State facing buckets or red ink, no easy solutions

Cigarette tax would provide some relief

State budgeters and state politicians may not agree on the size of the economic black hole facing South Carolina, but they all agree there is a black hole.

“This will be one of the toughest years I’ve had,” predicted 27-year General Assembly veteran Sen. Hugh Leatherman, R-Florence. “2001 to 2003 was tough but nothing like what we are looking at today.”

Meeting with the press last week, budget Director Les Boles said the state was starting its budget preparation $80.8 million in the red and warned the number could grow to $570 million if basic funding issues aren’t addressed.

House Ways and Means Committee Chairman Dan Cooper, R-Anderson, said lawmakers know it cannot be business as usual and suggested the deficit going in would be closer to $269 million.

Either way, lawmakers agree that balancing the budget will not be easy in the short run given that, with the exception of hiking cigarette taxes, there seems to be little support for increasing taxes.

In the long run, assembly members appear to agree the state’s tax law is in need of revision. Several voiced support for Leatherman’s Tax Realignment Commission (TRAC), which passed the Senate last year but reached the House too late for passage. If approved this year, the commission would be charged with reviewing all tax exemptions and presenting a recommendation that could only be voted up or down in the General Assembly.

Sen. Thomas Alexander, R-Walhalla, expressed concern about whether an up or down vote could gain passage but advocated Leatherman’s bill. “As far as I’m concerned, they would have carte blanche to look at everything,” Alexander said. “I would hope they would bring back a balanced approach.”

Consensus among lawmakers was that closing tax exemptions could generate more money for the state. Rep. Gilda Cobb-Hunter, D-Orangeburg, said the state has $2 billion in exemptions on its books.

Until tax revision is complete, however, cuts would appear to be the only path to the state fiscal promised land.

Leatherman predicted a “drastic” downsizing of government. Cooper didn’t disagree but said that once kindergarten- through 12-grade education, corrections and Medicaid are taken out of the budget, there are only 21 agencies from which the state could expect to carve $239 million.

House Minority Leader Harry Ott, D-Calhoun, said increasing taxes couldn’t be ruled out but seemed to limit his interest to hiking cigarette taxes.

“We can’t stick our heads in the sand and say we will not look at any tax increase,” he said.

“Not every penny has to come from cuts,” he added.

Ott found wide support for a cigarette increase from the legislators present, but several suggested the sticking point would likely be less about the amount and more about where the new tax money would go.

“The problem is not whether to raise (the tax),” House Majority Leader Kenny Bingham, R-Lexington said. “How the money is going to be spent is the issue. If it works, it should be a declining source of revenue so we can’t fund future expenses. This issue will be front and center, and I would expect some heated debate.”

Leatherman called resistance to a cigarette tax increase unless there is a corresponding decrease in taxes elsewhere, a position held by some legislators last year, the “most asinine thing I’ve heard of.”

Ott said he wants to use the added revenue to secure 3- to 4-to-1 matching funds from the federal government, a position supported by others who see all those funds being used to educate young people against smoking and to open up avenues to health care for the uninsured.

For the most part, lawmakers meeting with the media hovered around a 50-cent per pack increase. Most felt going higher would doom any legislation to defeat. Rep. Brian White, R-Anderson, said he has already filed a bill calling for a 25-cent per pack increase with the revenue going into a reserve account for Medicaid, which was cut by $137 million to balance last year’s budget.

The General Assembly convenes today for the first time this year.

upstatetoday.com
By Brett McLaughlin

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