What’s in the Senate budget?

Last week, the Senate amended and passed the state appropriations bill, which spends $29.8 billion. This includes a surplus of $344 million ($16 million more than the House budget allocated). Many of the House and Senate spending priorities are the same – such as a 2% pay raise for state employees, a 4% pay raise for teachers, and budget increases for most state agencies.

However, many particularly significant items are contained in the budget provisos. These provisos (contained in Part 1B of the budget) should merely explain the line-item spending in Part 1A, but have become a catch-all of a wide assortment of legislative purposes. For instance, this year’s Senate budget provisos create new study committees, authorize new spending programs, set education policy, and contain numerous pet projects. In fact, the entire surplus of non-recurring dollars is spent by proviso, and is not even included in the official budget totals.

Below are some of the more significant budget provisos, sorted by topic.

Education

• 1.3 – Allocates “State Aid to Classroom” funding. This proviso explains how the $2.8 billion of additional education funds are to be spent. It should be noted that nearly a third of these new dollars are going to the pension system – proof that when lawmakers increase “employer contributions” in order to shore up the insolvent pension system, those funds come from the taxpayers.
  • 66% of these funds go to schools based on a formula in the Education Finance Act
  • 29% of funds go to pension system employer contributions
  • 6% go to teacher salary increases (includes a revised teacher salary schedule, with minimum starting salary of $35,000)

This proviso increases per-student funding by $815, for a total average per-pupil allocation of $14,227. This does not include local bond revenues, however.

• 1.76 – Allows the Office of First Steps to spend up to $1 million on grants to public-private partnerships to address building renovation for early reading program.
• 1.77 – $400,000 of professional development funds must be used to contract with a non-profit “statewide K-12 professional association in South Carolina whose membership provides for the development and support of current and future school leaders.” It should be noted that the House version of this proviso specifically allocated these funds to the school board association.
• 1.88 – Spending capital improvement funds. Lawmakers robbed the debt service fund again this year, and allocated $65 million of those funds to “school district capital improvements.” This proviso directs 25% of that ($16.25 million) to cover the costs of school district consolidation (such as salary adjustments, debt mitigation, millage rate adjustments, transportation) in small districts in low-income counties. The remaining 75% of these funds actually go to capital improvements.
• 1.89 – Requires local school districts to give teachers a raise of at least one experience credit. No specific funds are allocated to cover this mandate, but the following proviso (1.90) states that if a district needs to dip into reserves in order to meet this obligation, the law governing district reserves is suspended for them for that year – with the approval of the Department of Education.
• 1.93 – Suspends section three of a local law for Dorchester County School District 2. This section allows the district to keep a cash reserve of 5% of their operating budget, funded by surplus dollars (not by new taxes), which cannot be used for anything general obligation bonds can be issued for.
• 1.94 – Suspends requirement for 8th grade science test and 5th & 7th grade social studies tests. This is a policy from the education omnibus bill.
• 1.95 – School districts can create multiple “schools of choice” in a district. “Schools of choice” are special schools created by local school boards that are (with the permission of the State Board of Education) exempt from certain state education laws.
• 1.97 – School districts may use funds from developmental impact fees to pay debt service on projects that are part of the plan for which the fees were imposed.
• 1A.56 – Amending reading coaches program
  • Department of Education must screen and approve literacy coaches for a school if one third of its third grade students are scoring at the lowest achievement level. This policy was pulled from the higher education omnibus bill.
  • School districts can request waivers allowing them to spend the funds on interventionists who spend over half their time working directly with struggling readers.
• 3.5 – Lottery funding. Below are a few spending highlights
  • From lottery proceeds and certified surplus:
    • Various scholarships, grants, and tuition assistance – $414.5 million
    • SC State University – $2.5 million
    • ReadySC Direct Training – $10 million
    • School buses – $19 million
    • Technology upgrades for colleges/universities/tech schools – $8 million
  • From earnings above certified surplus:
    • Higher Education Excellence Enhancement Program – $2.9 million
    • Greenville Tech for SPICE (self-paced in-classroom education) program – $250,000 (“designed to prepare eligible citizens for re-entry into the workforce through gainful employment in skilled and other professions”)
    • Midlands Tech quick jobs/dual credit – $3.5 million
    • Career clusters – $450,000 (1:1 match) “to better prepare students for employment in high paying job clusters across the State.” Funds to be spent on students and student support services
      • $350,000 to Voorhees College
      • $50,000 to Benedict College
      • $50,000 to Claflin University
    • University Center of Greenville Debt Service – $600,000
    • Department of Education innovation grants – $3.8 million
    • Education Oversight Committee (EOC) – after school pilot program and Clemson forest initiative – $1.5 million. It should be noted that the EOC’s proper role is – as its name implies – oversight, not appropriation. It is unclear what this program is, exactly, and why the funding is going through the EOC.
• 117.170 – Creates early childhood education study committee to recommend the best way to consolidate the various early childhood services from birth to age 5 currently operating across multiple systems and funding streams. Committee must study at least the following:
  • Head Start Collaboration Office
  • Office of Early Learning
  • ABC Childcare Program
  • Childcare Licensing Office
  • Childcare Resource and Referral Network
  • Child Early Reading Development & Education Program
  • BabyNet
  • Women, Infants and Children Supplemental Food Program (WIC)
  • Postpartum Newborn Home Visitation Program

Higher education

• 25.11 – $500,000 for technical education advertising campaign to “enhance the perception of technical education”. Requires a 2:1 private match.
• 25.13 – State tech board must come up with a plan to help transport students to another tech school if one closes down.
• 25.12 – Redirects $3.5 million from Northeastern Technical College to fund construction of space for “critical industry training.”
• 117.169 – Higher education institutions must report to the Commission on Higher Education the faculty credit hour production and the number of adjunct professors and graduate students teaching in undergrad programs. This report would be passed on to certain legislative committee chairs.
• 117.155 – Higher education funds in exchange for tuition freeze. Like the House version, this proviso appropriates additional state funding to public colleges and universities on the condition of a tuition freeze. However, the “freeze” is not a hard freeze, and schools can still increase tuition and fees according to the inflation index. Institutions must also implement a cost mitigation plan.

Healthcare

• 33.15 – Mirrors House proviso expanding Children’s Health Insurance Program (CHIP). This would result in the CHIP upper income limit being increased to the average of the states within CMS Region IV. This proviso also allows government to automatically enroll people to Medicaid and children to CHIP – a highly concerning policy. Moreover, federal funding for programs like these always come with strings attached.
• 33.22 – Department of Health and Human Services (DHHS) must spend $5 million in accordance with a graduate medical education plan developed by MUSC, USC, and Francis Marion University.
• 34.8 – Unexpended funds must go to the SC EMS Association to promote EMT education, collect/analyze/distribute info about emergency services, cooperate with other organizations, and to effect more efficient administration of emergency medical services in South Carolina.

Criminal justice

• 67.14 – Department of Juvenile Justice to contract with non-profits and solicitors’ offices for community-based diversion and intervention services.
• 64.4 – Law Enforcement Training Council must develop school resource officer training program.

Economic development

• 50.13 – Splits $200,000 that previous budgets appropriated to Beaufort and Lancaster Counties for economic development, between the I-77 Alliance and SC Alliance. The proviso also allocates the usual appropriation to a total of eight economic development groups – despite little evidence of significant return on past investment. The proviso adds a requirement that they send annual reports to all lawmakers (not just the appropriations chairmen), and requires the Department of Commerce to put the reports online.
• 50.21 – Establishes the Rural School District and Economic Development Fund to facilitate economic development and infrastructure improvements in poor counties. Another proviso allocates $50 million of excess debt service funds to this fund, essentially taking money away from paying down debt and spending it on economic development instead. The Department of Commerce would decide how these funds are spent after review by the Joint Bond Review Committee. Funds can only be spent on expenditures not eligible for the Commerce closing fund.
• 50.22 – Department of Commerce must conduct a report on broadband internet accessibility. The report can include information on “involvement of public-private partnership, infrastructure needs, and other available connectivity options.”
• 88.5 – Ports Authority can spend $5 million to buy property for an economic development project through “option agreement” between Sherwood Plantation, Inc. & the SC Regional Development Alliance.

Transportation and utilities

• 73.6 – Extends Energy Efficient Manufactured Homes Incentive Program administered by the Office of Regulatory Staff.
• 73.7 – Creates Regional Transmission Organization study committee to study regional transmission entities (RTE) and organizations. Its purpose would be to examine how customers would benefit from investor-owned utilities joining or starting RTEs.
• 84.17 – DOT must impose a toll along I-95 where it crosses Lake Marion in either Orangeburg or Clarendon. The revenue goes to maintenance, upgrades, and expansion of I-95. The next proviso requires DOT to design a plan for I-95 maintenance and expansion, requires report of progress and other feasible funding options for comprehensive plan report to lawmakers by March 1, 2020. Raising the gas tax was supposed to provide the revenue for repairing roads and bridges. It is unclear why lawmakers are attempting to create yet another revenue stream for this project.
• 88.6 – Creates Jasper Ocean Terminal Port Facility Infrastructure Fund. The fund would be maintained and administered by the State Ports Authority for the development of the Jasper Ocean Terminal Port facility and necessary infrastructure.
• 117.141 – Eliminates joint Santee Cooper study committee. This proviso was struck on the floor, and Senators paused their budget debate to place legislation outlining a sale process for Santee Cooper on special order status. (However, for a sale to be beneficial to the public, the process must be open and accountable to taxpayers. Here’s a roadmap.)
• 117.165 – Department of Motor Vehicles (DMV) & Department of Revenue (DOR) to develop system for commercial motor vehicles to pay all fees to DMV, with a payment plan option so they can pay the infrastructure maintenance fee in installments. The plan must be submitted by December 1.
• 117.166 – Bans the approval of offshore drilling infrastructure permits by local governments and the Department of Health and Environmental Control (DHEC).
• 117.167 – Santee Cooper can’t enter new contracts for executive benefit plans.
• 117.162 – Department of Transportation & Santee Cooper must develop cost estimate for stabilizing and repairing bridge over Lake Marion for public pedestrian and bicycle traffic.
  

Miscellaneous provisos

• 91.26 – House Speaker & Senate President have unconditional right to intervene in court on behalf of their respective bodies if legislation is challenged. Attorney General is to notify them of any challenges to statute constitutionality, validity of legislation, or action of legislature.
• 109.14 – Prohibits private third parties from collecting business license taxes on behalf of local governments (includes a couple of exceptions for current state law). Creates study committee to study reform and implementation of a third-party tax collection system. Committee includes lawmakers and representatives of the Municipal Association, Chamber of Commerce, etc.
• 117.21 – Every nonprofit entity receiving contributions from entities that get state appropriations must report to the Executive Budget Office and Revenue and Fiscal Affairs Office a detailed statement explaining their nature and function, how they used the state funds received, etc. Statements must be available for public inspection. Contribution must not be made to an organization until it agrees in writing to be audited.

Statewide revenue and spending

• 112.1 – Spends excess debt service funds. If excess debt services is less than $135,000,000, the first item gets docked.
  • $50 million – Rural School District and Economic Development Closing Fund
  • $65 million – school district capital improvements
  • $20 million – employee bonuses ($600 for full-time employees who make $70,000 or less and have been employed by the state for at least six months)

Up to $5,552,123 of excess debt service funds from the prior fiscal year can be carried forward and spent on debt service.

This proviso leaves the state paying the bare minimum on debt service – a dangerous policy, given that default on a debt payment would result in an automatic statewide property tax without warning, debate or limit.

• 118.15 – Up to $61.4 million of lottery tax money goes to $50 rebates – but only for taxpayers who filed an income tax return and had a tax liability of at least $50 after credits – which appears to disqualify any taxpayer who did not owe money upon filing their tax return or who received a state tax refund.
• 118.16 – Allocates the $328,191,926 surplus, which is $16,040,426 more than the House budget’s surplus. Additional sources were the Litigation Recovery Account and the fiscal year 2018-19 Debt Service Lapse. This proviso also provides for spending of any surplus funds that are over and above the projected amount – just in case. Below are some spending examples, not listed in order of funding priority.
  • Taxpayer rebate – $6 million (House allocated $34,733,266)
  • Rest areas – $8 million (House allocated $4 million)
  • DOT – T-Bridge Repair and Rehabilitation – $500,000 (Again, it is unclear why lawmakers want to spend surplus dollars on bridge repair when they raised the gas tax for this very purpose.)
  • Senate operating budget – $1,250,000 (This is in addition to a $250,000 budget increase)
  • Department of Employment and Workforce: “Be Pro, Be Proud” – $950,000 This appears to be an Arkansas program where a “tricked-out trailer” (their term) tours to give students exposure to industries.
  • State Aviation Fund – $1 million (for a 10-1 federal match)
  • Parks, Recreation and Tourism funds:
    • Advertising – $1.2 million ($200,000 more than the House appropriated)
    • Saluda River Greenway – $1.5 million (read more)
    • Special Olympics – $250,000 (read more)
    • SC aquarium – $1 (House appropriated $1.5 million)
    • SC Association of Tourism Regions – $550,000
    • Parks revitalization – $6.5 million ($4 million more than House)
    • Morris Island Lighthouse – $175,000
    • South Edisto River recreational improvements – $200,000
    • African American Tourism Marketing – $100,000
  • DSS – Epworth Children’s Home – $350,000 (read more)
  • DSS – Florence Crittenton – $150,000
  • DHEC – M.A.D. USA Men Against Domestic Violence – $250,000
  • Dept of Agriculture – regional farmers market – $1 million
  • Dept of Agriculture – flood relief for farmers – $25 million
  • Archives & History – African American Heritage Commission – Greenbook of SC – $100,000
  • Dept of Commerce
    • Closing fund – $3.7 million
    • Military base task force – $750,000
    • LocateSC – $4 million (read more)
    • SC Workforce Development Artificial Intelligence Pilot Program – $900,000
    • Colleton County economic development – $150,000
  • Corrections equipment upgrades – $10 million
  • State Museum Commission
    • Exhibit renovations – $3 million
    • Ticketing EMV Chip and Pin – $15,000
    • Firewall Replacement – $30,000
    • Point of Sale Upgrade – $71,900
    • Bishopville Military Museum – $75,000 (a privately owned nonprofit)
  • Prosecution Coordination Commission
    • Centers for Fathers and Families – $700,000
    • Student Loan Forgiveness – $500,000
  • State Law Enforcement Division
    • SC Critical Infrastructure Cybersecurity Program Equipment – $126,475
    • Vehicle Replacement Plan – $500,000
    • First Responder PTSD Treatment – $500,000
  • Clemson – PSA – Facility Renovation for Water Research – $1,000,000
  • Arts Commission
    • Greenville Cultural and Arts Center – $7,000,000 ($2 million more than the House allocated – read more)
    • Cultural Arts & Theater Center Renovation – $450,000
  • Dept of Mental Health – Fisher House – $200,000
  • Marion County long-term disaster relief – $100,000
  • Williamsburg Senior Center – $500,000

• 118.17 – Creates a temporary SC Farm Aid Fund. To be eligible for a grant, a farmer must have experience at least a 30% loss due to flooding from Hurricanes Michael and Florence, and cannot have received any federal funds for these specific disasters. Seasonal processing facilities located in Tier IV counties are also eligible for grants capped at $50,000. The proviso creates a Farm Aid Advisory Board, comprised of a plethora of agency heads/appointees and industry members. Farm aid grants cannot be more than 20% of verifiable loss, and are capped at $100,000. The fund and board are dissolved at the end of the fiscal year. If a federal program is created for these farmers, this proviso is null and void.
• 100.21 – Hurricane relief funds given to non-profits can be carried forward and spent the same

Pension plan and employee benefits

• 117.112 – Employee pay raises. State employees get a 2% raise (except for higher/tech education employees making at least $100,000). Doesn’t include judges, magistrates & masters-in-equity.
• 117.163 – Judicial pay raise schedule. Instead of giving judges a percentage-based salary increase, the Senate budget includes a new pay schedule. The Supreme Court Chief Justice salary would increase from $156,234 to $179,550 under this proviso. However, the following proviso stipulates that these salary increases would not be included in retirement calculations. (read more)
• 108.6 – Employer & employee premiums for state health plan don’t increase. The Senate budget allocates $49.7 million in recurring taxpayer dollars to cover state health insurance increases.
• 108.17 – Changes thresholds for county governments’ participation in state insurance plan. Small employers = less than 150 covered lives; medium employers = 150-500 covered lives.
• 75.2 – Director of the State Accident Fund must create a military disability program for National Guard personnel who became permanently disabled while serving during the October 2015 flooding.
• 74.3 – Suspends state law that ties Workers Compensation Commissioner salaries to circuit court judges (code section also includes $35/day per diem when serving outside Columbia).
• 49.17 – Parks, Recreation and Tourism employees can be paid for actual hours instead of comp time during state of emergency, at discretion of the director and if funds are available.
• 49.10 – Parks and Recreation Development Fund dollars in county accounts carry over from year to year. Projects must be completed and funds expended within 3 years of the application approval.
• 38.33 – DSS can use funds to train private lawyers to represent the department on a pro bono basis.

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The budget will go to conference committee next, where a panel of three legislators from each chamber will resolve differences between the House and Senate budgets. The last day of regular session is May 9.