May 1, 2017

South Carolina State House Month in Review: April 2017

Senate Approves Gas Tax With Many Additions

After days of lengthy floor debate and numerous floor amendments, the Senate approved its version of the gas tax on April 26. The Senate's plan increases the gas tax incrementally by 2 cents per gallon over six years for a total increase of 12 cents per gallon, which will raise approximately $200 million more than the approved House plan. But the Senate's increased revenue will be offset by the numerous tax credits included in the plan. Senators who supported including tax relief in the plan believe it’s important to make South Carolinians whole, while still capturing out-of-state funds to help pay for road maintenance and improvements.

The Senate plan includes a plethora of tax relief, including college tuition rebates, earned income tax credits, commercial property tax cuts for manufacturers, and vehicle maintenance and gas tax rebates. These rebates and credits would reduce the raised revenue by an estimated $150 million, even though the bill includes caps for the amount of tax relief allowed. Additional money to cover some of the tax credits may be pulled from the general fund and the capital reserve fund, if necessary.

The state’s 16.75 cents-per-gallon gas tax is one of the lowest in the country and has not been raised in the last 30 years nor indexed for inflation. The approved Senate version includes a provision that authorizes inflation adjustments after the increase is fully implemented, and mandates that the inflation adjustment not raise the state’s gas tax above the gas tax levied in any bordering county in North Carolina or Georgia.

Sen. Larry Grooms (R-Berkeley) championed the compromise amendments, which ultimately received a 30-9 vote for third reading on April 27, but some Senators remained unconvinced. As expected, Sen. Tom Davis (R-Beaufort) filibustered the bill late April 26, just before the full bill was approved. House members also woke up on April 27 with questions about what exactly the Senate had done the night before.

The bill will now return to the House, where representatives have the opportunity to accept the Senate's amendments, but will not likely accept the full tax relief package. Expect the bill to head to conference quickly this week, as the dwindling number of legislative days pressures legislators to get a bill to the governor.

On multiple occasions, Gov. Henry McMaster (R) has expressed his dislike of the gas tax proposal, stating that it should be a “last resort” for infrastructure maintenance and improvement funding and that he will veto the legislation if it makes it to his desk.

Budget Conference This Week

On April 26, the House returned the budget to the Senate, where senators immediately non-concurred with the House amendments. On May 2, the House and Senate will appoint three members from each body to the conference committee on the budget package, H. 3720 and H. 3721. The conference committee will likely begin work before the end of the week.

The House’s bond proposal for the state’s capital improvement needs, which Gov. Henry McMaster (R) urged the legislature to utilize for infrastructure funding instead of capital improvement, remains in the House with requests for floor debate.

Governor Signs Pension Systems Fix

On April 25, Gov. Henry McMaster (R) signed legislation authorizing a plan to fix the state's ailing retirement system. Despite approving the plan, Gov. McMaster stated, "The bill does not address the single most important measure which would ensure the long-term financial stability and viability of the state's retirement system." He believes the state needs a deferred compensation, or 401k-style, plan to offer to state employees, as opposed to the current defined-benefit plan, which promises the state's employees an exact monthly payment based on length of service and salary.

The approved plan, which went into effective immediately upon the governor’s signature, decouples and raises the employer and employee contribution percentages. The employer contribution will be raised 2 percent to 13.56 percent on July 1 for FY2018, and will then increase by 1 percent each year until FY2024, for a total of 7 percent over the course of the plan. By the end of the plan, the employer contribution will be 18.56 percent. The employee contribution will also be increased on July 1, from 8.66 percent to 9 percent, but will be capped at 9 percent for the following years.

The members of the Joint Committee on Pension Systems Review, who crafted the plan, will meet again on May 9 to map out their continued study and discussion on improving the system, which will likely include considering deferred compensation plans for future state employees.

Governor Asks for More Federal Money for Flood and Hurricane Relief

On April 27, Gov. Henry McMaster (R) formally asked Congress for $220 million in additional disaster aid to help cover expenses from the historic 2015 flood and 2016's Hurricane Matthew. Currently, a federal disaster recovery grant program is expected to bring $222 million in aid for the disasters, but Gov. McMaster pointed to the state's dire need for safe housing, saying those funds have already been committed to some 2,300 South Carolina families who need help replacing or renovating their homes. Gov. McMaster noted that there are still 2,700 families of low to moderate means who will go without disaster relief, and if received, the additional $220 million will help meet their needs.

State Media Sue House GOP for Records in Ongoing Ethics Probe

A coalition of South Carolina media outlets have come together to sue the House Republican Caucus for financial records recently turned over to the S.C. Law Enforcement Division (SLED) during the long-running corruption investigation. The media coalition argues that the caucus is subject to the state's Freedom of Information Act for both its records and meetings, which have been closed this year. The lawsuit comes after the caucus denied The State newspaper's Freedom of Information Act request to view the records submitted to SLED.

Medical Marijuana Proposal Losing Steam

The S.C. Compassionate Care Act appears to have stalled for the year as the legislative days pass without committee action in either body. Despite increasing support in the House, the Medical, Military, Public and Municipal Affairs Committee has failed to move the legislation forward to the floor. Opposition from the state’s law enforcement community and leadership has continued to have great impact on the proposal.

Ports Board Nominees Approved After Ethics Probe Delays Hearings

On April 5, the Senate Transportation Committee approved Gov. Henry McMaster’s (R) two nominees to the S.C. Ports Authority after raising questions about their connections to the public relations firm in the middle of the state’s ongoing ethics investigation. The nominees — Kenneth Jackson, a senior vice president at SCANA, and William Jones, an attorney — still require approval by the full Senate before being confirmed.

House, Senate Disagree on Future of Higher Education Oversight Agency

In the upcoming budget conference, the House and Senate will have to come to an agreement on the funding and future of the S.C. Commission on Higher Education (CHE). Currently, the House budget plan removes funding and authority for the CHE to approve college construction projects, but the Senate plan restored both.

The House has had serious question and concerns about the mission and authority of the CHE throughout this legislative session. House leaders have stated that they are trying to focus CHE’s manpower on academic program oversight, instead of requiring the CHE’s limited staff to stretch resources to do multiple jobs that could be done by other oversight bodies.

Please contact any member of the McGuireWoods Consulting team if you would like more detailed information about the above issues or any other policy issues in South Carolina.

Governor Jim Hodges, Senior Advisor

William D. Boan, Senior Vice President

Robert Adams, Senior Vice President

Amber S. Barnes, Vice President

Brian P. Flynn, Vice President

Kayleigh E. Hall, Assistant Vice President

Robin T. Crawford, Research Assistant