FEB. 28, 2014 -- That South Carolina politicians has an historic $7 billion in state taxes to budget this year, don’t be fooled by gaudy numbers. There may not be enough money to go around, especially for higher education and local governments.
The House Ways and Means Committee last week approved a budget for the upcoming 2014-15 fiscal year that tops out at a total of $24 billion, with $7 billion coming from state taxes. The committee’s budget proposal is the first big step in a long process wherein the final budget will be approved.
By Monday, the committee’s printed budget plan will be put on representatives’ desks, where it will sit for a week before members debate it on the floor starting March 10. That debate has taken less than a week in recent years. A House-passed plan then will head to the Senate where it will undergo scrutiny by its Finance Committee and then the full chamber. Sometime probably in May, the two sides will work out compromises and send a bill to the governor, who may veto portions, which the legislature will vote yet again to concur or override the vetoes.
The proposed budget is the first in five years that the General Fund -- the portion comprised of state tax collections, has reached the $7 billion mark. The current year’s General Fund budget is close to $ 6.7 billion.
Education and Medicaid atop spending
As usual, the big-ticket items were once again K-12 and Medicaid funding. Combined, Medicaid and K-12 education comprise slightly more than half of the state’s $24 billion overall budget. Medicaid received an additional $135 million in state tax dollars over last year, roughly half what the state Department of Health and Human Services requested in new funding. Public schools got an additional $30 million in technology, $30 million in reading and $135 million in formula funding.
State employees will receive a 1.5-percent pay raise, notable since pay raises are usually hammered out in floor debate and not in first-round budget proposals. Observers said this could be a potentially smart move in an election year.
Consumer protection efforts in the wake of the computer hacking at Revenue continue to drain funds as the proposed budget sets aside $6.5 million for identity protection.
But what was not included in the budget plan may be the bigger story – no increases in higher education and local government funding.
Cut and limit
Without a doubt, what’s garnered the most headlines in the Ways and Means budget proposal was the tens of thousands of dollars cut from two state colleges’ budgets as punishment for those schools providing what was perceived as too gay-friendly reading lists.
But ignoring the smoke and mirrors and looking at the bigger higher education picture, it appears the legislature has some very serious trust issues with public higher education, according to one state college lobbyist speaking on condition of anonymity.
The Ways and Means package included the same amount of spending on higher education in the coming year that it has in the current fiscal year. Some around the state see such a funding level as a de facto cut, because the proposed higher education budget doesn’t include inflationary increases or does it reflect a level of funding that is commensurate with the increase in state tax collections.
In short, if things will cost more next year and the state budget has more money across the board, why didn’t higher education funding increase, even only marginally?
“It’s a statement that the legislature doesn’t trust higher ed,” said the lobbyist, who said politicians see colleges building “fabulous” buildings for millions of dollars and then coming back at budget time “to fight over little chunks of change.”
Several members of Ways and Means have said they wanted to freeze the amount before conducting a study of how the state has funded, and should in the future, higher education. A similar study was conducted in recent years in North Carolina.
As such, public colleges and universities now find themselves in a tough spot, fiscally, with a frozen state stipend, as they have been warned in writing by Senate Finance chair Hugh Leatherman (R-Florence) that if they increased tuition in tough economic times, they could see building projects stopped dead.
While Leatherman’s warnings don’t carry the full weight of law, the lobbyist said they were close enough. The end result may be a cut and limiting the ability for colleges to raise money elsewhere.
The Ways and Means Committee’s 2014-15 budget package did include authorization for colleges and universities to increase tuition and fees by tens of millions of dollars in total. But that liberty may come at a price of being less competitive in the academic marketplace.
Julie Carullo, governmental affairs and special projects director for the state Commission on Higher Education, said the bigger issue was a flawed funding structure that lacks a defined funding source for higher education.
Squeezed at both ends
By statute, the General Assembly is required to pass down 4.5 percent of its General Fund to local governments, such as cities and counties. It hasn’t done that in years, thanks to special one-year laws that usurp the statute. Legislators have sidestepped the statutory requirement in 2002-03, and 2009-13, the years corresponding with the last two recessions and recoveries.
The coming year, much like the current one, is no exception. This budget package would freeze local government funding at $213 million, once again not taking into account for inflationary cost increases or the overall increase of the state budget.
Additionally through a separate budget proviso, the legislature may seek to once again limit counties’ ability to raise funds. In this case, it would block counties from assessing a fee for taxes paid via credit card.
Some cities already assess a convenience fee, according to Miriam Hair, the executive director for the Municipal Association of South Carolina.
Tim Winslow of the S.C. Association of Counties said credit card fees would be passed on to cities and school districts as counties dispense their tax collections.
Winslow also disagreed with the position that removing the ability to charge the convenience fee would be a “wash” for counties, since allowing credit card payments increases the number of taxpayers paying and paying on time.
For example, Charleston County, Winslow said, probably couldn’t offset $1 million in potential convenience fees with a higher rate of compliance.
Bill Davis is senior editor at Statehouse Report. He can be reached at: email@example.com.
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