Jun 2, 2017

South Carolina State House Month in Review: May 2017

On May 11, the South Carolina General Assembly adjourned sine die on the 2017 legislative session. Legislators returned on May 23 s required by the sine die resolution to take up the budget and vetoes, but due to the lack of business before the House, members were informed that unless they had other official business to address, it was unnecessary for them to attend session.

The Senate met briefly on May 23 to ratify acts and approve S. 671, a joint resolution to allow the legislature to fund the government at current levels in case a budget is not approved before July 1, the beginning of the state’s fiscal year. Senate Finance Chairman Hugh Leatherman (R-Florence) stated that the continuing resolution was just a precaution and would be used only in the unlikely event of a budget not being approved by the legislature before June 30.

Budget Conference Committee Concludes Work

The conference committee working to bring the House and Senate versions of the state’s FY18 budget together announced its conference report on May 31. Approved funding includes $60 million to increase the state’s per student allocation to $2,425 for public schools, $12 million for the state’s colleges and universities, and $10 million for the Local Government Fund.

The second piece of the pension system fix was also approved, providing state funding to state agencies, cities, counties and other local entities to cover half of the required 2 percent increase in payroll allocation. The increase is part of the statutory fix to help shore up the state’s ailing pension fund and will go into effect July 1, 2017, for FY18.

The Commission on Higher Education (CHE) took a hit in the budget, and not just with a loss of funds. The conferees agreed to remove the CHE’s authority to review college construction or renovation projects. These projects will now be reviewed by the Joint Bond Review Committee and the State Fiscal Accountability Authority.

The House will return to Columbia on June 6 to consider the conference report.

Legislature Overrides Veto on Roads Bill

On May 9, the House and Senate approved the long-debated roads funding bill with veto-proof majorities. The bill was immediately sent to the governor for consideration upon passage by the House. Gov. Henry McMaster (R), who previously promised to veto the bill , wasted no time and vetoed the legislation before the end of the day, with a veto message posted on Facebook.

On May 10, after several rousing speeches on the floor about executive leadership, or lack thereof on this issue, the House voted 95-18 to override the governor’s veto. The Senate followed with a 32-12 vote to override the governor, completing three years of passionate debate over the gas tax in the state.

Revenue Generation
Effective July 1, 2017, the legislation will increase the state’s 16.75 cents per gallon gas tax to a total of 28.75 cents per gallon by the year 2022. The legislation’s 12 cents per gallon increase, named the motor fuel user fee, will be phased in as a 2 cents per gallon increase in each of the six years of the plan. The state’s gas tax has not been subject to inflation indexing over the last 30 years, which will not change since the final legislation does not include the Senate’s inflation indexing provision.

The legislation requires that all revenues raised from the 12 cents per gallon increase be placed into the newly created Infrastructure Maintenance Trust Fund, which is required to use these funds exclusively for repairs, maintenance and improvements to the existing transportation system.

Other fees were also increased or introduced to raise revenue for the trust fund, including a $16 increase on every biennial registration and license fee in the state and an increase in the vehicle sales tax, now called the Infrastructure Maintenance Fee. For vehicles purchased and immediately registered in the state, the Infrastructure Maintenance Fee is 5 percent of the sales price or fair market value, capped at $500. For vehicles not initially registered in the state, a one-time $250 fee will be imposed upon registration in South Carolina. New fees for hybrid and other alternative fuel vehicles were also introduced to help offset the loss in motor fuel user fees from more efficient vehicles.

The legislation is expected to raise approximately $630 million each year for road repairs after full implementation. The plan is estimated to cost South Carolina drivers who travel 15,000 miles in a car that gets 25 miles per gallon about $1.40 per week in additional motor fuel user fees after full implementation.

Tax Relief
Several of the Senate's various tax credit and rebate proposals, originally intended to offset the cost of the increase to the state’s taxpayers as well as help make the legislation veto-proof, are included in the final legislation. The legislation includes the main tax relief program proposed by the Senate, the motor fuel user rebate, which will be a refundable income tax credit for preventative maintenance on the state’s registered private passenger vehicles. The legislation also implements a state earned income tax credit that will be a nonrefundable credit equal to 125 percent of the federal earned income tax credit. The state’s students also received an increase in the cap on their refundable income tax credits for higher education tuition, which will now be up to $1,500 for two- and four-year programs. Finally, in an effort to lower the cost of business in the state, manufacturers will get a small break on their property assessment ratios phased in over the six-year plan.

DOT Governance Reforms
Additional Department of Transportation (DOT) reforms were also included in the final legislation. Legislators opted to add an additional at-large member to the DOT Commission, the governing body of the DOT, to make full commission membership an odd number to avoid tie votes. All nine commissioners will be appointed by the governor and vetted in some manner by the legislature in a plan inspired by the Ethics Commission appointment process. The seven congressional district seats on the commission will be vetted and confirmed by the legislation delegations of the congressional district, which will now include all legislators who represent any portion of the congressional district. The two at-large members will be confirmed by the House and the Senate.

Ongoing Ethics Probe Leads to Another Indictment

On May 16, another Republican lawmaker was indicted on public corruption charges in the state’s ongoing ethics investigation. Rep. Rick Quinn (R-Lexington), who faces two counts of misconduct in office, stated that he is “asking for a speedy trial so this can be resolved as quickly as possible.”

Rep. Quinn is the third state lawmaker indicted in the last six months after investigation by Pascoe, a state solicitor for Calhoun, Dorchester and Orangeburg. Rep. Quinn, a former majority leader in the House, currently serves on the House Judiciary Committee.

On May 23, the legal team representing Rep. Quinn asked the court to remove Solicitor David Pascoe from the case, arguing that Pascoe wrongfully viewed documents seized in a raid on a business run by Quinn’s father that would be constitutionally protected as attorney-client privilege. After an all-day hearing, a judge asked for written arguments on the issue by June 5 before he makes a decision.

Vacant State House Seats Filled

Lt. Gov. Kevin Bryant’s (R) vacant Senate seat was filled on May 30, after businessman Richard Cash (R-Anderson) defeated a last-minute write-in campaign from supporters of his primary opposition, Carol Burdette, former Pendleton, S.C., mayor.

Ronnie Young (R-Aiken), chairman of the Aiken County Council, was elected to fill a vacant seat in the House, handily defeating two other candidates on the ballot. Young replaces Chris Corley, who resigned from the House in January after an arrest on domestic violence charges from an incident in December 2016.

June 20 Special Election Primaries Take Place

The May 16 GOP runoff for the 5th Congressional District nomination was too close to call, triggering an automatic recount under state law. The State Election Commission certified the results on May 19, naming former Rep. Ralph Norman (R-York) as the winner over Rep. Tommy Pope (R-York) by a 221-vote margin. Norman will face Democrat Archie Parnell and several third-party candidates in the June 20 general election.

Democrat Wendy Brawley won the Democratic primary runoff on May 16 in her bid to win the vacated seat of Rep. Joe Neal, who unexpectedly passed away earlier this year. Brawley will face Republican Bill Strickland in the June 20 general election.

Phase I of Pension Systems Fix Finalized, Phase II Begins

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 said 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 effect immediately upon the governor’s signature, decouples and raises the employer and employee contribution percentages. The employer contribution will be raised, by 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 Joint Committee on Pension Systems Review, who crafted the plan, met again on May 9 to map out its continued study and discussion on improving the system. Discussion over the interim will likely cover deferred compensation plans or hybrid plans for future state employees. The committee asked interested parties to submit input regarding potential plans or any other ideas for improving the state’s pension system.