we need to bring here to put to work on working on our infrastructure needs,” Smith said. “They are good-paying jobs (making $50,000 to $90,000 a year) as a CDL driver or a welder or a skilled worker on our infrastructure.”
Like McMaster, Smith said he would work to expand partnerships between high schools and businesses to train workers for available jobs, and establish regional business incubators to support entrepreneurs.
He and Norrell said the state also needs to revamp its tax incentives to include attracting high-paying corporate headquarters and their research arms, not just capital investment for lower paying manufacturing.
Helping rural areas
New incentives, as well, are needed to encourage businesses to revitalize distressed areas and expand broadband internet into rural areas of the state, fostering greater opportunity and innovation, Smith said.
As proof he can get things done, Smith points to his sponsorship of a law that provides income tax or property tax credits to developers to rehabilitate abandoned buildings.
This summer, however, McMaster vetoed a bill to extend the credits, set to expire at the end of 2019, after it was loaded down with unrelated amendments.
McMaster, too, says he will focus on less prosperous areas of the state.
In March, the governor recommended the U.S. Treasury Department designate 135 communities in the state as so-called “opportunity zones,” including urban and rural areas throughout the state.
If approved, the governor expects businesses to start investing in the zones, lured by the promise of federal tax breaks in they remain in the communities for at least 10 years.
Both McMaster and Smith have pushed for tax breaks for certain South Carolinians — a full state income tax exemption for retired military veterans and first responders, including state and federal law enforcement officers and firefighters.
”My goal as governor is point us in the right direction ... and see that this economic opportunity we have continues on, accelerated, and we don’t lose it,” McMaster said. “The main way you do that is to keep the taxes low.”
As part of his first state budget proposal, the Republican governor proposed cutting the top rate in all state income tax brackets by 1 percentage point, phasing in the cuts over five years. The move, he says, would reduce South Carolinians’ taxes by $139 million in the first year and about $2.2 billion over five years.
The cuts would save the average S.C. taxpayer between $55, for low-income taxpayers, and about $54,000, for high-income taxpayers, over five years. The cuts also would reduce the state’s revenue by more than $782 million a year, once fully phased in, said the state Revenue and Fiscal Affairs.
Critics argue the tax cuts would result in deep cuts to already underfunded state programs — from K-12 schools to colleges to prisons to mental health to Social Services. They also note the state’s taxes aren’t particularly high.
The Tax Foundation, a nonprofit Washington, D.C.,-based think tank, ranks South Carolina 48th in the nation for the amount of tax it collects per capita.
However, the state has the highest marginal income tax rate in the Southeast — 7 percent — putting it at a competitive disadvantage, said the Tax Foundation’s Jared Walczak.
“While South Carolina offers a generous standard deduction and a range of other deductions and credits that reduce taxes for many people,” marginal rates matter because they create “sticker shock,” particularly for small businesses and entrepreneurs, Walczak said.
“(A lower tax rate) makes living and investing in the state more attractive,” Walczak said. “It makes a difference in how you grow your business.”