Lawmakers Move to Stop School Bond Bills

January 5, 2012

Investigative Reports

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The NerveSeveral S.C. school districts that are seeking the General Assembly’s approval to allow them to sell taxpayer-backed bonds for daily operations likely will face an even tougher fight when lawmakers return to Columbia next week.

Sens. Danny Verdin, R-Laurens, and Ronnie Cromer, R-Newberry, have pre-filed separate bills that would ban school districts from issuing general obligations bonds – which have to be paid back by taxpayers with interest – for that purpose.

“I’ve never been in agreement with the position of issuing g.o. bonds for operating costs,” Verdin toldThe Nerve recently. “It’s not good business practice, whether you’re talking about the private sector or public sector. Cash flow has to be managed.”

“To me, it’s ludicrous,” Cromer said when contacted recently. “It’s almost like using a credit card to pay off credit-card debt.”

Both Cromer’s bill (S. 1058) and Verdin’s bill (S. 1010) were referred to the Senate Education Committee. Verdin’s bill already has 23 co-sponsors, including Cromer.

The General Assembly returns to session on Tuesday.

Contacted recently, Debbie Elmore, spokeswoman for the South Carolina School Boards Association, told The Nerve that issuing bonds for general operations is not “financially the best way to go about getting funding for operations.”

But she added, “The problem is that when local school boards and school districts get in over their heads on a cash-flow basis, that’s the only temporary means they can come up with.”

Elmore blamed cutbacks in recent years in state funding for local districts and Act 388, which eliminated homeowner property taxes for school operations in exchange for a 1-cent state sales tax increase, for forcing some districts to seek legislative approval of local bond bills.

But with more than half of the 46-member Senate behind Verdin’s bill, which was pre-filed on Nov. 28, the chances appear slim that the chamber will override vetoes by Gov. Nikki Haley of two local bills that would allow bonds to be sold for school operations.

The Senate adjourned in July without taking up Haley’s vetoes of S. 877 and H. 4149, bond bills that would benefit the Hampton 2 and Colleton County school districts, respectively.

The House didn’t take up the veto of the Hampton 2 bill, though the Colleton County delegation in the House voted 2-1 in June to override the veto of the Colleton County bill, sponsored by Rep. Kenneth Hodges, D-Colleton.

Traditionally, lawmakers in both chambers have abstained from voting on local bills outside their areas. But in June, the Senate broke with that tradition, voting after a heated debate to narrowly sustain Haley’s veto of a bill (S. 785) that would have allowed the financially struggling Florence County School District 4 to issue bonds for general operations.

The S.C. Supreme Court in August ruled that the state constitution requires vetoes to be overridden by a two-thirds vote of a quorum, or a majority, of lawmakers in each chamber.

There are 46 members in the Senate and 124 members in the House. Assuming full membership in both chambers, at least 16 votes in the Senate (two-thirds of a bare majority, or 24 members) and 42 votes in the House (two-thirds of a bare majority, or 63 members) are needed to override a veto, based on the court’s ruling.

Whether that ruling will affect the Colleton County House delegation’s 2-1 vote in June to override Haley’s veto of H. 4149 is unclear.

In her June 14 veto letter on Florence District 4 bill, Haley said school districts “should not fund short-term operational costs with long-term debt backed by taxpayers.”

After the veto, Florence County Treasurer Dean Fowler said his office would lend the district up to $1.3 million to keep schools operating until the district could begin receiving property tax collections this month, The State newspaper reported.

The Nerve in May first reported on the Florence District 4 bill and four other similar local bills. As of the end of fiscal year 2009-10, Florence District 4 listed a negative fund balance of $1.3 million, according to S.C. Department of Education records reviewed by The Nerve.

Under the bond bill sponsored by Senate Minority Leader John Land, D-Clarendon, Florence District 4 could have sold up to $1 million in general obligation bonds – without voter approval – to “mitigate a deficit” over two fiscal years.

Sen. Clementa Pinckney, D-Jasper, is the sponsor of the Hampton District 2 bond bill that was vetoed by Haley and another bond bill (S. 884) for the Jasper County School District. Based on a lone vote by Pinckney in May, the Jasper County bill passed the Senate, though the county’s House delegation didn’t advance it.

Another school bond bill (H. 4094), sponsored by Rep. Leon Stavrinakis, D-Charleston, for the Charleston County School District, unanimously was passed by 10 House delegation members in April, though it stalled in the Senate.

In addition, Pinckney in late June introduced separate bond bills (S. 974, S. 975) for the Hampton 2 and Colleton County school districts, respectively. Just two Senate votes were cast – Pinckney and Sen. John Matthews, D-Orangeburg, who co-sponsored S. 975 – to pass those bills on second reading; both bills are on the House calendar when the Legislature reconvenes Tuesday.

Because the General Assembly operates on a two-year cycle, both the Charleston County and Jasper County bond bills also can be taken up this year. But given the support behind Verdin’s bill, which would ban such proposals, passing any of the pending bond bills likely will be difficult.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.