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The State Budget: Taxpayers’ Priorities, or Politicians’?

When the S.C. General Assembly passes a budget each year, just like when families plan out their household finances, legislators define their spending priorities for the state.

More money for this, less money for that, and so on and so forth.

But, to what extent does the Legislature’s budget reflect the concerns of Palmetto State taxpayers?

It’s a sweeping question, to be sure, so it might be more useful to ask: To what degree does the budget not evince the people’s priorities?

Some broad themes, such as another record-size budget and a windfall in state tax collections, as well as some specific examples – including state employee raises and more money for economic development – help answer the question.

This is a good time to ask it because the Legislature is on the cusp of passing its spending plan for the 2012-13 fiscal year, which starts July 1.

A conference committee of three House members and three senators is working to forge a compromise budget for next fiscal year based on different versions each chamber has approved.

The committee could finish up today when the Legislature reconvenes to begin wrapping up its work for the year.

Whenever the committee does report out a budget, it will go back to the House and Senate for a final OK and then to the governor, who can approve or veto all or parts of it.

Broadly speaking, a blueprint the conference committee is working with, consisting of House changes to the Senate’s proposed spending plan, could once again produce the largest state budget ever.

That template puts the total budget – general state dollars along with federal and “other” funds – at $23.54 billion, according to a tabulation prepared by the Office of State Budget.

Yes, although the Great Recession hammered state tax collections and there’s been much talk of that fact, it’s also a fact that the budget has grown virtually unimpeded for the past 10 years.

“Since 2002, the total budget decreased during only one year, FY 10, by 0.8%,” says research published by The Nerve’s parent organization, the South Carolina Policy Council, a nonprofit advocating limited government, free enterprise and individual liberty.

During the recession, declines in state tax revenues largely were offset by increases in federal and “other” funds – other being mostly fees and fines, including tuition.

“The budget always grows,” says Lexington County resident David James, vice president of the South Carolina Association of Taxpayers. “Even in the worst of years it’s larger than in the previous year.”

Generally speaking, that trend goes unreported in the media, as they tend to focus on only the general fund portion of the budget that derives from state taxes.

But even taking just that part of the budget points up another broad theme to what’s likely in store for South Carolinians in fiscal 2013.

The Legislature has about $1 billion more to work with than what state revenue forecasters originally projected, according to Les Boles, director of the Office of State Budget.

The extra money, some of it a one-time infusion but most of it estimated to be annually recurring revenue, comes from increasing tax collections in an improved economy.

The conference committee template – the House changes to the Senate’s proposed budget – returns a small part of the $1 billion in tax relief.

That includes $77 million in order to lower unemployment insurances taxes plus $65 million to cut taxes on small businesses, according to a bullet-point explainer House Speaker Bobby Harrell links to on his website.

Otherwise, however, the House-amended budget spends most of the additional $1 billion.

The largest chunk of the new spending, approaching one-third of the $1 billion, would be $300 million to deepen the Port of Charleston.

Other big spending increases include:

  • A 2 percent across-the-board pay raise for state employees, costing tens of millions of dollars;
  • A $38 million, or 760 percent, increase – from $5 million to $43 million – in the deal-closing fund, an account controlled by the governor, through the Department of Commerce, and designated for corporate welfare in the form of economic development subsidies; and
  • At least $10 million more for the local government fund, which the state parcels out to counties and municipalities.

Despite the House’s proposed spending increases, Harrell, a Republican representing Charleston County, touts the chamber’s amended budget as fiscally conservative.     

“This is a solid, fiscally conservative, balanced spending plan that limits government growth while responsibly planning for our state’s economic future,” he says in a statement accompanying the bullet-point explainer.

The statement goes on to assert $700 million in tax relief under the budget, rather than $142 million or so, but it does not explain the higher figure.

Regardless, James of the state taxpayers association isn’t impressed with the House amended budget.

“Well, it’s OK, I guess,” he says. “I can’t get enthusiastic because there are some things that I’d like to see in the budget that aren’t there.”

Namely, James says he would like the budget to reflect lower income and property taxes.

The House passed an income tax overhaul bill this legislative session, H. 4997 by Rep. Tommy Stringer, R-Greenville, but the Senate did not take up the measure.

Meanwhile, as the budget moves closer to final form, state taxpayers will get a more definitive sense of whether it reflects their priorities – or politicians’.

Reach Ward at (803) 254-4411 or eric@thenerve.org.

Taxes Other Funds Legislation Incentives General Assembly Economic Development Budget

S.C. House Speaker Bobby Harrell David James Rep. Tommy Stringer South Carolina Association of Taxpayers South Carolina Policy Council