Until 2007, homeowners paid property taxes to support the day-to-day operations of the schools in their communities. That all changed with the passage of Act 388, which eliminated school operating taxes for homeowners in exchange for a higher sales tax.
While homeowners have seen a reduction in their property taxes, businesses have been left paying a larger share of the cost of operating the schools. As result, S.C. businesses have some of the highest property tax burdens in the country.
Funding of our schools is now on less stable ground as they must rely on the Legislature to make good on its pledge to make up shortfalls when economic downturns result in lower sales tax collections.
Bear in mind, the money that makes up for these shortfalls comes directly from the general fund, the same source of funding for public safety and other operations of state government.
Because school funding is no longer tied to new housing construction, areas that are experiencing rapid residential population growth, such as Chapin, Fort Mill and Indian Land, see their student populations skyrocket while their school funding remains stagnant.
On top of this, new manufacturers have long been able to negotiate fee in lieu of tax agreements that effectively lower their property taxes for years or decades. Counties are anxious to negotiate these agreements because they want the new development, and they can do so without any input from the school districts. This further reduces the amount of property tax revenue school districts receive as their communities grow.
This leaves existing industry and small businesses in a community as the main sources of revenue for local school districts. So when a school district needs to increase revenue to fund day-to-day operations, that tax increase is borne almost entirely by the small businesses and older manufacturers that do not have an agreement with the county.
So how does SCANA fit into this? In Fairfield County, SCANA is the largest single taxpayer. Total property taxes from the operations of the existing nuclear plant at V.C. Summer are $29 million this year. Because that facility is not covered by a fee in lieu of taxes agreement, $16.5 million of that total goes to the Fairfield County School District to fund day-to-day operations. This amount is the equivalent of the operational budgets of all of the elementary schools in Fairfield County plus another $1 million. And our school district is not alone in this.
The most recent audit reports show that SCANA is the largest taxpayer in several school districts, including Lexington-Richland 5, Lexington 2, Richland 1, Richland 2, Aiken, Orangeburg 5 and Beaufort. Districts in Charleston, Berkeley, Dorchester and Jasper have large SCANA operations as well.
Now, imagine what would happen if SCANA declared bankruptcy or if its assets were sold to a non-profit entity. Property tax revenue could plummet. This would be devastating to school districts and students attending those schools because, as result of Act 388, there is no alternate source of revenue to make up for a loss from this single large contributor.
We cannot continue to progress as a state if we require our schools to rely on fluctuating sources of revenue, require our existing businesses to shoulder a disproportionate share of the burden of school operations and demand that our fastest growing districts educate a rapidly growing population with little additional money.
It is time to reexamine Act 388.
Mr. Frick is a Winnsboro attorney and chairman of the Fairfield County School Board; contact him at firstname.lastname@example.org.