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2012 session set to start

Posted: December 29, 2011 11:09 a.m.
Updated: December 30, 2011 5:00 a.m.

Let’s start with some good news:

1) South Carolina’s unemployment rate dipped below 10 percent last month to 9.9 percent.

2) On December 1, Moody’s restored South Carolina’s AAA credit rating to “stable.” It had previously put South Carolina on “credit watch” during the debt ceiling debate because of the state’s dependence on federal funds, due in large part to our high poverty rate and defense spending in South Carolina.

3) State revenues are expected to produce a $1 billion surplus, $500 million in one-time money, and $500 million in growing revenues.

Does this good news mean the economy is turning around? Surely we can hope, but while the General Fund is growing over the last year’s General Fund, the economy remains sluggish. Building permits in the state are still low at 750 per month compared to building permits in excess of 2000 per month in 2007. Also, South Carolina’s economy is heavily tied to the automotive industry. BMW, Michelin, and other associated businesses have a huge economic impact on our state; the Port of Charleston moves cars and trucks for shipment across the United States. During the 10 years of 1998-2007, US car and truck sales averaged about 17,000 in each of those years. In 2009, US cars sales were below 11,000, and in 2010 car sales were around 11,500. These are numbers similar to those of the 1970s. The Legislature should keep this information in mind for perspective when crafting the state’s budget for the coming year.

While there are forecasts for increased state revenues, I believe that the General Assembly should keep a tight rein on spending and not increase agencies’ operating budgets. Nonetheless, there are several issues that the General Assembly may need to address with the additional recurring revenue. There are a few agencies whose appropriations in last year’s budget were insufficient to adequately meet their statutory obligations. Three agencies that are being discussed in this regard are the Department of Mental Health, the South Carolina Law Enforcement Division (SLED), and the Department of Health and Human Services (DHHS).

For example, the DHHS budget has been problematic due to the dramatically rising cost of health care. DHHS has a request in for an additional $350 million. Of that request, the bulk is for continuation of the program that is currently being funded with non-recurring funds. Another $68 million is for actual population growth in the system and an additional $29 million is for the Express Lane Initiative to enroll about 70,000 or more South Carolina children who are currently eligible for Medicaid but are not enrolled. Enrolling children who are eligible better ensures they will get the health services they need.

With surplus non-recurring or “one-time” dollars, the state should look for opportunities to pay down debt and invest in road and bridge improvement projects that will make our roads safer for our citizens and more attractive for economic development.

Reforming our state retirement systems will be up for debate this session. There are five different defined benefits plans and one defined contribution plan; the two largest defined benefit plans are the South Carolina Retirement Systems (SCRS) and the Police Officers Retirement Systems (PORS). SCRS is not just a retirement system for state agencies and higher education institutions. The majority of the approximately 800 participating employers in SCRS -- 72 percent, in fact -- include public school districts, cities, counties and other local subdivisions of government. The remaining 28 percent is comprised equally of state agency and higher education employers.

In 2012, the General Assembly will most likely have various proposals to consider to put the retirement systems on better financial footing. An ad hoc retirement study committee has been formed within the House Ways and Means Committee and a similar body has been formed in Senate. Information about both of these study committees is available on South Carolina General Assembly’s website: www.scstatehouse.gov. The House study committee has been meeting these past few months so that it will be able to make recommendations about what changes might be needed. Actual legislation based on the working recommendations of the House study committee has not yet been filed. However, any legislation introduced will have to go through the same legislative process as any other bill.

It has been a year since the South Carolina Taxation Realignment Commission completed its comprehensive study of the state’s tax system and released its report and recommendations for tax code changes that would enhance the state’s efforts to attract businesses to locate and invest here. This past session I filed legislation to lower the manufacturing property tax rate -- which is currently one of the highest in the nation, and I co-sponsored legislation to make significant revisions to our sales and use tax exemptions. Lawmakers have continued to express interest in the topics of fairness in taxation and the modernization of a tax code that has been somewhat haphazardly assembled in piecemeal fashion over the course of many years. I hope that this is the year that the legislature does more than just express an interest in, but takes action on, comprehensive tax reform.

 As you can see, 2012 is shaping up to be a busy year when the General Assembly reconvenes Tuesday, January 10, 2012. The New Year provides lawmakers an opportunity to provide leadership on issues of real importance to South Carolina citizens. That would be genuine good news to start the year.

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