What happened?

After Act 388 went into effect three years ago, the majority funding source for public K-12 education flipped from residential property taxes to a  1-cent state sales tax increase. In turn, several larger counties got surprised, fiscally, losing tens of millions of dollars in state education support.

One of those counties was Charleston, home to arguably the most powerful legislator in the state, Senate President Pro Tempore Glenn McConnell, a Republican.

After listening to the wails of his local school district as it tried to patch up the massive funding leak, McConnell swore to address the formula funding in the state’s Education Financing Act. That act, a relic of the 1970s, established the amount of state money that a county received based on its ability to contribute locally to its education budget.          

Prior to Act 388, a major source of school district funding was from local property taxes. But after Act 388, everything changed because new and volatile sales tax revenues didn’t cover the stable amount that had come from property taxes. So down went school budgets in places like Charleston and Beaufort counties. And yet McConnell did nothing this year to push through change.

That’s not to say no education reforms were pushed through, as the legislature gave counties more “flexibility” in spending state dollars to run their school districts. Basically, legislators loosened the reins, but replaced the team dragging the wagon with smaller horses.

Education spending, in actual dollars, in the new 2010-11 budget will drop to spending levels rivaling the mid-90s, unadjusted for inflation, according to several sources.

Worse next year

It could get worse next year, as the state is facing an expected $1.1 billion shortfall in its General Fund budget, thanks to a dragging economy, lagging tax collections and the evaporation of federal stimulus monies.

McConnell said this week from his corner office in the Gressette Building that the reason he did nothing this year was because he was looking for political leverage to get something done right, and something that was sweeping.

The recession, according to McConnell, has provided him with strong enough leverage to bring the counties who were benefiting more from the EFA formula to the table, because “now everyone is suffering.”

Formula funding may be antiquated and slanted, but it was entrenched and unassailable until the recession dragged everyone down to the same level,  McConnell said.

But the recession has changed that.

Recession could lead to real change

Senate Finance Chairman Hugh Leatherman (R-Florence) said this week that the recession could become the largest agent for change in next year’s budget-writing session. And perhaps beyond, the Taxation Realignment Commission’s mid-November report could divine a path to an entirely different state funding structure altogether.

TRAC’s effects are already being heard in the House, where Rep. Phil Owens (R-Easley), chair of the Education and Public Works Committee, said “something has to be done.”

Owens claimed that 54 percent of the state General Fund budget goes to education, and that legislators should consider applying every solution -- including resorting to zero-base budgeting, where even the most basic questions of what the state should be providing would be picked over.

Like Leatherman, Owens said he hoped the TRAC commission does good, well-researched work, in part, because the state is headed to an overall fiscal crisis, and also because the last effort to reform the EFA died in committee two years ago.

A study committee in the House looking into EFA two years ago not only failed to report out a bill for consideration, but never submitted a final report, according to several still-miffed legislators in both the House and Senate.

That the TRAC commission recently switched to a workgroup/issues format borrowed from the success of the Sentencing Reform Commission has emboldened hope in some legislators, who worry that the already-delayed TRAC report will receive the same dusty fate so many similar efforts have suffered in the past.

House Minority Leader Harry Ott (D-St. Matthews) said this week he knew why, despite all past rhetoric and promises, the General Assembly failed to act on public K-12 education funding this year. To him, it was simple and plain.

“We’re driving this train into the abyss,” said Ott, saying that the legislature won’t act until the crisis really hits home next year. “To extend the train analogy: the only light we see at the end of the tunnel, is another freight train, and we’re going to collide with it next year.”

Crystal ball: If Ott is right, then next year will be as bloody a budget fight as has been projected. But then the question will be, if you saw this coming last year, why didn’t you act then? Regardless of irony and history lessons unlearned, if TRAC puts out a solid report followed by legislative action, then South Carolina could see a major tax structure overhaul next year. If not, then expect the legislators to play it safe and put up Band-aid bills. And considering the amount of fiscal bleeding expected, it could be a whole, lot of Band-aids.

5/7: Circumventing process on abortion

4/30: Could public colleges be partially privatized?

4/23: State's budget is bleeding all over

There is only one legislative committee meeting scheduled next week of any weight. The full House Judiciary Committee will convene Tuesday at 2:30 p.m., or an hour and a half after adjournment, in 512 Blatt for an agenda full of housecleaning issues.  More.

The budget is the big exception, with a conference committee in the offing, to be accompanied by a round of gubernatorial vetoes and a return to Columbia for the legislators likely to override those vetoes in mid-June.

Sine die likely will be June 3, with the session ending or adjourning two weeks later.

UPDATE: 1:10 p.m., 5/14/10:  After publication of this brief earlier today, State Rep. Jim Harrison (R-Richland) denied rumors that he might challenge House Speaker Bobby Harrell (R-Charleston) for his leadership position.  Statehouse Report tried to reach Harrison before press time several times, but wasn't successful until after publication.

Rumors picked up steam this week when Harrison voted with Democrats to sustain Gov. Mark Sanford’s veto of a bill that would allow increased fines and fees to be used to fund the state court system.

Whenever Democrats side with Sanford, something is afoot. The skinny is this: there is an enormous budget crisis brewing for next year’s session, and by voting to sustain, Democrats may be trying to push the timetable up a year and put pressure on House elections this November.

By aligning himself with the Democrats, Harrison may be drawing a line in the sand. Harrell has quietly been praised for his handling of the Sanford affair, but criticized for some of the tough stances he’s taken, particularly for calling for a corporate income tax cut in a year of massive shortfalls. Or Harrison may have simply wanted the ability to vote for reconsideration, which a legislator can only do if he/she votes on the prevailing side.

Harrison didn’t return a late call for comment, so maybe he’s just pulling a procedural move and not massing support. Who knows? What is more certain is that House GOP leadership will likely punish the Dems for their moves, so watch out for Democratic darlings like First Steps, CHIPs and others to get cut in the budget conference committee.

Cigarette tax increase passes

The General Assembly voted this week to override a gubernatorial veto of a bill that will increase the state’s per-pack cigarette tax by 50 cents. The money raised from the increase, about $125 million annually, will go to offset the cost of expanded state Medicaid programming.

The override was important for several reasons. First, it will save lives (cancer) and pay for health care. Next, it may serve as an indicator of how likely the General Assembly will be next year, when neither chamber is in an election year, to raise taxes to cover a looming expected shortfall of $1.1 billion caused by a loss of federal stimulus dollars, unfunded mandates and more.  

Here’s proof of how important the vote was to Sen. John Matthews (D-Bowman). For the past five weeks, Matthews has not been able to attend the legislative session to a very painful pinched nerve. This week, he caught a ride to Columbia, rode in a wheelchair to the Senate floor and walked with a cane to his customary seat just to vote for overriding Sanford’s veto.

“I’m lucky enough to have the finest health care money can buy,” said Matthews, covered by the state health plan, from his home on Friday. “I understand what it’s like for people who have no access to good care or the right prescriptions. We need to stop fighting people getting what we’ve already got.”

Budget fight to continue

One is how to fund the state courts system. And the other is language dealing with abortion. The abortion fight is over whether women covered by the state’s health insurance can have the procedure covered by their policy.

The court funding fight is equally difficult. S.C. Supreme Court Chief Justice Jean Toal has gone to the legislature with complaints of looming cuts and layoffs because a paucity of state funds. This week, the House voted to sustain Gov. Mark Sanford’s vetoing a bill that would raise court fines and fees and let the money stay with the courts. Next week, the House vote to reconsider the override. Failing that, the conference committee meeting between the House and the Senate on the final form of the state fiscal year 2011/12 budget will be much more contentious.

Cloudy transparency

This week, the Senate, prodded in part by public outcry, passed a rule change that will record every “voice vote” in its chambers.  Until this week’s rule change, senators could give up or down voice votes on certain, usually smaller matters, and their individual votes went unrecorded. A similar tradition had been entrenched in the House.

Critics, led in part by the S.C. Policy Council, complained that the practice occluded who voted how on what. Supporters said it would speed votes and debate along, with bigger items, like the state budget, requiring days of recorded votes to pass. The rule change in the Senate presented a compromise. There will still be voice votes, but senators’ individual votes will be recorded as the outcome of the entire chamber in the daily journal, unless they specifically request for their vote to be recorded.

TERI safe -- for now

My, how times have changed. With global competition, off-shoring of American jobs and massive improvements in technology, finding good professional jobs became increasingly harder for graduates in the 2000s. Then the Great Recession hit with a 12 percent gong of unemployment in South Carolina.

So the tens of thousands of new graduates in South Carolina face a job market much more daunting than that of their parents. If they don’t delay entry into the market by going to graduate school, they’re now out there selling their talents in a whole bunch of ways.

With this as a backdrop, we wondered what college presidents were telling apprehensive new graduates about the world of work. Interestingly, their advice had similarities that should be helpful to everyone looking for work -- new grads and the unemployed.

University of South Carolina President Harris Pastides said he was reminding students that they would have many jobs over their careers and that their first job might not be the one they initially wanted.

“I would urge them to take something that may come their way, even if it is not where they hoped to be, and make the most of that opportunity,” he told Statehouse Report. “I would encourage them to be a leader where they can, come up with good ideas that may improve effectiveness or efficiency and good things are likely to happen.

“For those who don’t have an immediate opportunity - - read a national newspaper to stay current with world events, network with alumni, get out of the house as much as possible and stay active.  If they have more idle time than they hoped for, it’s a great time to give extra service to a child, a community or to an organization that would benefit from their involvement.”

SC State University President George E. Cooper encouraged students in the Class of 2010 to keep their faith and remain motivated.

“As you go out into the world, for some of you jobs may be uncertain and acceptance to graduate school may be unconfirmed, but your belief that it will happen is all you need to get you through the wait,” Cooper told graduating seniors a few days before last weekend’s commencement. 

“When life seems to get you down, and you experience downfalls and disappointments, have faith that things will get better and there will be something better in store for your life.”

He added that while having a degree was a big milestone, graduates needed to remain lifelong students and keep working to reach goals: “You must stay motivated to continue to build upon the foundation set here at SC State University.”

College of Charleston President George Benson implored graduates to be innovators and follow some of the lessons offered by Boeing, whose state executive gave graduation remarks.

First, Benson said, students shouldn’t automatically avoid the riskier choice because it could lead to success. Other advice:

• Innovate. “Don’t assume the crowd is correct. Innovative companies and innovative people blaze their own trails.”
  
  
• Prepare. “ Always do your homework. Don’t jump blindly into your future. Weigh potential risks against potential rewards. Or, simply, find a piece of scratch paper, draw a line down the middle, and list the pros on one side and cons on the other.
  
  
• Think. “Strive to be a visionary. Think on a global, transformational scale.”
  
  
• Learn. “Learn from your mistakes. Failure is a much better teacher than success.”

Flora Riley, executive director of the Michelin Career Center at Clemson University, urged new graduates to prepare for the job search by thinking through what they wanted. They should have a professional resume and be comfortable in interviews, which often means practice.

Like Pastides, she said a first job might be in a related field than the one a graduate wanted, which suggests that searches be broad and, perhaps, in different locations that originally envisioned.

“You’ve just got to be creative,” she said.

5/7:   SC should pass on offshore drilling

4/30:   Two words that have caused problems

4/23:   Time has come on cigarette tax

Jobs.  One thousand paper mill jobs in Anderson may not be high-tech, but 1,000 jobs is 1,000 jobs.  More.

Cigarette tax increase. Passing the increase will do some things, but the word around the Statehouse this week was that many who voted for it were staying true to their “small government” roots, because the thought was it was better to have a 50-cent increase this year than a one-dollar increase next year.

$35 million. The uptick in state tax collections was welcomed, but far short of the projected shortfall next year.  More.

Transparency. The Senate’s transparency rule change this week will only add another layer to political gamesmanship, because senators can say they forgot to inform the daily journal of their real vote if they want cover.  On the plus side, it won’t take a week just to vote the budget and all of its nooks and crannies into law.  More.

Cougars. Sarah Palin made an appearance on Friday in Columbia to support Rep. Nikki Haley (R-Lexington) in her gubernatorial bid, as former Jenny Sanford is already stumping for her across the state. This has got to be the worst episode of “Sex in the City.” Ever.