Sunday, Aug. 7, 2005
downgrade is economic red flag
SC Statehouse Report
7, 2005 - When Standard and Poor's Rating Services downgraded
South Carolina's stellar AAA credit rating last month, state
lawmakers should have seen an economic red flag.
And despite news that another service, Moody's Investors
Service, decided to let the state to keep its AAA rating,
the state is far from out of the economic woods. Lawmakers
need to take a serious long-term look at how they spend money
and how they raise revenues if they want to again become the
vanguard of state fiscal management.
The state's credit ratings, just like your personal credit
score, is important because the higher or better the credit
rating, the less that the state has to pay in interest costs
to fund borrowing. In short, it's an indicator of how well
the state, mnages its finances.
South Carolina first gained the AAA credit rating in the
early 1960s under then-Gov. Fritz Hollings. It kept the rating
through 1993, when it lost it, as most agree, because of the
economic strain put on the state by 1989's Hurricane Hugo.
Interestingly by 1996, South Carolina became the first state
ever to regain its AAA credit rating. Why? Because of its
conservative practices of limiting state debt, having a constitutional
amendment for a balanced budget and having a "rainy day"
Even though Standard and Poor's has now dropped South Carolina's
rating to AA+, it remains in one of the top 10 states nationally
in terms of financial management, said Clemson economist C.
But the downgrade may be a sign of more trouble ahead.
Standard and Poor's reduced the state's rating because of
its sluggish economy and continuing high unemployment rate.
Over the last year, the Palmetto State has lost more than
16,000 jobs, including 5,000 manufacturing jobs. With the
recent passage of the Central American Free Trade Agreement,
there's good reason to worry that thousands of more manufacturing
jobs will move overseas, particularly in textiles and manufacturing,
if the experience offered by the North American Free Trade
Agreement is an example.
Similarly as the nation is rebounding from recession, South
Carolina remains a place with one of the nation's highest
unemployment rates - - 6.3 percent. Unless the state can generate
some jobs, the economy may remain sluggish and mired in economic
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Other signs of trouble:
State revenues. While the state is on target to repay
"rainy day" funds and trust funds raided by lawmakers
a couple of years ago at the bottom of the recession, lawmakers
continue to look for ways to cut revenues. With the state
still recovering, that might not be too smart, economists
say. By trying to cut more, they would be taking away the
money that could help fix state government in the short run
and give more confidence about longer-term stability to rating
agencies and economists. The zeal to cut taxes will increase
pressure on revenues, which will make state government less
stable over time, economist Harry Miley noted.
Other taxes. By having the nation's lowest gasoline
and cigarette taxes, South Carolina also is missing revenue
that other states are using to improve economic stability.
Education funding. Miley added that cuts to higher
education funding, compared to levels from recent years, also
add to instability. Additionally, a soon-to-be-decided lawsuit
by poorer school districts seeking equitable school funding
may result in a whopping verdict that causes the state to
incur millions of dollars in upgrades that it doesn't now
have the money for.
"There's just a lot of negative factors for the state
that are adding up and a reluctance of the legislature to
address them," he noted.
In a column on the AAA credit rating last month in The
State newspaper, Comptroller General Richard Eckstrom
was blunt: "Let's be honest about this: It'll be tough
to regain our AAA. It might not be possible."
And while he called on state officials to work together and
not point the fingers of blame, he then went on to point fingers
at lawmakers for raiding funds and spending recklessly in
the recent past.
That might not be totally fair, but he's right that state
lawmakers need to look at the big, long-term picture and not
apply quick fixes that will add to instability.
8/7: Sales force
Another great cartoon from Bill McLemore:
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8/1: Property taxes are a scourge
To the editor:
I continue to enjoy your column. I wanted to make the comment
that your allude to (Commentary,
July 10), but fail to fully explore. Property taxes
are just an inconvenience to the financially better-off in
South Carolina, but they are the difference between land-ownership
(which often means a better life financially) and making ever
higher rent payments for the rest of your life. It should
be illegal to lose your land in this country if you don't
owe anything on it. Property taxes turn property owners into
renters. If you don't believe this is true, quit paying your
property taxes and see how long you get to keep what you "own".
The sad fact is, this only affects the poorer among us, because
those with the money to pay their taxes don't lose their property.
Also, with the number of people in this country who are only
able to "make ends meet" from refinancing their
property every few years rather than from their income, this
is a huge deal. I'll bet we might be surprised at how high
that number is nationwide.
North Charleston, S.C.
among morality police,
Name withheld, Summerville, S.C.
for math and common sense, Paula Richardson, Britton's
credit rating is red flag, Bob Logan, Little
should focus on real problems, Donna Crile, Myrtle
to do more about poverty, Earl Capps, Ladson,
school would help on St. Helena Island, Tom
Hatfield, Hilton Head Island, SC
program addresses Pee Dee poverty, Tammy Pawloski,
Professor of Education, Francis Marion University, Florence,
approach on prosperity, Laura Morris, Mount
can we let poverty happen, Nancy Kolman, Pawley's Island,
residents need equal representation, Gene Deragon,
Jasper working together, Rep. Bill Herbkersman,
This section tracks past forecasts by Statehouse Report
with other media reports:
In Statehouse Report:
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
"Santee Cooper's struggles should
serve as a reminder to members of state governing boards
that public service requires them to carry out two duties.
First, there's a "duty of care," which calls
for board members to ensure an organization is running
effectively and efficiently. (This gives an entrée
for meddling.) But board service also carries a "duty
of loyalty," which means members must serve the
interests of the organization over interests of anyone
else, such as a governor."
In The Post and Courier
Cooper directors, governor blamed in report.
"A bipartisan panel of five state senators was
scheduled to release a report this morning saying Santee
Cooper board members repeatedly and recklessly mismanaged
the state-owned utility for more than two years, capping
a months-long investigation that included 22 hours of
hearings and about 10,000 pages of e-mails and documents.
"The statement, written by Sen.
Luke Rankin, said bullying by a few rogue board members
jeopardized the power company's stellar credit rating
and could have been costly for taxpayers and the utility's
customers and bondholders. The report also said those
directors deflated morale at the utility while pursuing
a political agenda for Gov. Mark Sanford, who appointed
them to their posts."
SOUTH CAROLINA SCORECARD
Here's a "thumbs up" and "thumbs down" related to various
political events from the past week:
House GOP. It's good that the House Republican Caucus
returned a state Chamber PAC check because they didn't want
it to look like their votes had been bought and paid for.
Wonder about all of those individual contributions?
Sanford. Hats off to the governor for saying that
education funding should be studied before property taxes
changed. If the taxes are altered, there could be a serious
disruption to the education funding stream.
Richardson. Three cheers to Sen. Scott Richardson,
R-Beaufort, for the idea of a coastal caucus.
State Dems. The party better get more money in the
bank if it wants to be competitive. Empty isn't a good place
Folks. Former Sanford spokesman Will Folks can't have
it both ways on a criminal domestic violence charge, but he
seems to be trying to get it by saying he'll plead guilty
to avoid a messy trial, but claims to really be innocent.
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