The Comptroller General’s Office announced a $350 million surplus when the books were closed this month. The comptroller – the state’s accountant – advised lawmakers to “forgo the ‘spending spree’ temptation,” recommending instead that at least some of the surplus go toward paying down the pension system’s unfunded liability. The pension deficit amount, it should be noted, varies widely depending on the assumptions used and how realistic they are. The comptroller placed the deficit at $24 billion, but independent sources have calculated it as high as $90 billion.
Last year, the comptroller issued a similar admonition while announcing a $177 million surplus, pointing out that a rash of surplus spending in 2007-2008 was followed by deep budget cuts in the following year due to the Great Recession. “Good times don’t last forever,” he observed. (Lawmakers ignored that counsel and passed the largest budget in state history earlier this year.)
Unfortunately, the state is not merely looking at the possibility of a recession, nor is the pension deficit the only obligation looming on the horizon. South Carolina’s bond debt is also significant, part of which is funded by student tuition but ultimately backed by taxpayers. Should a shortfall hit universities, the taxpayers would be on the hook to pay a massive debt bill that lawmakers have not budgeted for.
This week’s throwback is an overview of the various debts and obligations which could create a domino effect resulting in a budget shortfall – which would, in turn, trigger an automatic property tax for all South Carolinians, without warning, without debate, and without limit.
In 1976, voters passed a constitutional amendment amending legislators’ ability to provide for state borrowing. The ballot question was general, vaguely worded and failed to spell out what was arguably the most important part of the amendment: the creation of a new, automatic and limitless state property tax that could kick in with no warning and without debate or vote by the legislature.
The amendment mandates that the tax be imposed if the state is unable to make a payment on the debt. Unknowingly, South Carolinians voted to guarantee state debt with their property.
If the General Assembly fails to properly provide for debt payment, South Carolinians would get a bill for whatever amount was necessary to satisfy the payment.