South Carolina 2017 Legislative Report

The South Carolina Legislature adjourned sine die on May 11 for the 2017session year, the first year of a two-year session. The year’s biggestcontroversy was settled by the legislature, ending three years ofpassionate debate on how to pay for much-needed road maintenance andimprovements across the state.

After Veto and Override, Roads Funding Plan Effective July 1

On May 9, the House and Senate approved the roads funding plan withveto-proof majorities. Gov. Henry McMaster (R), whopreviouslypromised 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 and the Senatefollowed with a 32-12 vote to override.

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 feeswere also increased or introduced to raise revenue for the trust fund,including a $16 increase on every biennial registration and license fee inthe state and an increase in the vehicle sales tax, now called theInfrastructure Maintenance Fee.

The legislation is expected to raise approximately $630 million each yearfor road repairs after full implementation. The plan is estimated to cost aSouth Carolina driver who travels 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 another at-large member tothe DOT Commission, the governing body of the DOT, to make full commissionmembership an odd number to avoid tie votes. All nine commissioners will beappointed by the governor and vetted in some manner by the legislature in aplan inspired by the Ethics Commission appointment process. The sevencongressional district seats on the commission will be vetted and confirmedby the legislation delegations of the relevant congressional district,which will now include all legislators who represent any portion of thecongressional district. The two at-large members will be confirmed by theHouse and the Senate.

FY2018 Budget

On June 12, Gov. McMaster utilized his line-itemveto power to remove $56.4 million in spendingfrom the legislature’s $8 billion budget. The governor’sveto messagefocused on transparency in spending taxpayer dollars in light of therecently passed gas tax increase. Here are some highlights of Gov.McMaster’s vetoes:

• $20.5 million allocated for school bus upgrades because the funding is dependent upon the lottery raising more than projected and lottery money should be spent on scholarships as promised.
• $8 million for mandatory contraceptive coverage for dependents of state employees receiving benefits from the state health plan.
• $6.2 million to the Department of Parks, Recreation and Tourism; $3.3 million for sports marketing grants; and $4.9 million for medical contracts because they are vaguely named “port projects.”
• The legislature’s cuts to the S.C. Conservation Bank, which effectively restores funding to the agency at its current levels, because “South Carolina deserves a reasoned debate about the Bank’s future and mission through normal legislative processes, not the budget.”
• The provision expanding the counties’ power to spend gas tax money on nonpaving projects.

The legislature may override the governor’s vetoes with a two-thirdsmajority vote in both the House and Senate, but legislators have suggestedthey would not return before the end of June. The state’s budget takeseffect July 1, 2017, and if the legislature does not return before the endof the year to address the vetoes, the affected agencies will not haveaccess to the funds until well into their fiscal year.

First Part of Pension Systems Fix Finalized, Phase II Begins

After months of study and discussion, Gov. McMastersigned legislation authorizing a plan to fix the state’s ailingretirement system. Despite approving the legislature’s efforts to shore up the plan, Gov.McMaster told lawmakers to continue their work. He believes the state needsa deferred compensation, or 401k-style, plan to offer to state employees,as opposed to the current defined-benefit plan, which promises the state’semployees an exact monthly payment based on length 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.

On June 6, the legislature approved the second piece of “Phase I” of thepension system fix, providing state funding in the FY2018 to state agencies, cities, countiesand other local entities to cover half of the required 2 percent increasein payroll allocation.

The Joint Committee on Pension Systems Review, who crafted the plan, met onMay 9 to map out its continued study and discussion on improving thesystem. Discussion over the interim will cover deferred compensation plansor hybrid plans for future state employees. The committee asked interestedparties to submit input regarding potential plans or any other ideas forimproving the state’s pension system.

Legislature Attempts to Strip Power from State College Oversight Agency

The Commission on Higher Education (CHE)took a hit in the budget, and not just with a loss of funds. The budget conferees agreed to removethe CHE’s authority to review college construction or renovation projects.Under the legislature’s plan, capital improvement projects for the state’scolleges would be reviewed by the Joint Bond Review Committee and the StateFiscal Accountability Authority.

The House has had serious concerns about the mission and authority of theCHE throughout this legislative session. House leaders have stated thatthey are trying to focus CHE’s manpower on academic program oversight,instead of requiring the CHE’s limited staff to stretch resources to domultiple jobs that could be done by other oversight bodies.

On June 12, in his veto message to the legislature, Gov. McMasterrestored the Commission on Higher Education’spower to review capital improvement project proposals from the state’scolleges and universities, stating that “the CHE must be allowed toexercise its oversight authority.”

Special Election Results

On June 20, former state Rep. Ralph Norman (R-York)defeated Archie Parnell (D-Rock Hill) in thespecial congressional electionto fill the state’s vacant U.S. House seat. Norman will serve the remainderof former Rep. Mick Mulvaney’s term; Mulvaney resigned to lead the Officeof Management and Budget after an appointment by President Trump. Normannarrowly defeated Rep. Tommy Pope (R-York), House Speaker Pro Tempore, by a 221 vote margin in a primary runoff just threeweeks before the special election.

On May 30, Lt. Gov. Kevin Bryant’s (R) vacant Senate seatwas filled, after businessman Richard Cash (R-Anderson)defeated a last-minute write-in campaignfrom supporters of his primary opposition, Carol Burdette, formerPendleton, S.C., mayor. Sen. Cash was sworn in on June 6, and immediatelybegan his work on the Senate floor.

Several House seats were also filled in the last month of the session. Ronnie Young (R-Aiken), chairman of the Aiken CountyCouncil, waselected to fill the vacant seatof former Rep. Chris Corley, who resigned from the House in January afteran arrest on domestic violence charges from an incident in December 2016. Bruce Bryant (R-York), a former York County sheriff, waselected to fill Norman’s vacant House seatafter a quiet and uneventful campaign against Democratic challenger BebsBarron Chorak. Wendy Brawley (D-Richland) waselected to fill the vacant seat of former Rep. Joe Neal, who passed away unexpectedly earlier this year. Brawley, the former chairof the Richland One School Board, easily defeated Republican challengerBill Strickland in the special election.

Upcoming Special Elections

Two House Democrats resigned from their seats this spring, leavingadditional vacancies that must be filled. Rep. Seth Whipper (D-Charleston) resigned toaccept a position as a magistrateand Rep. Harold Mitchell (D-Spartanburg) decided to stepdown in early May, citinghealth reasons.