Lining the nestLegislators look to save millions through fundsBy Bill Davis, senior editor FEB. 12, 2010 -- South Carolina state government is on the verge of subtly changing how it budgets and spends its money. That’s good news since the proposed changes could save the state tens of millions of dollars in annual interest charges.  Those savings could come as even better news, considering the state is about to issue $270 million in bonds later this month as part of the deal that this year landed a Boeing plant expansion in the Charleston area.
When the bonds are sold, the state will automatically be put through a re-ranking by the nation’s top three financial ranking institutions.
Three bills worked their way through the state Senate this week that could make the state look a good bit more attractive to those three institutions, two of which continue to classify the state as having the top AAA credit rating. The third, and perhaps the best known, Standard and Poor’s, currently has the state rated at “AA+” , after having taken away its top ranking several years ago due to debt considerations. Credit ratings, combined with factors like a state’s per capita income and perceived ability to pay down debt, help lending institutions decide how to set lending rates for borrowers. In short, the more trust that the rating agencies have in a state’s financial stability, the more likely a state will get a lower borrowing rate, and subsequently, lower debt payments. SC's problem with end of year debt
But one of the things that has been a recent problem for South Carolina is its end-of-year debt, something rating institutions hate, state officials said. Such debt has been bad news for South Carolina, which ended the 2008-09 fiscal year last June with a shortfall in excess of $93 million. With state coffers empty last June, the state was, arguably, unable to pay some of its bills. So to close the gap, state officials tapped what was left in the state’s two main rainy day funds, worth a total of $241 million at the beginning of the 2008-09 fiscal year.  “Those shortfalls were a wake-up call,” said Greg Foster, communications director for House Speaker Bobby Harrell (R-Charleston). After discussions with State Treasurer Converse Chellis last year, leaders in the legislature began immediately pushing for a way to shore up and smooth out the state’s budget and spending habits.
Two companion bills, one statutory and the other calling for a constitutional amendment, emerged from the House last year that would increase the General Reserve Fund from 3 percent to 5 percent. Both of those bills cleared the Senate this week, with procedural amendments, and have been sent back to the House for collaboration. The Senate also passed its own version of the 2-percent increase, and sent it along this week, too. Some legislators have questioned the call to move to the 5-percent level, pointing out that combined with the Capital Reserve Fund (2 percent of General Fund), the state already had a de facto 5-percent cushion. Chellis responded that of the nine states that already have AAA ratings from the three major rankings institutions, all nine had 7-percent cushions. Saving millions in interest costs  Should the proposed the increase pass, according to Sen. John Land (D-Manning), the state would reach that same plateau, and lending rates on debt service could drop.
“And that could potentially save the state tens of millions of dollars every year for as much as 20 years,” the normal length of most loans the state takes out, according to Land, the ranking Democrat on the Senate Finance Committee. Chellis, who met with legislative leaders last year to push for the changes, was a little more conservative in his annual savings estimates. “I don’t know about ‘tens’ of millions, but certainly several million dollars every year,” he said.  While the amount saved annually might pale in comparison to the tens of billions of dollars making up the state’s usual annual budget, Chellis said any millions would come in handy in cash-strapped agencies hit hard in recent years by statewide cuts.
The three reserve fund restructuring bills that went to the House this week also called for the Capital Reserve Fund to be left alone until the final weeks of the fiscal year. In the recent past, mid-year state budget cuts have consumed the fund, which was designed to help pay for major capital projects -- roads, buildings, etc., with money left over at the end of one fiscal year Land, usually quick to criticize GOP moves to shrink government in the name of Grover Norquist, praised these bills as good governance. “This is just something we have to do,” he said. Land did use the opportunity to say the state needed to go further than just increasing its safety net. He said politicians in the legislature needed to address the state’s taxing policies before more money is taken out of crucial services, like public education, by politically advantageous tax cuts. Crystal ball: Beyond agreeing to a schedule of increasing the fund over a several year period, expect this bill to pass before the ink is dry. Deficit hawk Gov. Mark Sanford will likely approve of the savings increases, but will likely blanch at what the re-rankings will also show -- lenders love the Budget and Control Board, which provides additional oversight to much of the state’s finances.
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ESC debates aheadWith the budget dominating activity in the House Ways and Means Committee, ESC reform will dominate floor debate in the House and Senate.
In the Senate:
- Judiciary. The full committee will meet 3 p.m. Tuesday in 105 Gressette to discuss a bill that would provide financing for citizens to buy more energy efficient appliances, among other bills. More.
- Finance. The full committee will meet at 2 p.m. Tuesday in 308 Gressette. No agenda has been released.
In the House:
- Ed. The full committee will meet at 2:30 p.m. Tuesday in 433 Blatt to discuss a bill banning texting while driving. More.
- Ways and Means. The full committee will meet an hour and a half Tuesday after adjournment in 521 Blatt to discuss Speaker Bobby Harrell’s economic development bill, and other bills that could change tax policy. More.
- Ag. A subcommittee will meet at 2 p.m. Wednesday in 410 Blatt to discuss a bill requiring a DHEC water management plan as the result of a discharge of waste. More.
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ESC reform is hot ticketThis will be the hot ticket next week in the Senate and the House, as legislators there line up to kick the convenient political football. Sen. David Thomas (R-Greenville) has promised to file an amendment requiring drug tests for those drawing benefits, and a new report claims more than a billion dollars in savings is possible. Basic differences between the two chambers’ plans, according to Rep. Annette Youngblood (R-Summerville): the House would do away with the commissioners, and the Senate would keep on a few, three, but only to handle claims appeals. In the House, also look for the Voter I.D. bill to reenter the floor discussions, as it will be the featured on Speaker Bobby Harrell’s weekly show on ETV.
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Bow-tie frowny faceUsually, a guy in a bowtie makes you smile. Not so much this week with House Ways and Means chairman Rep. Dan Cooper (R-Piedmont).  Caught in the midst of his committee’s hearings to craft the FY2010-2011 budget, Cooper, still quick with a joke, was unusually quick with bad news. According to Cooper, the state’s projected baseline General Fund Budget has shrunk quicker than Starr Jones after gastric bypass surgery.
“Four years ago, we were working with a base of about $7.1 billion,” said Cooper. “This year, we’re starting off at $5.0 billion.” Compounding the drop in revenues were state budget cuts in recent years despite economists acting as harbingers of doom that a serious downturn was coming. Cooper said he warned his colleagues, but also defended them, pointing out that the state’s first real economic drop since the Korean War came in 2003. Good fiscal news! For this first time since last decade (think about it; it’s early 2010), the state’s Board of Economic Advisors met and did not issue a call to further cut state budget expectations. Even better news! The board left its estimate unchanged for this year and next year! What does that mean? Good question. It could mean that the state’s economy has not only bottomed out, but began to rise, so that business activity could match budget needs. Or, that we are so close to the bottom that lagging tax revenues will catch up in the coming months and do away with any current shortfalls. Then again, some economists are calling for a second national economic retrenchment (e.g. recession) in the coming year. Shrinking Democratic ticket Rock Hill’s Chad McGowan announced this week that he will stop campaigning to challenge Sen. Jim DeMint (R-S.C.) for his seat. In a statement, McGowan said it wasn’t the “right” time: his kids were too young and that he might return to run in the next election cycle, in hopes of fixing the nation’s “broken” political system. McGowan was being hailed as a real challenger by his party members, but with his removal from the ballot, the Democrats’ choices and offerings just got even slimmer. Shifting GOP ticket State Rep. Tim Scott (R-Charleston) has announced officially that he is leaving his bid to become the state’s next lieutenant governor. But, he has also decided to enter the race to fill GOP U.S. Congressman Henry Brown’s seat. Brown has announced he will not seek reelection. Smoking debate A proposed state cigarette tax increase reportedly was the hot button topic this morning at the 200-person strong S.C. Hospital Association’s annual meeting. The meeting was highlighted by a debate between four gubernatorial candidates: Republicans Lt. Gov. Andre Bauer and Attorney General Henry McMaster, and Democrats Superintendent of Education Jim Rex and state Sen. Vincent Sheheen of Kershaw. McMaster and Rex clashed the hardest over the proposed tax increase, as Rex wanted to see any increase parsed out between health care programs and education. Heightened debate News that Lt. Gov. Andre Bauer’s will begin airing television ads this weekend has gotten tongues wagging in the back halls of the Statehouse. Bauer will be the gubernatorial candidates first to air ads. Bauer, according to one GOP insider, speaking off the record, is making a smart move if he hopes to cover the fundraising gap between him and the two front-runners from his party, U.S. Congressman Gresham Barrett and state Attorney General Henry McMaster. “Andre just wants to do enough to get into the run-off, where he’s always under-rated and always wins,” said the quiet source.
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Making liberal use of amendment processBy Andy Brack, editor and publisher FEB. 12, 2010 – Anybody care to guess how many bills are in the legislative hopper to amend the state constitution?
 A dozen? Twenty? Thirty?
Try more than 80. By our count, state lawmakers since last year have filed 83 bills that seek to amend the state constitution.
These bills seem to fall into three categories:
Legitimate uses of amendments. Several proposals seek structural changes to the constitution, a flexible document that sets a general vision of our state government. This category of proposals can’t move forward by just passing a new law. There needs to be a change to the constitution. Example: Changing the process involving constitutional officers, such as adjutant general or agriculture secretary. Some say these officers should be appointed and become part of a governor’s cabinet because it’s time to modernize government. But because these are constitutionally-mandated offices, the only way for them to become appointed is for the constitution to change. Currently, there are 17 bills that would impact various constitutionally-elected offices.
Lazy amendments. Several bills seek to change the constitution for measures that could really be handled by law. Examples: Proposals to limit government spending or increase use of reserve funds. State lawmakers don’t really need the crutch of a constitutional amendment for these kinds of ideas. They just need to have fiscal and legislative discipline to stick to priorities.
Political amendments. Several constitutional proposals are political ideology or legislative matters cloaked as amendments. In other words, they’re often partisan, political ideas cynically designed to be put on the statewide ballot to gin up interest in elections so people will get out to vote. Example: the recent same-sex marriage amendment from a few years back. Same-sex marriage was already illegal in South Carolina via state statute, but conservative forces who wanted to make a political statement successfully got it on the ballot. Current “political” proposals to amend the constitution include proposals to again allow video poker, force unions to allow secret ballots and shorten the legislative session.
 Charleston School of Law constitutional law professor John Simpkins explains a constitution isn’t like a statute.
“It is not intended to be a law that is changed very easily,” he said. “The amendment process is intended to be cumbersome – to be difficult, so that the document isn’t changed on a whim.
“When measures are introduced that are really legislative matters couched as constitutional matters, then they run the risk of doing great harm to what we intend by having a constitution – of injecting short-term political considerations into what should be a much more forward-looking arrangement.”
So far in this session, only one measure has been ratified to be on the November ballot. It’s a proposed constitutional amendment to include a “right to hunt” in the state constitution – just the kind of political measure that loads the process with non-visionary matters that should be handled by laws.
 State Rep. Brian White, R-Anderson, and seven other Republicans introduced the measure. White, who said he came up with the idea before the National Rifle Association and other groups started an effort nationally to protect a right to hunt, said he was legitimately concerned that someone in the future would take away people’s right to hunt and fish in South Carolina – even though he knew of no proposals here over the last 10 years to harm people’s ability to hunt or fish.
“I don’t think you should mess with the constitution unless you’re trying to protect rights,” he admitted, adding that the “right to hunt” was such an issue.
But is this “right to hunt” something that’s really needed? Perhaps a guide might be the state’s largest and oldest wildlife and hunting organization, the S.C. Wildlife Federation.
“It was not anything we felt like there was a real need for,” said Executive Director Ben Gregg.
State lawmakers should be conservative in how they amend the state constitution. Yes, there are some structural issues that merit the ballot – adding justices to the Supreme Court, encouraging high-quality public education over a “minimally adequate” one, the right of initiative petitions and restructuring constitutional officers.
But they shouldn’t fiddle with any constitution as part of a game to score political points. It’s too important to deserve such insincere, disrespectful treatment.
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ACLU of South Carolina The public spiritedness of our underwriters allows us to bring SC Statehouse Report to you at no cost. This week's spotlighted underwriter is the American Civil Liberties Union. The ACLU of South Carolina’s National Office in Charleston is dedicated to preserving the civil liberties enshrined in the U.S. Constitution and Bill of Rights. Through communications, lobbying and litigation, the ACLU South Carolina’s National Office works to preserve and enhance the rights of all citizens of South Carolina. Foremost among these rights are freedom of speech and religion, the right to equal treatment under law, and the right to privacy. More: http://www.aclusouthcarolina.org/
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Embracing education as an investment By Jon Butzon and Peggy Huchet
Part 1 of 2 (see part 1)
FEB. 12, 2010 -- In Fiscal Year 2008-2009, the state appropriation for K-12 public schools was $387 million less than the previous year. Additional reductions during the year meant that school districts started FY 2009-2010 with $513 million less in state funds than when FY2008 began. An infusion of federal stimulus funds reduced that loss to $132 million. Along came more budget cuts in November and December 2009 and we are looking at a reduction of $317 million this fiscal year – and probably more cuts to come.
 In 2006, despite warnings from economists and educators, the state traded a stable and progressive funding mechanism (local real property tax) for a less reliable and regressive one (state sales tax) to fund public education. Although forecasters projected that public school expenses would exceed sales tax revenues, even in good times, the new law prohibits school districts from filling their operational budget gaps with property tax.
The recent precipitous decline in sales tax revenue has eviscerated district budgets and the children of South Carolina are paying the price. School districts are furloughing employees, closing schools, increasing class sizes and suspending enrichment and remediation programs. One can only wonder when our schools will be forced to shift from a mission of education to a mission of custodial care.
Compounding the problem is the outdated, inequitable and woefully inadequate methodology used to allocate state operating funds to school districts. In addition, school districts are financed by numerous state and federal categorical programs, which has resulted in a hodge-podge of competing priorities, conflicting rules, and special deals. Constructing a school district budget to strategically fund a world-class education has become unnecessarily complex and onerous.
What must be done? First we must stop the hemorrhaging. School districts are so dependent on state revenue that it will take comprehensive tax reform to bring funding stability. The Legislature needs to create a state tax structure that is equitable, efficient and adequate to produce a superior work force that will attract industry and investment South Carolina. Moreover, it should stop enacting new legislation that aggravates the problems before comprehensive tax reform is accomplished.
It is well past time for the state to update the formula by which it distributes funds to school districts to reflect the true cost of a high quality education in the 21st century. For years, legislative committees have gathered expert testimony and made recommendations about the essential elements of an updated funding mechanism. We know what to do; let’s do it.
It has been said that a crisis is a terrible thing to waste. Demands for high-quality schools have not lessened as funds have diminished. Our children urgently need a top-notch education if they are going to survive in an ever-more competitive world. Here is an opportunity for our leaders to think and act boldly. The Legislature should seize the opportunity to initiate comprehensive changes that will assure that the schools have adequate resources to educate all of our children. The time to act is NOW -- when the faults in the system are magnified; when there are no surplus funds for stopgap solutions to systemic problems; when school district personnel are riveted upon ways to deliver a better education with less money; and when the public is mindful of the need to set priorities and use our resources wisely.
South Carolina needs to embrace public education as an investment in our future and stop dismissing it as an expense to be cut. We cannot afford to wait. Our schools cannot afford to wait. And our children certainly cannot afford to wait - that is, if they are going to take a seat at the table.
Jon Butzon is executive director of the Charleston Education Network. Peggy Huchet is education director for the League of Women Voters of the Charleston Area. RECENT MY TURNS
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2/11: DNR already conducts warrantless searchesTo Statehouse Report: I was interested in your article that appeared in the Sumter Item yesterday regarding the bill going through the SC Legislature that would allow warrantless searches of people on parole or probation. I’m not sure if you are aware of it but the practice of warrantless searches already goes on in South Carolina. These warrantless searches do not target people on parole or probation but are used against law abiding citizens. They are performed by DNR agents and are apparently legal. I live in Georgetown and love to boat and fish the waters of that area. It is a common (regular) occurrence to be stopped by the blue lights of a DNR boat, boarded by armed DNR agents (affectionately referred to as the “Green Gestapo”), and your boat searched from top to bottom without permission or probable cause. These warrantless searches are called “Safety Inspections” but they go well beyond looking at life jackets, fire extinguishers, etc. In the last six years my boat has been subjected to these boardings over a dozen times. Last year I was boarded and searched two days in a row by the same agents. Never have I received a citation or warning as a result of any of these “safety inspections.” I consider these warrantless searches a violation of the fourth amendment of the Constitution: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” It is apparently OK for DNR agents to violate the fourth amendment with impunity. -- Name withheld upon request, Sumter, SC
2/10: Can't keep slapping hands To Statehouse Report: I do not see what the problem would be to allow law enforcement officials to search the house, apartment, or condo of known convicted criminals. Those individuals gave up their rights when they decided to become criminals and steal, sell drugs, etc. If they are living with someone who is not a criminal, then what is that person doing hanging around a criminal in the first place. We cannot continue just slapping the hand of these individuals and harsher punishment should be introduced. All you bleeding hearts who believe they have rights wouldn’t think so if their own daughter was raped by one of those individuals, or you where robed by one of them at gun point. If the convicts know they are subject to a search at any time, it might just keep them from committing more crimes, which would be a good thing. When you brought up the point about a lawyer is trying to protect individuals rights, that made me laugh! Lawyers only care about making money and nothing else! They rank right up there with the ACLU, which is the biggest Anti-Christ organization in the world, and the world would be better off without both of them!!!! -- James M. Ashburn, Lugoff, SC
2/9: Story inspired action To Statehouse Report: Your piece "Legislators Hit Snooze on Tax Commission: TRAC Report Likely to be Delayed" appearing in Columbia's "The Free Times" (January 27 - February 2nd edition) motivated me to contact my elected "representatives" as well as all of those on the TRAC. I asked each Senator / Representative to pass along my opine to the individuals they appointed to the Commission. -- Tim Houghtaling, Lexington, SC EDITOR’S NOTE: Mr. Houghtaling provided a copy of a letter to Sen. Larry Grooms, R-Berkeley, that complained about efforts to privatize Interstates into toll roads and about high personal property taxes. NEED TO VENT? Or mad about something we wrote? Send us a letter to the editor and we'll print it (as long as it isn't libelous!). Please include your name and town for identification purposes. Send up to 200 words to feedback@statehousereport.com.
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Up, down and in the middle BEA. Read our lips. No. New. Cuts. (Yet).
 Inmates. The First Lady misses you … washing her dog.
 Point-of-Sale. A bill to supply tax breaks to buyers and sellers of second properties fell short this week because it could cripple local government …and because some thought it didn’t go far enough. More.
Snow. Yeah! Schools out! Boo! We have to drive in this stuff … and we can’t. Slow down; turn into the skid.
 Jenny. Don’t go on every talk show you can book to sell your new revenge memoir and then bristle at the questions that might embarrass your family, especially when the guy asking the questions is a joke (Larry King) or a joker (Jon Stewart). More.
 Democrats. Chad McGowan stepping down in race against Sen. Jim DeMint (R-S.C.) begs the question, Who will Democrats put up against DeMint? It replaced the question, Who the hell is Chad McGowan? More.
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