South Carolina State House Month in Review: May 2017

June 2, 2017

Pardon Our Dust

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On May 11, the South Carolina General Assembly adjourned sine die on the2017 legislative session. Legislatorsreturned on May 23 s required by the sine die resolution to take up the budget and vetoes,but due to the lack of business before the House, members were informedthat unless they had other official business to address, it was unnecessaryfor them to attend session.

The Senate met briefly on May 23 to ratify acts and approve S. 671, a jointresolution to allow the legislature tofund the government at current levels in case a budget is not approvedbefore July 1, the beginning of the state’s fiscal year. Senate FinanceChairman Hugh Leatherman (R-Florence) stated that thecontinuing resolution was just a precaution and would be used only in theunlikely event of a budget not being approved by the legislature beforeJune 30.

Budget Conference Committee Concludes Work

The conference committee working to bring the House and Senate versions ofthe state’s FY18 budget together announced its conference report on May 31.Approved funding includes $60 million to increase the state’s per studentallocation to $2,425 for public schools, $12 million for the state’scolleges and universities, and $10 million for the Local Government Fund.

The second piece of thepension system fix was also approved, providing state funding to state agencies, cities, counties and otherlocal entities to cover half of the required 2 percent increase in payrollallocation. The increase is part of the statutory fix to help shore up thestate’s ailing pension fund and will go into effect July 1, 2017, for FY18.

The Commission on Higher Education (CHE)took a hit in the budget, and not just with a loss of funds. The conferees agreed to remove theCHE’s authority to review college construction or renovation projects.These projects will now be reviewed by the Joint Bond Review Committee andthe State Fiscal Accountability Authority.

The House will return to Columbia on June 6 to consider the conferencereport.

Legislature Overrides Veto on Roads Bill

On May 9, the House and Senate approved the long-debated roads funding billwith veto-proof majorities.The billwas immediately sent to the governor for consideration upon passage by theHouse. Gov. Henry McMaster (R), who previouslypromised to veto the bill, wasted no time and vetoed the legislation before the end of the day, withaveto message posted on Facebook.

On May 10, afterseveral rousing speeches on the floor about executive leadership, orlack thereof on this issue, the House voted 95-18 to override the governor’s veto. The Senatefollowed with a 32-12 vote to override the governor, completing three yearsof passionate debate over the gas tax in the state.

Revenue Generation
Effective July 1, 2017, the legislation will increase the state’s 16.75 cents per gallon gas taxto a total of 28.75 cents per gallon by the year 2022. The legislation’s 12cents per gallon increase, named the motor fuel user fee, will be phased inas a 2 cents per gallon increase in each of the six years of the plan. Thestate’s gas tax has not been subject to inflation indexing over the last 30years, which will not change since the final legislation does not includethe Senate’s inflation indexing provision.

The legislation requires that all revenues raised from the 12 cents pergallon increase be placed into the newly created Infrastructure MaintenanceTrust Fund, which is required to use these funds exclusively for repairs,maintenance and improvements to the existing transportation system.

Other fees were also increased or introduced to raise revenue for the trustfund, including a $16 increase on every biennial registration and licensefee in the state and an increase in the vehicle sales tax, now called theInfrastructure Maintenance Fee. For vehicles purchased and immediatelyregistered in the state, the Infrastructure Maintenance Fee is 5 percent ofthe sales price or fair market value, capped at $500. For vehicles notinitially registered in the state, a one-time $250 fee will be imposed uponregistration in South Carolina.New fees for hybrid and other alternative fuel vehicleswere also introduced to help offset the loss in motor fuel user fees frommore efficient vehicles.

The legislation is expected to raise approximately $630 million each yearfor road repairs after full implementation. The plan is estimated to costSouth Carolina drivers who travel 15,000 miles in a car that gets 25 milesper gallon about $1.40 per week in additional motor fuel user fees afterfull implementation.

Tax Relief
Several of the Senate’s various tax credit and rebate proposals, originallyintended to offset the cost of the increase to the state’s taxpayers aswell as help make the legislation veto-proof, are included in the finallegislation. The legislation includes the main tax relief program proposedby the Senate, the motor fuel user rebate, which will be a refundableincome tax credit for preventative maintenance on the state’s registeredprivate passenger vehicles. The legislation also implements a state earnedincome tax credit that will be a nonrefundable credit equal to 125 percentof the federal earned income tax credit. The state’s students also receivedan increase in the cap on their refundable income tax credits for highereducation tuition, which will now be up to $1,500 for two- and four-yearprograms. Finally, in an effort to lower the cost of business in the state,manufacturers will get a small break on their property assessment ratiosphased in over the six-year plan.

DOT Governance Reforms
Additional Department of Transportation (DOT) reforms were also included inthe final legislation. Legislators opted to add an additional at-largemember to the DOT Commission, the governing body of the DOT, to make fullcommission membership an odd number to avoid tie votes. All ninecommissioners will be appointed by the governor and vetted in some mannerby the legislature in a plan inspired by the Ethics Commission appointmentprocess. The seven congressional district seats on the commission will bevetted and confirmed by the legislation delegations of the congressionaldistrict, which will now include all legislators who represent any portionof the congressional district. The two at-large members will be confirmedby the House and the Senate.

Ongoing Ethics Probe Leads to Another Indictment

On May 16,another Republican lawmaker was indictedon public corruption charges in the state’s ongoing ethics investigation.Rep. Rick Quinn (R-Lexington), who faces two counts ofmisconduct in office, stated that he is “asking for a speedy trial so thiscan be resolved as quickly as possible.”

Rep. Quinn is the third state lawmaker indicted in the last six monthsafter investigation by Pascoe, a state solicitor for Calhoun, Dorchester and Orangeburg. Rep. Quinn, aformer majority leader in the House, currently serves on the HouseJudiciary Committee.

On May 23, the legal team representing Rep. Quinn asked the court to removeSolicitor David Pascoe from the case, arguing thatPascoe wrongfully viewed documentsseized in a raid on a business run by Quinn’s father that would beconstitutionally protected as attorney-client privilege. After an all-dayhearing, a judge asked for written arguments on the issue by June 5 beforehe makes a decision.

Vacant State House Seats Filled

Lt. Gov. Kevin Bryant’s (R) vacant Senate seat was filledon May 30, after businessman Richard Cash (R-Anderson)defeated a last-minute write-in campaignfrom supporters of his primary opposition, Carol Burdette, formerPendleton, S.C., mayor.

Ronnie Young(R-Aiken), chairman of the Aiken County Council, waselected to fill a vacant seat in the House, handily defeating two other candidates on the ballot. Young replacesChris Corley, who resigned from the House in January after an arrest ondomestic violence charges from an incident in December 2016.

June 20 Special Election Primaries Take Place

The May 16 GOP runoff for the 5th Congressional District nominationwas too close to call, triggering an automatic recountunder state law. The State Election Commissioncertified the resultson May 19, naming former Rep. Ralph Norman (R-York) as thewinner over Rep. Tommy Pope (R-York) by a 221-vote margin.Norman will face Democrat Archie Parnell and severalthird-party candidates in the June 20 general election.

Democrat Wendy Brawleywon the Democratic primary runoff on May 16in her bid to win the vacated seat of Rep. Joe Neal, who unexpectedlypassed away earlier this year. Brawley will face Republican Bill Strickland in the June 20 general election.

Phase I of Pension Systems Fix Finalized, Phase II Begins

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 said the bill “does not addressthe 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 effect immediately upon the governor’ssignature, decouples and raises the employer and employee contributionpercentages. The employer contribution will be raised, by 2 percent, to13.56 percent on July 1 for FY2018, and will then increase by 1 percenteach year until FY2024, for a total of 7 percent over the course of theplan. 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 Joint Committee on Pension Systems Review, who crafted the plan, metagain on May 9 to map out its continued study and discussion on improvingthe system. Discussion over the interim will likely cover deferredcompensation plans or hybrid plans for future state employees. Thecommittee asked interested parties to submit input regarding potentialplans or any other ideas for improving the state’s pension system.