House Republicans Give in to Democratic Pressure over Cuts to Local Government

GOP indicates their intention to reduce cuts after Democratic resistance

Columbia, SC – In an effort to kill legislation proposed by House Republicans that would cut funding to local governments by $122 million in this year’s budget, Democrats in the House blasted the proposal for nearly four hours on Thursday.

Democrats took a stand against the Republican proposal t hat would force local governments to either raise property taxes or cut basic services in communities across South Carolina. Dozens of House Democrats spoke out against the tax hike proposal on the house floor, proposing amendments exempting all 46 counties from being subject to the cuts.

“House Democrats refuse to force local governments to raise taxes on their citizens simply because Republicans cannot provide solutions for the problems they created”, said Rep. James Smith (D-Columbia). “These cuts would cripple local governments to the point that they could no longer operate and provide basic services like fire, police, and EMS”.

Smith concluded that these were the most irresponsible cuts he’s seen proposed in his twelve years in the House.

Press reports indicate that the Democratic opposition to this bill had forced Ways and Means Committee Chairman Dan Cooper (R-Anderson) to reconsider the magnitude of the cuts. He told the Greenville News on Friday that he thinks it is a strong possibility that the committee could reduce the cuts from $122 million to $50 million.

“We’re pleased with the reduction in the cuts, but it’s not enough. We won’t stay quiet while our colleagues across the aisle attempt to pass the buck of responsibility”, said Democratic Leader Harry Ott (D-St. Matthews), who also serves on the Ways and Means Committee.

House Democrats will continue to fight for jobs, public education, and healthcare during budget week slated to begin Monday morning.

Rural Communities Suffer Most Under House Budget Proposal

In a surprising move the South Carolina House Ways and Means Committee decided that the best method for emerging from an economic recession is to raise property taxes, force layoffs, and reduce services necessary for everyday taxpayers and economic development. This crisis will occur if the House chooses to continue down the path set when Ways and Means balanced the state budget by slashing the Local Government Fund. Perhaps not so surprisingly, the House Leadership has decided that rural communities should once again pay the largest price for the state’s continued budgetary mismanagement.

The Local Government Fund is best looked at as the first property tax relief granted to the taxpayers of South Carolina. If funded according to the statutory formula, local governments are sent 4.5% of the last fiscal year’s State General Fund. This provides all counties with a predictable flow of income other than property taxes. Next year, for instance, we know the Local Government Fund will diminish because of the reduction in this year’s General Fund.

This money does not come to counties for nothing. Counties are statutorily required to comply with numerous mandates on behalf of state government. Some of these mandates include the housing of the judicial system, paying for magistrates, and providing office space and supplies for state agencies located in the county. All of these are state functions (indeed the authority over all rests in Columbia) but are funded by county tax dollars.

Clearly, the greatest suffering as a result of the ongoing recession is in rural communities. Many counties are experiencing double digit unemployment, companies laying off employees, and diminishing tax bases. Three years ago, the General Assembly sentenced the rural citizens of this state to second class citizenry as a result of imposing a millage cap caste system. The millage cap states that local governments may not increase the millage more than the consumer price index plus population growth in the county. In communities with lower population, this means that citizens will never enjoy the services available in more rapidly growing communities, even if they are willing to pay for it. With the proposed local government fund cut, the House leadership decided that turning their backs on the rural taxpayers of this state is not enough. They feel that our citizens do not deserve basic services, such as law enforcement, EMS services, and infrastructure maintenance. They want your property tax dollars to increase and go toward funding state functions while cutting those services that local taxpayers want and deserve.

Reeling from the millage cap and the recession Abbeville County, for instance, eliminated an ambulance station and turned it into a “quick response vehicle” station. This means that a truck with equipment and drugs is dispatched and works to stabilize the patient until a transporting ambulance can arrive on the scene. Abbeville has also instituted a one week unpaid furlough, cut four positions from the payroll, and reduced three other positions from full to part-time. The proposed action of the Ways and Means committee means another $660,000 cut from their budget, a cut that will put taxpayer lives at risk.

My constituents in Saluda County will lose $485,110 as a result of this cut. This is the equivalent of 9.88 mils. The millage limitation this year for Saluda County will likely be 3.9, which means, assuming county council raises taxes to the maximum extent allowed, we could make up $191,427. The remaining $293,683 will need to be stricken from an already lean budget utilizing either a reduction in force, furloughs, elimination of services or a combination of all three.

The result of cutting the Local Government Fund is apparent. Local governments are limited by a millage cap created in 2006 when the General Assembly, awash in cash, implemented a sales tax for school property tax replacement. At the same time they decided to emasculate local government fiscal authority by limiting millage increases to CPI plus population growth. Clearly, as a result of this measure, all local governments will be forced to increase millage to the maximum allowed under the limiting statute. In wealthy, populous communities, perhaps like those in the House leadership, taxpayers will see the taxes on the homes and cars skyrocket with some service loss. However in rural communities, already battered as a result of the General Assembly’s millage cap, this action will result in higher taxes, the slashing of local services, and most likely layoffs and furloughs in rural local governments. It is my hope House members who represent constituencies like mine will not once again succumb to the House leadership, but instead will save our taxpayers from the ruthless pillaging these actions represent.

By T. Hardee Horne, Chairman of Saluda County Council and a member of the Board of Directors of the South Carolina Association of Counties

2008 Proposed State Budget Cuts

Gov. Sanford's propsed budget cuts appear here online. You can leave comments on that page as well.

South Carolina Chamber Response
The following response may be attributed to Otis B. Rawl Jr., President and CEO of the South Carolina Chamber of Commerce.

First, the South Carolina Chamber of Commerce commends Governor Sanford for acknowledging the need to increase South Carolina’s lowest in the nation cigarette tax. But, the South Carolina Chamber believes that any increase in the cigarette tax must be used for healthcare-related purposes only. The Chamber supports increasing the state’s cigarette tax to the Southeastern average to provide premium assistance to individuals and small business tax credits.

The Chamber also applauds Governor Sanford for trying to create a tax reform plan to spur investment and create jobs, but we believe that in order to truly achieve this, comprehensive tax reform must be achieved. Like the Governor has called for, it is imperative that the state examines inequities in the current property tax structure that adversely impact businesses. Examining corporate income tax should be part of this reform.

South Carolina, like the rest of the nation, is experiencing a difficult time in today’s economy, but we are placed at an even larger competitive disadvantage because of past piecemeal approaches to tax reform. These piecemeal approaches have created shortfalls in South Carolina’s budget and ultimately harm the state’s economy, increase job losses and negatively impact everyone’s pocketbook.

Pieces of Governor Sanford’s proposal should be considered as part of an overall comprehensive tax reform plan. The business community thanks Governor Sanford for his continued dedication and work on behalf of all South Carolinians.