…We only wish we were talking about USC Women’s Basketball.
The South Carolina General
Assembly is getting its first crack at a 2015-2016 spending plan this week as
the state budget hits the House floor for debate.
The budget always includes
Part IA, the spreadsheet of
expenditures by agency, and Part IB,
instructions from the General Assembly on how those funds should be spent
(provisos).
But this year, legislators will
take up a Part III. Part III can be
summarized in one word: borrowing.
The total tab is $497 million, requiring the state debt limit to be raised from
$2.58 billion to $3.90 billion.
Most of the borrowed funds ($337
million) will be used to build or renovate various state buildings, many of
them on college and university campuses. The remaining $160 million or so will
go to the Department of Commerce for “Regionalized Economic Development
Infrastructure” ($60 million), to State Technical Colleges for “Pathways to
Workplace Infrastructure Development” ($50 million) and to, most generic of all,
“K-12 Initiatives” at the State Department of Education ($50 million).
The quest to put the state in
hock to the tune of $497 million comes on the heels of the visit to South
Carolina last week of Jonathan Williams, the chief tax economist for ALEC, the
American Legislative Exchange Council. For a number of years ALEC has published
Rich States, Poor States, a
state-by-state analysis of the competitiveness of each state government in
attracting jobs and economic development. Williams conducts the analysis with
oversight from noted economist and Reagan advisor Dr. Arthur Laffer.
In a meeting with key
legislators and policymakers last week, Williams presented the brand new data
on the fifteen Economic Outlook variables that make up the 2014 edition of Rich States, Poor States. South Carolina
shone brightly for our strong Right to Work laws and for our low inheritance tax
rates.
But in two categories, South
Carolina is competing for worst in the
nation.
One of the key variables in
those 15 in the determination of fiscal health is Debt Service as a Share of
Tax Revenue. We are shocked to learn that South Carolina is the second
worst in the country in this category. That means we pay a lot of interest
on borrowed money every year.
The other category worth
noting for South Carolina’s poor performance is Personal Income Tax Progressivity, or put another way, the “change
in tax liability per $1,000 of a person’s income.” Our rank? 43rd,
or seventh worst in the nation.
Last week, SC House leaders
poured cold water on the idea of cutting personal income taxes on South
Carolina families. This week, they take up the idea of borrowing $497 million. Sounds
like DC logic for solving SC problems.
There is no other
conclusion we can reach but that in at least two very important economic
competitiveness categories, we are moving in the exact opposite direction from more
jobs, better jobs, wage growth, and entrepreneurship. The numbers don’t lie. If we don’t change our ways,
the Palmetto State could be looking at a #1 ranking in debt and taxes. That’s
great news…for North Carolina, Tennessee and Georgia.
Note: With all 15 Rich
States, Poor States factors considered, South Carolina ranks #31 in
competitiveness, down from a rank of #20 in 2008, the first year of Rich States, Poor States.
Dr. Oran P. Smith is Palmetto Promise Institute's Policy Senior Fellow.
