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Teacher pay a priority for legislators

January 6, 2019

FLORENCE, S.C. – The Trump economy is paying off for the government of the state of South Carolina.

At the 2019 South Carolina Press Association Legislative Workshop for the Media, Frank Rainwater, executive director of the South Carolina Revenue and Fiscal Affairs Office, told the assembled media that the state had a surplus of approximately $177 million its 2017-18 fiscal year budget.

Surpluses, in finance, are funds remaining when the required funds have been expended.

Where does the surplus come from?

Rainwater said the additional money was primarily the results of capital gains taxes collected as the bull market in stocks continued.

The Dow Jones Industrial Average, a stock market index that measures the value of the price of 30 large, publicly owned companies in the United States, grew by 25 percent in 2017.

The additional capital gains taxes would suggest that some people in South Carolina have elected to “cash out” of the stock market, as those taxes are paid when one sells an asset, and the state does not charge a capital gains tax on real estate transactions or the sale of a business in another state.

The capital gains rate in the Palmetto State is effectively 3.92 percent. Nominally, the rate is 7 percent, but the state allows a 44 percent exclusion on capital gains taxes.

Is that all of the extra money available?

Budget estimates show the state is going to have another $220 million surplus for the coming fiscal year.

If these surpluses are combined and added to the state’s capital reserve fund, the state will have $548.9 million in nonrecurring revenue to spend. Estimates also show the state will receive $497.8 million in new recurring revenue for its general fund.

S.C. Sen. Hugh K. Leatherman Sr. said the nonrecurring revenue would be spent on one-time projects such as buildings. He said the recurring funds would be spent on things like raises for teachers and state employees.

How will the money get spent?

The issue of what to do with the state’s extra general fund money is expected to be a major one in the 123rd session of the South Carolina General Assembly that begins Tuesday.

The funds will be spent in the state’s budgeting process.

State law requires the governor to submit a budget to the General Assembly, but according to the South Carolina Policy Council, these budgets are typically not used, and the real drafting of the state budget begins in the House of Representatives Ways and Means Committee and its eight subcommittees. The policy council is critical of the secretive nature of these subcommittees.

Two Pee Dee representatives serve on the Ways and Means Committee. Rep. Phillip Lowe, a Republican who represents a portion of western Florence County and southern Darlington County, serves as chairman of the law enforcement subcommittee, and Jackie “Coach” Hayes, a Democrat whose district includes part of Marlboro County and most of Dillon County, serves on the Public Education Subcommittee.

Recurring expenses, he added, were for things like salary increases for state employees or teachers. These expenses continue after the first year. One-time expenditures, he said, were for things like the construction of new buildings, a one-time use of funds.

In the Senate, Leatherman said the issue of what to do with the money goes through the Finance Committee. The Finance Committee, he added, is divided into subcommittees that supervise the state’s agencies. Each state agency under the supervision of the General Assembly, he said, “makes its pitch” to a subcommittee for the funds.

The Senate Finance subcommittees are K-12 Education, Higher Education, Health and Human Services, Criminal Justice, Natural Resources, Constitutional, and Transportation and Regulatory.

There are two Pee Dee senators on the subcommittees. Sen. Greg Hembree, a Republican whose district includes eastern Dillon County, sits on the Criminal Justice and Transportation and Regulatory subcommittees. Sen. Kent Williams, a Democrat whose district includes western Dillon, northeastern Florence and all of Marion counties, sits on the Natural Resources Subcommittee.

What do Pee Dee legislators want to see happen with the money?

Lowe said the Ways and Means Subcommittee chairmen recently had their first meeting about the potential allocation of funds. Some of the things he said they were looking at were teacher pay raises, state employee pay raises, slightly increasing the funding of the local government fund and a potential tax refund.

Williams said he wanted to spend some of the recurring funds on raises for state employees and teachers. He called for the state to prioritize its teachers, as they affect so much of the state. He said the timing for a raise is right.

House Speaker Jay Lucas said the House’s priorities are likely to be education reform and tax reform. He also said the General Assembly should be good stewards of the taxpayers’ money and the General Assembly should look at a rainy day fund or giving some back to the taxpayers.

Terry Alexander, the representative from House District 59 that includes northern Florence County and eastern Darlington County, said he already has introduced legislation to spend some of the nonrecurring funds on new voting machines, which is a request of the South Carolina Election Commission.

He added that the state’s current voting machines are 12 to 14 years old and need to be replaced. Alexander also said he wanted to use some of the recurring funds on increases in pay for teachers and then state employees. He called for caution to make sure the funds are going to be in place to afford the potential raises in the coming years.

Rep. Jay Jordan said the House is going to have many discussions about how to use the money over the next few weeks. He said some of the additional funds are being looked at to fund a raise for teachers and some of the nonrecurring money should be sent back to the taxpayers in some form.

Rep. Robert Williams said something needs to be done to fund a raise for teachers and state employees in general. He added that some of the nonrecurring money should go to fund infrastructure repairs and upgrades.

Rep. Pat Henegan has three priorities: increasing the funding for the local government, increasing teacher pay and increasing pay for prison guards. As a former educator, she said she wants teachers to be paid with dignity.

Hayes said his top three priorities are figuring out how to pay teachers more, continuing to make South Carolina an attractive place for business and finding a way to stem the tide of rising college tuition. He also said the state should consider forming a rainy day fund with some of the surplus.

Rep. Lucas Atkinson said his first priority was a raise for teachers, and he is glad to see Hembree, who represents a neighboring district, on board with the idea. Atkinson said he is fully supportive of Hembree’s bill.

Rep. Cezar McKnight called for a major increase in teacher salary and the use of funds to improve the schools in the corridor of shame from Dillon southward.

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