South Carolina State House Month in Review: April 2017

May 1, 2017

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Senate Approves Gas Tax With Many Additions

After days of lengthy floor debate and numerous floor amendments, theSenateapproved its version of the gas taxon April 26. The Senate’s plan increases the gas tax incrementally by 2cents per gallon over six years for a total increase of 12 cents pergallon, which will raise approximately $200 million more than the approvedHouse plan. But the Senate’s increased revenue will be offset by thenumerous tax credits included in the plan. Senators who supported includingtax relief in the plan believe it’s important to make South Carolinianswhole, while still capturing out-of-state funds to help pay for roadmaintenance and improvements.

The Senate plan includes a plethora of tax relief, including collegetuition rebates, earned income tax credits, commercial property tax cutsfor manufacturers, and vehicle maintenance and gas tax rebates. Theserebates and credits would reduce the raised revenue by an estimated $150million, even though the bill includes caps for the amount of tax reliefallowed. Additional money to cover some of the tax credits may be pulledfrom the general fund and the capital reserve fund, if necessary.

The state’s 16.75 cents-per-gallon gas tax is one of the lowest in thecountry and has not been raised in the last 30 years nor indexed forinflation. The approved Senate version includes a provision that authorizesinflation adjustments after the increase is fully implemented, and mandatesthat the inflation adjustment not raise the state’s gas tax above the gastax levied in any bordering county in North Carolina or Georgia.

Sen. Larry Grooms (R-Berkeley) championed the compromiseamendments, which ultimately received a 30-9 vote for third reading onApril 27, but some Senators remained unconvinced. As expected, Sen. Tom Davis (R-Beaufort) filibustered the bill late April26, just before the full bill was approved. House members also woke up onApril 27 with questions about what exactly the Senate had done the nightbefore.

The bill will now return to the House, where representatives have theopportunity to accept the Senate’s amendments, but will not likely acceptthe full tax relief package. Expect the bill to head to conference quicklythis week, as the dwindling number of legislative days pressureslegislators to get a bill to the governor.

On multiple occasions, Gov. Henry McMaster (R) hasexpressed his dislike of the gas tax proposal, stating that it should be a“last resort”for infrastructure maintenance and improvement funding and that he willvetothe legislation if it makes it to his desk.

Budget Conference This Week

On April 26, the House returned the budget to the Senate, where senatorsimmediately non-concurred with the House amendments. On May 2, the Houseand Senate will appoint three members from each body to the conferencecommittee on the budget package,H. 3720andH. 3721. The conference committee will likely begin work before the end of theweek.

The House’sbond proposalfor the state’s capital improvement needs, which Gov. Henry McMaster (R) urged the legislature toutilize for infrastructure funding insteadof capital improvement, remains in the House with requests for floordebate.

Governor Signs Pension Systems Fix

On April 25, Gov. Henry McMaster (R)signed legislation authorizing a plan to fix the state’s ailingretirement system. Despite approving the plan, Gov. McMaster stated, “The bill does notaddress the single most important measure which would ensure the long-termfinancial stability and viability of the state’s retirement system.” Hebelieves the state needs a deferred compensation, or 401k-style, plan tooffer to state employees, as opposed to the current defined-benefit plan,which promises the state’s employees an exact monthly payment based onlength of service and salary.

The approved plan, which went into effective immediately upon thegovernor’s signature, decouples and raises the employer and employeecontribution percentages. The employer contribution will be raised 2percent to 13.56 percent on July 1 for FY2018, and will then increase by 1percent each year until FY2024, for a total of 7 percent over the course ofthe plan. By the end of the plan, the employer contribution will be 18.56percent. The employee contribution will also be increased on July 1, from8.66 percent to 9 percent, but will be capped at 9 percent for thefollowing years.

The members of the Joint Committee on Pension Systems Review, who craftedthe plan, will meet again onMay 9to map out their continued study and discussion on improving the system,which will likely include considering deferred compensation plans forfuture state employees.

Governor Asks for More Federal Money for Flood and Hurricane Relief

On April 27, Gov. Henry McMaster (R) formally askedCongress for$220 million in additional disaster aidto help cover expenses from the historic 2015 flood and 2016’s HurricaneMatthew. Currently, a federal disaster recovery grant program is expectedto bring $222 million in aid for the disasters, but Gov. McMaster pointedto the state’s dire need for safe housing, saying those funds have alreadybeen committed to some 2,300 South Carolina families who need helpreplacing or renovating their homes. Gov. McMaster noted that there arestill 2,700 families of low to moderate means who will go without disasterrelief, and if received, the additional $220 million will help meet theirneeds.

State Media Sue House GOP for Records in Ongoing Ethics Probe

A coalition of South Carolina media outlets have come together tosue the House Republican Caucusfor financial records recently turned over to the S.C. Law EnforcementDivision (SLED) during the long-running corruption investigation. The mediacoalition argues that the caucus is subject to the state’s Freedom ofInformation Act for both its records and meetings, which have been closedthis year. The lawsuit comes after the caucus denied The State newspaper’sFreedom of Information Act request to view the records submitted to SLED.

Medical Marijuana Proposal Losing Steam

TheS.C. Compassionate Care Actappears to have stalled for the year as the legislative days pass withoutcommittee action in either body. Despite increasing support in the House,the Medical, Military, Public and Municipal Affairs Committee has failed tomove the legislation forward to the floor. Opposition from the state’s lawenforcement community and leadership has continued to have great impact onthe proposal.

Ports Board Nominees Approved After Ethics Probe Delays Hearings

On April 5, the Senate Transportation Committee approved Gov. Henry McMaster’s (R) two nominees to the S.C. PortsAuthorityafter raising questionsabout their connections to the public relations firm in the middle of thestate’s ongoing ethics investigation. The nominees — Kenneth Jackson, asenior vice president at SCANA, and William Jones, an attorney — stillrequire approval by the full Senate before being confirmed.

House, Senate Disagree on Future of Higher Education Oversight Agency

In the upcoming budget conference, the House and Senate will have to cometo an agreement on thefunding and future of the S.C. Commission on Higher Education(CHE). Currently, the House budget plan removes funding and authority forthe CHE to approve college construction projects, but the Senate planrestored both.

The House has had serious question and concerns about the mission andauthority of the CHE throughout this legislative session. House leadershave stated that they are trying to focus CHE’s manpower on academicprogram oversight, instead of requiring the CHE’s limited staff to stretchresources to do multiple jobs that could be done by other oversight bodies.

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