2017 South Carolina Legislative Outlook

January 9, 2017

Pardon Our Dust

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The 2017 session of the South Carolina Legislature will begin tomorrow, Jan. 10, 2017, as it enters the first year of the 2017-2018 biennial legislative session.  

In 2016, some of the state’s largest issues, specifically infrastructure funding, were given only short-term fixes, which leaves plenty for South Carolina’s leaders to accomplish this session. And, after 2016’s session-shortening bill, the legislature has three weeks less than usual to complete their work — which will include addressing the state’s pension system, the Abbeville order, and failing infrastructure.

Leadership Transition

South Carolina’s leadership succession remains unclear while Gov. Nikki Haley (R) awaits confirmation of her appointment as ambassador to the United Nations. Once Haley is confirmed, Lt. Gov. Henry McMaster (R), who previously served as the state’s attorney general and is generally liked across the state, will rise to the office of governor.

The position of lieutenant governor is less settled. Current state law requires the Senate president pro tempore, currently Sen. Hugh Leatherman (R-Florence), to fill a vacant lieutenant governor position; however, a 2014 constitutional amendment may allow the new governor to pick his successor. Sen. Leatherman publicly stated before he was re-elected as president pro tempore in December that he will not become lieutenant governor. Senate leaders have reiterated that they will “cross that bridge when we get there.”

Infrastructure Funding, Take 2

After providing only a short-term solution to South Carolina’s unmaintained roads and bridges in 2016, the legislature promised to revisit the issue in 2017 to work out a long-term solution. The state’s gas tax is the primary source of road repair funds, but the legislature declined to increase it in last year’s funding package. The 16.75-cents-per-gallon tax is the second-lowest in the country, and hasn’t been raised in almost 30 years. Expect the gas tax debate in 2017 to feature new opposition, as one of the Senate’s most vocal opponents was defeated in a June primary. Proponents of a raise point to the governor as the key to its success, as Gov. Nikki Haley’s promise to promptly veto the measure killed the legislation in 2016.

The legislature will also address the state’s failing dam system after another major storm, Hurricane Matthew, exacerbated existing damage left by October 2015’s historic floods. A special House committee heard a variety of speakers on the issue; however, no specific policy proposals have emerged from the committee’s work. 

Pension Reform

The Joint Committee on Pension Systems Review met several times last fall to hear testimony from state officials, nonprofit organizations, and state employees concerned about the management of the fund. The testimony focused on the need for policy change and better management; the committee generally agrees change is necessary, but no specific proposals have been outlined yet. Sen. Kevin Bryant (R-Anderson), co-chairman of the Pension Systems Review Committee, plans to schedule a meeting the first week of the session to work out the companion bills for the pension fix.

Currently, the pension fund’s unfunded liability is estimated at $20 billion, assuming the standard 7.5 percent return on the pension fund’s investments. However, according to multiple testimonies, 7.5 percent is no longer a realistic market value of return, so the debt is likely greater.

Budget Shortfall

Determining budget allocations and reductions will be one of the biggest obstacles the legislature faces in 2017, especially with infrastructure, education, and pension issues looming large. Two straight years with major natural disasters have hit the state’s budget hard and left taxpayers with costly unexpected bills. Hurricane Matthew is expected to cost the state almost $64 million. Additionally, a lower-than-usual revenue surplus leaves legislators little room for planned program expansion and overdue maintenance projects at government offices and the state’s college campuses. Some believe this makes a bond bill an attractive option to address the much-needed capital improvement projects at the state’s agencies, but any borrowing proposals will be heavily scrutinized by the legislature. The last bond bill the legislature approved for building projects was in 2001.

Education Improvements, Abbeville v. South Carolina Order

The legislature has yet to fully address the South Carolina Supreme Court’s orders regarding the decades-old Abbeville lawsuit. Many legislators are eager to find solutions for the state’s most vulnerable schools. Expect a variety of bills to address what the legislature has determined to be problematic: teacher recruitment and retention, gaps in early childhood education, and student achievement retention, also known as “summer slide.” Sen. Tom Davis (R-Beaufort) also plans to advocate for school choice as a component of education reform.

Tax Reform?

The House Tax Policy Review Committee met every two weeks during the legislative off-season to hear testimony, work through staff projections, and discuss potential changes to the tax structure. The committee is chaired by Rep. Tommy Pope (speaker pro tempore, R-York), who stated that the committee will continue to meet and work during the 2017 session. The speaker has not given the committee specific objectives, simply a charge to study the current tax system and potential changes. Rep. Pope also stated that the work of the committee does not necessarily have to end in comprehensive legislation for consideration in 2017, and most believe that will not be the result of the committee’s work. 

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