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SC budget to reduce income taxes, repair bridges, raise employee pay

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SC budget to reduce income taxes, repair bridges, raise employee pay

Jun 21, 2024 | 6:44 pm ET
By Skylar Laird
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SC budget to reduce income taxes, repair bridges, raise employee pay
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Senate Finance Chairman Harvey Peeler, R-Gaffney, and House Ways and Means Chairman Bruce Bannister, R-Greenville, talk to reporters after a panel of legislators approved the state spending plan Friday, June 21, 2024. (Skylar Laird/SC Daily Gazette)

COLUMBIA — Legislators agreed Friday to a $14.4 billion spending package that further reduces South Carolina income taxes, repairs aging bridges and raises public employees’ salaries.

A six-member budget negotiating committee voted unanimously on the plan that keeps Clemson University’s new veterinarian school on track to open in 2026, while also pumping $100 million into a medical campus at the University of South Carolina. It also includes more than $400 million for various community projects sponsored by legislators.

“I think this is a budget we can all be proud of,” said retiring Sen. Nikki Setzler, D-West Columbia, about the last negotiations of his 48-year tenure.

The full Legislature is set to return Wednesday to adopt the package and send it to Gov. Henry McMaster. By law, he would have until midnight July 2 — a day after the fiscal year starts — to review it and issue line-item vetoes on any spending he opposes.

The budget will take effect with his veto message. If that comes after the fiscal year starts, a resolution approved as a just-in-case stopgap measure will keep government operating in the interim. But that could delay state employees and teachers getting their raises on time.

Income tax reduction

Residents could see slightly higher paychecks starting this January after legislators agreed to shave another $100 million off state income taxes, doubling the reduction scheduled for the third year of a phased-in tax cut.

That money came from a $600 million surplus in state sales taxes that has been building up since the pandemic.

Should a surplus go to a 1-time property tax cut or reducing SC income taxes?

The 2006 law known as Act 388 increased the state sales tax by one cent on the dollar, up to 6%, in exchange for no longer charging owner-occupied homes for school operating costs. The idea was to use the sales tax to reimburse counties for what they lost.

For years, the state sales tax ran at a deficit, requiring legislators to make up the difference with other state taxes. But as people spent their federal stimulus checks during the pandemic and inflation drove up costs, the state collected more sales taxes, and a surplus built up.

The House had initially proposed putting $500 million of that toward reducing property tax bills, though its updated proposal passed in May scaled that back to $150 million.

But a one-time property tax reduction could have been a problem logistically for county officials attempting to distribute the money.

Getting one year closer to the collective $1 billion revenue cut from reducing state income taxes that lawmakers approved in 2022 was more of a sure bet, said House Ways and Means Chairman Bruce Bannister, R-Greenville.

So, the negotiating committee opted to go with the Senate’s plan, reducing the state income tax.

“By locking in the income tax, we know that’ll happen and that we’ll maintain it over a period of time,” Bannister said. “After discussions with the Senate and the governor, we decided that it made really good sense to do it that way.”

Roads and bridges

Most of the remaining sales tax surplus money will go toward bridge and road work, which legislators called a top priority.

All told, the agreement puts $200 million toward repairing or replacing dilapidated bridges. Nearly a third of the state’s 8,400 bridges are approaching or past their intended lifespans, according to the state Department of Transportation.

“The roads and infrastructure investment is huge,” Bannister said.

Another $200 million will go toward roadwork approved by county officials. That’s essential for smaller fixes that cause everyday annoyances, such as potholes, said Senate Finance Chairman Harvey Peeler.

“We should not have potholes in our districts,” the Gaffney Republican said.

The plan puts an additional $117.4 million into improving safety on rural roads.

New vet school

The deal will also give Clemson $125 million for its new vet school in one-time money, which is $50 million short of what Peeler, a Clemson graduate, wanted to finish funding construction. But the compromise gives Clemson $8 million additional indefinitely for the vet school, which will keep its timeline for accreditation and opening on track.

SC budget negotiations stall over Clemson vet school, though legislators say not for long

The decision on how much to give the college, Peeler’s alma mater, was a sticking point in negotiations.

The University of South Carolina is also set to get $100 million for its medical campus. But the two requests were not dueling propositions for the rival colleges, Peeler said.

“I like to leave the Clemson vs South Carolina at Williams-Brice,” Peeler said.

Raises for state employees, teachers

State employees will receive another raise this year, following a $2,500 bump in their salaries last year.

Any employees making less than $50,000 per year will get a $1,125 boost, and anyone making more will see their salary increase 2.25%.

“We’re focusing the majority of that raise on the state employees who are making the least amount of money,” Bannister said.

The Senate proposed giving a $1,375 raise to all employees making less than $50,000, and a 2.75% pay boost to all other workers. The House proposed a $1,000 raise for anyone making $66,667 or less and a 1.5% raise to everyone else.

One thing the House and Senate agreed to all along was raising the minimum pay for first-year teachers to $47,000, a $2,500 increase.

Under Friday’s proposal, districts will receive $200 million to increase teacher pay. The panel agreed to extend state-paid yearly boosts for experience from 23 years to 28 years in the classroom, something teachers’ advocates have been requesting for years as a way of rewarding the state’s more veteran teachers.

Local projects

The compromise combined the local projects in each chamber’s plan. In all, that’s $435 million for local governments, charities, events and other community enhancements.

SC lawmakers set to spend over $430 million on local projects

That includes $10 million to turn Myrtle Beach into a tech lab, allowing it to partner with companies as a test ground for new technology, as well as $8 million to improve local roads in York County and $6 million for an aquatics center in Richland County.

After two years of setting aside hundreds of millions of dollars for these projects, legislators plan to reexamine the process during the coming year, Peeler said. Last year, legislators spent $713 million on pet projects, far above any years before.

While Peeler couldn’t offer any specifics on what might change, he said the process is something legislators need to reconsider.

“It can get out of hand, and it seems to be getting out of hand, and we’re going to work on that to make it more fair and equitable,” Peeler. “Or, we might not have them at all.”