S.C. Statehouse Report
Sunday, May 29, 2005
VIEW: http://www.statehousereport.com/columns/05.0529.structural.htm


COMMENTARY
State has a long way to go on solid budgeting
By Andy Brack
SC Statehouse Report

MAY 29, 2005 - - A friend observed this week that he buys shirts online because it's easy and he can avoid the mall.

He, like millions of others, has shifted in the way he buys things to make life easier and take advantage of innovation.

But most states, including South Carolina, continue to use archaic tax systems that don't respond to changes in the way people behave, live and do business. And that's why, in large part, South Carolina faces a looming budget crisis in coming years unless something is done.

A new report says South Carolina is among 11 of the states in the nation that face the highest risk of not having enough money down the road to pay for its current level of programs and services. Because of the way the state's tax system is set up, its shrinking tax bases will grow at a smaller rate than the costs to maintain government programs at current levels.

STATEHOUSE REPORT POLL

Who do you really think the next House Speaker will be?

If you want to voice your opinion, you can take our poll through the free Statehouse Report site on Yahoo! To take the poll, you have to have a Yahoo! account.

So while South Carolina now might have a balanced budget and the first surplus in years, it has a long-term structural deficit and scores poorly on each of 10 risk factors identified by the Center on Budget and Policy Priorities (http://www.cbpp.org).

"We're not trying to tell any state that they should have higher taxes," says CBPP Deputy Director Iris Lav. "But do you have a tax structure that keeps up with the level of services you choose?"

In South Carolina, the answer is a solid no. Take a look at just a few of the risks, as identified by the Center:

Shrinking tax bases. The state's sales tax base has shrunk 13.4 percent since 1990 - - much higher than other states - - and covers less household services than other states. It doesn't help, for example, that South Carolina has more than 60 sales tax exemptions that could generate $1 billion a year in tax revenue if they were off the books. Also importantly, the state's corporate tax base has shrunk 6.6 percent so that corporations are paying less of their share of government.

"There's definitely a shifting of the tax burden that's been going on for the last 10 years," said State Revenue Department Director Burnie Maybank.

Internet/catalog sales. The state is missing up to $395 million in sales taxes revenues because people have shifted to buying things through the Internet and catalogs. Maybank says the number is much lower - about $80 million - but agrees the tax structure is set up to make it tough to collect taxes from these sources.

ALSO THIS WEEK

McLEMORE'S WORLD: On Memorial Day

FEEDBACK: Sanford is wrong for SC

KEEPING TRACK: Right on Sanford's strategy, Santee Cooper

SCORECARD: Thumbs up and down

SUBSCRIPTION INFO

FEEDBACK POLICY

We encourage your feedback. If you'd like to respond to something in SC Statehouse Report, please send us an e-mail. We reserve the right to edit for length and clarity. One submission allowed per month. Submission of a comment grants permission to us to reprint. Please keep your comment to 250 words or less:

feedback@statehousereport.com

Seniors. According to the study, seniors in South Carolina get tax breaks that exceed the average. Meanwhile as a group, the growing elderly population will cost the state more to provide services in future years. The continued costly growth of Medicaid, for example, poses the biggest threat to the budget because it squeezes money from other programs, Maybank says.

Brackets. The state's top tax bracket is $12,300, which means most people's incomes are taxed at the same levels. Because brackets don't reflect a real cross-section of incomes, lower income people end up paying more than their fair share.

What's happening in South Carolina, much like at the federal level, is that people want government to perform, but they want to pay less.

"They haven't modernized the tax structures, but people expect schools to have computers and they expect hospitals to have MRIs so the costs of services that states are providing are going up," said report co-author Liz McNichol.

Options to reduce the risks from a structural deficit in the future include:

  • Removing sales tax exemptions, which will grow the sales tax base.
  • Close corporate tax loopholes
  • Stop giving income tax cuts, especially to the rich.
  • Eliminate tax breaks based on age, but consider them based on income.
  • Simplify the sales tax structure to make it easier to collect sales taxes on Internet and catalog sales.
  • Conduct longer term projections on spending and revenues, including growth in cost of services.

Lawmakers need to wake up to budget realities and resist the urge to try to give people something for nothing.


RECENT COMMENTARY


McLEMORE'S WORLD
5/29: On Memorial Day

Another great cartoon by Bill McLemore:

 


LEARN MORE DAILY

The best way to get South Carolina news is to augment your morning paper and TV show with SC Clips, a daily executive news summary compiled from more than 30 state newspaper and TV sources. It's delivered every business day and is packed with news of statewide impact, politics, business and more. Subscriptions are affordable at $30 per month -- and less for business subscribers. More: SC Clips.


FEEDBACK
5/22: Sanford is wrong for SC

To the editor:

Governor Sanford constantly lectures us that he is all about getting a great return on our tax dollars; and that he also wants all South Carolinians to have a better quality of life, and to increase trade and wages. That is great, I could not agree more.

So what is with all of these vetoes? Especially the veto of funds to help the struggling community of Willington in rural McCormick County? The funds earmarked for that community amount to seed money to enhance tourism and
ultimately income, and more jobs! Let's see that sounds like a good investment of tax dollars that will net an increase in the quality of life for Willington Citizens, and increase in wages. WOW, sounds like that money is in line with helping meet the Governor's goals. What gives. I think this can be explained by looking at the Governor's background of wealth and privilege. He does not know what it is like to live from pay check to pay check, to have to work nights and weekends just to feed the family. He is not even a native South Carolinian! And you know, he never sponsored legislation in Congress that resulted in any change or improvement. This
man is all talk - and no action. He could not get a consensus to get himself out of a wet paper sack!

Furthermore, He is also an egg headed Libertarian and he allows these pointy headed ideas to over rule common sense. This is not pork! This is about helping people to help themselves. But Mark cannot understand that, after all this is the same Mark Sanford who tells poor black children in Allendale County that they can have better schools if they just study harder, and their parents pay more taxes, and get local business to pay for school related expenses. Sure Governor, and I have lake front property for sale at a real deal in the center of the desert in Saudi Arabia!...

Again, in his defense, Mark not being a real native of South Carolina, and of course very wealthy and privileged, does not have a clue about what it is like growing up in rural South Carolina. If he did he would know what a tremendous blessing Santee Cooper was and is....to all of us. We are not interested in this particular business making a profit on the backs of South Carolina Farmers and hourly wage earners in rural South Carolina!!!!!!

Many years ago, the only way electricity was delivered to rural, underdeveloped, and poor South Carolina was and is through the South Carolina Electrical Cooperatives. These co-ops provide a real deal for rural South Carolinians, and having experienced it first hand, I think they do a darn good job.

-- Sandy Gibson, Lexington, S.C.

Here's some recent feedback to Statehouse Report:

KEEPING TRACK
House will be different

This section tracks past forecasts by Statehouse Report with other media reports:

In Statehouse Report:

5/1/05: House could be vastly different next year: "After 11 years of stability under Wilkins’ forceful leadership, next year’s House could easily become a more raucous place."

In other outlets:

5/22/05, Bandy in The State: Wilkins' shoes will be tough to fill: "Regardless of who wins, the victor will have problems with right-wing Republicans who are likely to try to test the new speaker early on."

11/16/03: Sanford may be using legislature as tool: "A high-ranking Republican senator is just one of several who say the poll-popular Sanford seems to be trying to build a case that he is being thwarted from what he wants to do by an obstructionist General Assembly - - even though it is controlled by fellow Republicans."

5/18/05, The State: Election 2006: Sanford vs. Legislature: "With 163 budget vetoes Tuesday, Gov. Mark Sanford began to lay the groundwork for his re-election next year — a campaign that could pit him as much against fellow Republicans who control the General Assembly as any Democrat who challenges him."

5/15/05: Public service has one master, not two: "While all of this has been going on, some members of the Santee Cooper board (i.e., Gov. Sanford's appointees) have become increasingly activist in nature. Charges are flying that board members are micromanaging on everything from corporate contributions and power contracts to working intimately on a privatization study." 5/20/05, The Post and Courier: First Lady's involvement questioned: "'It's worse than we expected," [State Sen. Luke] Rankin said Thursday. "I had seen a few e-mails and heard rumblings of some of these issues, but I didn't realize there were so many documents that call into question so many things.".


SOUTH CAROLINA SCORECARD

Here's a "thumbs up" and "thumbs down" related to various political events from the past week:

Thumbs up

Wilkins. Hats off to House Speaker David Wilkins, who was confirmed Thursday night unanimously by the U.S. Senate to be America's new ambassador to Canada.

Peeler. Congrats to Sen. Harvey Peeler, R-Cherokee, who was elected the new Senate majority leader. He'll follow Sen. Hugh Leatherman, who will resign on Aug. 1.

Reese. If you thought changes to the Senate rules this year would completely keep the Senate from breaking down. Sen. Glenn Reese, D-Spartanburg, proved it could be shut down with a parliamentary manuever this week.

Thumbs down

Sanford. Some 95 percent of the governor's vetoes were overridden. His press secretary attacked House members. Some senators say the governor has become irrelevant in the governing process.

Santee Cooper. Santee Cooper board member Keith Munson rightly finally resigned amid complaints of micromanaging. Sanford withdrew nominations of two others to the board.

Bauer. The Free Times reports that the S.C. Department of Transportation bought 1/10th of an acre from Lt. Gov. Andre Bauer for $130,000 -- some $47,500 more than it was appraised. The deal smells. More: http://www.free-times.com/News/newsmain.html#bauer


SUBSCRIPTION INFORMATION
How you can subscribe to the full edition of the report

The above version of S.C. Statehouse Report is the free edition. Our paid version, which costs about $100 per month, offer a weekly legislative forecast packed with information that can keep you and your business on the cutting edge.

Notes veteran lawmaker Sen. Glenn McConnell: "Statehouse Report gives an inside practical report of weekly problems with and progress of legislation. It reviews the whole landscape."

In each issue of Statehouse Report, you'll get::

Hot issue -- an early peek at weekly commentary on something really big. Last year, we continually beat other news organizations in finding major trends in issues, from teacher and budget cuts to wetlands proposals.

Agenda -- a weekly forecast of the coming week's floor agenda

Radar Screen -- a behind-the-scenes look at what's really going on in the General Assembly

McLemore's World -- an early view of our respected cartoonist Bill McLemore.

Tally Sheet -- a weekly review of all of the new bills introduced in the legislature in everyday language

Scorecard -- A Thumbs Up and Thumbs Down of major political/policy events for the week.

Calendar -- a weekly list of major meetings for the House, Senate and state agencies.

Megaphone -- a quote of the week that you'll find illuminating.

To learn more about subscriptions, contact Andy Brack at: brack@statehousereport.com

 

Learn more about Statehouse Report

  Copyright 2005, Statehouse Report LLC, which is affiliated with The Brack Group, Charleston, S.C.
Retransmission or reproduction of more than one copy is prohibited without express permission of the publisher. For additional information, including subscription prices, go to
http://www.statehousereport.com/.