South Carolina State House Month in Review: March 2017

April 3, 2017

Pardon Our Dust

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On March 30, Department of Health and Human Services (DHHS) Director Christian Soura announced his resignationand return to the private sector. As DHHS director, Soura oversaw thestate’s Medicaid program and the agency’s $7 billion budget, one of thelargest in the state. Soura’s press release touted his work with theBirth Outcomes Initiativeand thePay-for-Success Waiver, which received national attention. Deirdra Singleton, deputy director ofHealth Programs at HHS, will serve as acting director beginning April 7.

Gov. Henry McMaster (R) praised Soura for his work andinnovative leadership at DHHS, noting that Soura “has been a tremendousasset.” The resignation provides Gov. McMaster with his first opportunityto make a major Cabinet appointment since taking over as governor. Heannounced that a committee of state lawmakers and industry experts havealready been appointed to help select the next DHHS director.

Senate Finance Budget Deliberations Continue as House Unveils Bond Plan

The Senate Finance Committee finalized its budget recommendations, whichwill be debated on the Senate floor starting April 4. The approved Houseversion of the budget bill may be viewedhere.

On March 23, the House unveiled its first draft of the$500 million bond billfor the state’s capital needs. Legislators noted that they tried to keepthe bill under $450 million, but given the extent of the state’s capitalneeds this year and the difficulty in ignoring legitimate requests, thebill is just under $500 million. The bill addresses the state’s mostpressing funding issues not covered by the budget plan. Legislators notedthat the state’s colleges and universities were each given funds for theirtop priorities.

The Department of Education (DOE) will receive $30 million to replaceroughly a third of the state’s aging bus fleet, which is about 350 busesunder the plan. DOE testified early in the budget process that the safetyand cost-saving benefits of replacing the state’s fleet justified theinvestment. The current fleet is unreliable, which puts children at risk,and maintenance for the aging buses comes at great cost.

The state will use $80 million to repair state-owned buildings and $15million to renovate the armories, which are all in dire need of maintenanceand improvements after years of neglect. The Department of Transportationwill receive $16.2 million to renovate the state’s oldest rest areas, andsome of the state’s dams that were destroyed in the 2015 flood will berepaired under the $11 million given to the Department of Parks,Recreation, and Tourism.

The Department of Commerce will receive $25 million to repair water andsewer infrastructure critical to economic development, and $10 million wasgranted to the State Ports Authority to increase cargo capacity at theWando Welch Terminal in Charleston.

The bond bill,H. 3722, was approved by the Ways and Means Committee on March 28 and introducedon the floor the following day.

Senate Republicans Stall Gas Tax Floor Debate

On March 29, the Senatevoted against starting floor debateon the gas tax proposal to fund improvements for the state’s crumblingroads. A special order motion, which would have ensured debate on the billand requires a two-thirds majority, failed on the floor, with 18 Republicansenators voting against the motion.

The opposition comes after attempts to insert income tax breaks or othertax relief were not considered in committee. In a press conference at theState House after the vote, Sen. Shane Massey(R-Edgefield, majority leader) said, “We are not going to support astraight-up tax increase.” He also stated that the members who votedagainst the special order motion are not trying to kill the bill. Sen. Sean Bennett (R-Dorchester) said everyone voting againstthe debate “and many others are committed to getting this accomplished andmaking sure it’s done right.”

Senator Offers Alternative Infrastructure Revenue Plan With Income TaxBreaks

Sen. Greg Hembree (R-Horry) announced on March 27 hisintent to introduce a plan to reduce and restructure the state’s incometax. A press release from Sen. Hembree’s office stated that the legislationmakes significant structural changes to the state’s income tax bracketwhile reducing taxes “to working South Carolina families” by almost $635million after full implementation. The 3-5-7 Plan will reduce the state’sfive income tax brackets to three brackets, with 3 percent, 5 percent, and7 percent rates. The goal is to cut taxes for the state’s working poor andmiddle class families, or those households with annual incomes of $5,000 to$80,000.

Sen. Hembree’s plan also raises revenue for the necessary infrastructuremaintenance and improvement projects with the same gas tax increase as theapproved Senate plan, with a 12-cent-per-gallon gas tax increase phased inover six years. The plan also includes additional reforms to the gas taxsystem to ensure that $131 million is restored each year to the state’sgeneral fund toincrease education spending. The bill,S. 600, was formally introduced on March 30.

Long-Time Senator Indicted on Misconduct Charges

On March 17, the ongoing public corruption probe led by special prosecutorDavid Pascoeannounced the indictmentof Sen. John Courson (R-Richland) on two counts ofmisconduct in office and one count of using campaign money for personalexpenses. Sen. Courson is the second state lawmaker to be indicted in thelast four months after investigation by Pascoe, a state solicitor forCalhoun, Dorchester, and Orangeburg.

Sen. Coursonreleased a statementthrough his attorney vowing to fight the allegations, which he said are “completely false.” Sen. Courson has served in the Senate since 1985 and currently chairsthe Senate Education Committee. He previously served as Senate president pro tempore from 2012 until 2014.

Sen. Courson disclosed on March 23 that he wasdiagnosedwith a rare form of skin cancer in December 2015, and has been receivingtreatment since then. He also stated that he does not plan to resign hisSenate seat. On March 29, Sen. Courson wasallowed to remain free on personal recognizance after a brief bondhearingas he fights the charges.

Ongoing Ethics Probe Delays Governor’s Nominations

On March 23, the legislature rescheduled the vote to confirm Gov. Henry McMaster’s (R)two nominations to the S.C. Ports Authority board, in an effort to provide more time for further investigation of thenominees’ ties to the ongoing ethics investigation in the state.

Sen. Larry Grooms (R-Berkeley), Senate TransportationCommittee chairman, stated that legislators simply wanted to “do a littlemore homework” on the nominees. David Pascoe, the special prosecutorheading up the ongoing ethics investigation, is now looking into paymentsmade by the Ports Authority, which was recently subpoenaed in relation tothe investigation.

Pension Systems Fix Heads to Conference Committee

The House rejected the Senate’s amendments to the plan to fix the failingstate retirement system on March 29. The Senate’s amendments alignH. 3726with the approved Senate version,S. 394. At issue are some minor differences in proposed oversight of the system,as well as the Senate’s additional language mandating that new state hiresparticipate in adefined contribution retirement planonce the system is fully funded and stable.

Sen. Vincent Sheheen (D-Kershaw), co-chairman of thespecial committee that proposed the plan, stated that closing the pensionsystem to new employees is meaningless, as the state is decades away fromfully funding the system. But the legislature will eventually have todecide who shoulders the retirement risk for the state’s employees, as somelegislators, including Sen. Tom Davis (R-Beaufort),believe the current system is not sustainable.

The Conference Committee includes Sens. Sheheen, Sean Bennett (R-Dorchester) andMike Gambrell (R-Anderson), and Reps.Bill Herbkersman (R-Beaufort),Tommy Stringer (R-Greenville) and Gilda Cobb-Hunter (D-Orangeburg), who all served on theJoint Committee on Pension Systems Review.

Both the House and Senate versions decouple and raise the employer andemployee contribution percentages. The employer contribution will be raisedby 2 percent, to 13.56 percent on July 1 for FY2018, and will then increaseby 1 percent each year until FY2024. This means the employer contributionwill raise 7 percent to a total of 18.56 percent over the course of theplan. The employee contribution will also increase on July 1 from 8.66percent to 9 percent, but will be capped at 9 percent for the followingyears.

Real ID Legislation Headed to Governor for Signature

On March 29, the House concurred with the Senate’s amendments to theReal ID legislationin order to bring South Carolina driver’s licenses in line with federalsecurity standards. Once approved by the governor,the legislationwill take effect immediately. Currently, the state’s driver’s license doesnot meet the federal ID standards enacted after the events of Sept. 11. Thestate is operating under a number of exemptions from the U.S. Department ofHomeland Security to allow access to military bases within the state toSouth Carolina citizens. The Senate amendment addresses the concerns ofsome members about privacy rights of the state’s citizens.

Without legislative action on this issue, the state’s identification cardholders eventually would be prohibited from entering military installationsor federal buildings or boarding certain flights without a federallyapproved ID, such as a passport. Beginning June 6, anyone wanting to enterFort Jackson or Shaw Air Force Base will need to have a federally acceptedID.

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