MARCH 12, 2010 -- Think the state budget is bad now? Just wait until next year.

Sure, an additional half-billion may have to be cut from the already shrunken, current-year $5.1 billion state General Fund budget before July 1.

Sure, the possibility of even more Medicaid and K-12 education cuts, usually the third rail in state budgeting, seem to be more and more of a certainty.

Sure, tens of thousands of families might still have to take over full-time care of handicapped members if a $200 million federal funding extension doesn’t restore planned cuts to the S.C. Department of Disabilities and Special Needs (DDSN).

But many Statehouse watchers and combatants have been saying recently that nothing this year will compare to the budgeting bloodbath of next year. That’s when the legislature has to carve out a serviceable 2011-12 budget in the face of mounting costs, the exhaustion of federal stimulus dollars, and projected flat or nonexistent state tax revenue increases.

How bad could it be?

State lawmakers will face fiscal reality this week when House members start debating the 2010-11 state budget. But they also will keep this in the backs of their minds: the long-range forecast by the Office of State Budget outlines the possibility that an additional $700 million will have to be cut from the 2011-12 budget. That means close to $1.3 billion could dissipate from the state budget in next 15 months.

Why? Because state revenues lag behind what’s happening in the slowly recovering economy, which makes sense. If you earn more money this year than last, you won’t pay taxes on it until next year. 

Considering the overall size of the state budget, close to $20 billion annually, $1.3 billion might not seem like that big a bite. But federal pass-through funds are not as malleable as state money.

State projections show anemic tax revenue growth curve continuing for the next two years. That means that the state will likely bring in close to the same amount of money in taxes.

Next year when the legislature sits down to build the 2011-12 fiscal year budget, President Obama’s stimulus package will be a fond memory. Though perhaps not too fond, because to get the money, some state service agencies had to re-expand their service base to 2008 guidelines.

That means several state agencies, such as the Department of Health and Human Services in particular, will have more citizens dependent on their services, but even less ability to provide them. And considering the current projections for the following fiscal year, legislators will likely have to chose between tax increases and draconian cuts.

The nuclear option

There is, however,  a third option, a nuclear option.

In the 2011-12 budget, the legislature could fully fund the bare necessities, the programs they are required by statute to maintain -- K-12 education, higher ed and Medicaid at current levels, and prisons at an even more bare-bones level.

Research by the Senate Finance Committee shows spending in these four areas is about  83 percent of the 2009-10 General Fund budget. But for the 2011-12 budget – the one that won’t have buckets of federal stimulus dollars -- full funding of just those major state priorities is about equal to all of the state’s projected tax revenues for 2011-12. 

If the nuclear option were exercised, that would mean full funding of those four categories could mean cutting everything else in state government, such as money to run the House and the Senate, sending money back to counties and cities, paying for the courts system, retiring debt, etc.

The good ol’ days

“It’s weird, but these may be the ‘good ol’ days’” when it comes to budgeting, said House Ways and Means chairman Dan Cooper (R-Piedmont), who has suffered the slings and arrows of criticisms that proposed current-year cuts to disability programs would pull the wheelchair out from beneath the disabled.

“There needs to be a plan, but I don’t have one for next year, yet; I’m trying to get through this year’s budget first,” said Cooper. “But I’m working on it.”

Cooper’s committee starts the budgeting process, along with any bill that proposes a new tax in the state.

Gov. Mark Sanford wasn’t optimistic this week, either.

“It’s going to be a nightmare,” Sanford told Statehouse Report, as he walked back to his office Wednesday after debated supporters of a tax incentive package for a mega-mall in Jasper County.

Sanford won’t be in office next year. Trudging through the rain, the governor expressed deep concern that Statehouse leaders had pushed back the deadline for the Taxation Realignment Commission report from this month until mid-November, after the gubernatorial election to replace him.

Sanford said that fixing the state’s tax structure is one of the keys to its future.

And the good news is …

Coastal Carolina economist Don Schunk has been traveling the state, giving a report on the state’s economy now and into the near-future.

“The good news is, we are no longer in a recession,” said Schunk, who sees a smattering of bright spots dotting the state economy. But, he warns, it will be years, maybe as many as three, before the average business “feels” the improvement.

But there are dark spots abounding, too, according to Schunk. For instance, he said, the state is over-developed, in terms of residential to commercial real estate. That’s bad since real estate was the cornerstone of the state’s meteoric rise in tax revenues between 2002-2007, when it climbed 6.2 percent annually.

It was also, Schunk argued, the tanking of real estate that helped tax revenues to plummet like a rollercoaster from 2007-2010, when they fell 8.6 percent a year.

Crystal ball:  Sen. John Land (D-Manning), who serves on the Senate Finance Committee, sees a future where the legislature will make cuts and muddle through this year, but next year, get more serious about increasing more than just the cigarette tax. “I just don’t think there’s the political will this year“ to raise taxes, said Land. “But the chorus of people protesting cuts at DDSN may become too loud for even the legislature to ignore next year.”

• 3/5: Fines, fees make up bigger part of budget
  
• 2/26: Tough choices on Corrections
  
• 2/19: Legislature looks at texting ban

The House will debate the proposed 2010-11 budget starting Monday, and this will dominate all aspects of its agenda. Greg Foster, communications director for House Speaker Bobby Harrell (R-Charleston) said “everything else is basically in a waiting pattern until next week.” As of deadline on Friday, there was only a single announced minor subcommittee meeting scheduled for next week

In the Senate, there will be a light schedule, too. On Tuesday, March 12, a Judiciary subcommittee will meet at 9 a.m. in 105 Gressette to discuss a sentencing reform bill.

Perhaps the most important meeting will come later on Tuesday, at 3 p.m., with the full Finance Committee is slated to meet in 308 Gressette to discuss a state spending cap bill being pushed by its President Pro Tempore Glenn McConnell (R-Charleston) that would tie tax increase to rolling, 10-year averages.

The full Medical Affairs committee will meet Thursday at 10 a.m., in 308 Gressette with a full agenda, dominated by DHEC standards issues.

The Senate will soon receive a House-passed texting-while-driving bill that mirrors its own; $25 fine and no points for drivers’ licenses.

A big fight may be brewing in the state Senate where a threatened plan to get a House abortion bill fast-tracked could derail the Senate’s already-crowded agenda.

Senate brass have already warned their intent to block any move to drive this particular wedge into the process.

Word around the Senate this week was that if the bill, which would require a 24-hour cooling off period for women requesting an abortion, were to be put on the special consent agenda, that some Democrats would filibuster that bill and, in punishment, throw up amendments and slow down the budget bill when it emerges from the House.

One leading Democrat in the Senate, speaking on the condition of anonymity, said he’d heard of no plan, but wanted to see what Sanford supporters would do.

Lt. Gov. Andre Bauer has riled many across the state this week when it was announced he had hired political consultant Chip Saltsman to work on his gubernatorial campaign.

Saltsman may be most recognizable for having resigned from his bid to become Republican National Committee chairman after being linked to a CD distributed to supporters that included the song, “Barack the Magic Negro,” over a year ago.

“Chip didn’t even know the song was on there,” Bauer told Statehouse Report. “The main reason I hired him was his ability to run a campaign on a shoestring.” Bauer went on to praise Saltsman record working on the campaigns of both Bill Frist and Mike Huckabee. Bauer, himself, took considerable heat earlier this year when he likened children on free and reduced lunch programs to stray animals.

Will he or won’t he?

Gov. Mark Sanford remained somewhat coy this week about veto plans for a bill that would carve out a big chunk of tax relief for a retail shopping mall development in Jasper County.

Supporters, gathered on the grounds of the Statehouse and providing a free lunch to legislators and staff, argued that the development would bring much-needed jobs to their economically depressed corner of the state. Sanford, wading into their midst, praised them for “doing exactly what you are supposed to be doing, fighting for what’s best for you community.”

But, the governor pointed out, he was charged with doing what was best for the rest of the state, and said that big tax cuts like this one -- $100 million -- have historically gone through funding migration where public funds end up trebling private money in these kinds of packages. Asked afterward would he issue a veto should the bill emerge intact from the legislature, Sanford said he would wait to see the final product, “but I think we’ve laid out our position.”

So let’s try to look at qualities of good leaders in the abstract that can be applied to the current crop of candidates to help you make a decision for which you might consider supporting.

Regardless of party, most politicos agree that two recent governors – Dick Riley and Carroll Campbell Jr., both of Greenville – were effective leaders for the state. Others haven’t been as good. So what were the qualities that made Riley and Campbell good? Here are some indicators as related through several interviews:

Varied leadership experience. Both Riley and Campbell served in the state House and Senate before offering for higher office. Campbell also served as a chief of staff to a governor and as a member of Congress. Such broad government experience seems to help governors implement their visions.

Business experience. Having some success in business – law for Riley and small business for Campbell – added another layer of experience in that both knew how government impacted people and businesses in real ways. Business experience also helps leaders know the importance of cultivating relationships, understanding management and seeing a broader picture.

Big picture. Effective governors also seem to be able to balance the need to be partisan at some times with the necessity of being bipartisan at other times to promote the state’s interests. Economist Harry Miley, who served on Campbell’s staff, recalled that Campbell had an uncanny knack of being able to “think smart” but also compromise when needed to get things done. Miley said effective governors have the strength to stick to their convictions and do the right thing for everyone, not just a narrow interest.

Vision. S.C. Chamber of Commerce President Otis Rawl said successful governors also have a broad vision and are able to implement it in ways that really matter to people and improve the quality of their lives. “Do they have a vision of something more than just tomorrow?” Rawl asked. “You’ve got to be able to run on an issue that really matters.”

Salesmanship. But just having a big vision isn’t enough. Effective governors have to be able to sell their ideas to the people and state legislators. And sometimes that takes cajoling, horse-trading and compromise. “To be truly effective, you have to be the leader of the state and not the politician in the Statehouse with the most clout,” said political consultant Phil Noble of Charleston. “Being leader of a state involves mobilizing the whole state – the creative people, business community and the like – and setting an agenda for what needs to be done.”

If there ever were a time in South Carolina’s history that it needed real leadership, it is now. These past months have been rudderless at the top following much-reported infidelities by GOP Gov. Mark Sanford that have made him little more than a lame duck figurehead. Added to South Carolina’s problems are budget challenges and high unemployment caused by the slowly improving economy. 

Picking the state’s next leader is more important than ever. When making your choice later this year, it might be smart to look beyond the labels and rhetoric. Judge the candidates based on the qualities they have as compared to successful and effective governors of yore.

Noble suggests South Carolina needs transformational leadership, not just “transactional leadership” that ensures that the trains of government run on time.

“The political environment and political culture has shifted and is continuing to shift,” he said. “Vision is more important than experience. Values are more important than record. And communication is as important as the mechanical ability to get things done.”

DDSN. $200 million may be coming South Carolina’s way, thanks to an extension in federal funds earmarked for programs service citizens with disabilities. Tens of thousands of disabled citizens were facing significant losses in state services.  More.

Goggins. Juanita Goggins, the first black woman elected to the S.C. Legislature, was hailed this week for her good works. Unfortunately, she died alone, apparently of hypothermia, the week before. More.

Unemployment. National jobless rates may be improving, but the state is at a record 12.6 percent.  More.

Bauer. You hired Saltsman?  And this was supposed to clean up your image?

Sheheen. Misstating 15 percent of your endorsements? Who’s running your gubernatorial campaign, Andre Bauer?  More.

Foreclosures. Still rising, up 26 percent this February compared to a year ago.  More.