Friday Report - May 13, 2022

Use Fee Authorization – S. 984. S. 984 is in response to the June 30, 2021, SC Supreme Court decision in Burns v. Greenville County, which imperils various user fees, especially road use fees, imposed by counties and cities in South Carolina.

The House sent S. 984 back to the Senate with the amendments. The Senate amended the bill back to the Senate version, along with a technical amendment and sent it back to the House. The House did not take the bill back up. However, the provisions of S. 984 were added to S. 233 (discussed below). 

Many thanks to Reps. Gilda Cobb-Hunter, Craig Gagnon, Russell Ott, Davey Hiott, Heather Crawford, Case Brittain, and Jeff Bradley. Also, special thanks to Oconee Council member and SCAC President Paul Cain, Williamsburg Supervisor Dr. Tiffany Cook, Aiken County Administrator Clay Killian, and Florence County Administrator Rusty Smith for their calls to key House members during the House debate on S. 984. Finally, thank you all for the many calls and discussions with members of the General Assembly on this important bill.

Surviving Spouse – S. 233. This bill would provide that a qualified surviving spouse may qualify for a property tax exemption in an instance where they do not own the house. The statute previously required that the house be transferred to the surviving spouse by the deceased spouse. The bill also now provides the exemption to surviving spouses of those killed in action and to any structures owned by an otherwise qualified surviving spouse even if these structures are located on heirs’ property.

Last week, S. 233 was amended by the House to include language from several other property tax bills (H. 4243, H. 5144, and H. 5134).

The Senate further amended S. 233 this week by removing the language from the property tax bills added by the House and adding S. 984 as passed by the Senate. The Senate returned S. 233 to the House with amendments. The House voted to non-concur with the Senate amendments and S. 233 was referred to a conference committee. The Senate conferees are Sens. Williams, Davis, and Verdin. The House conferees are Reps. Crawford, Hewitt, and Weeks. As a result of the Senate amendment, the provisions for the user fee authorization in S. 984 still have a chance to become law this session. SCAC will provide the date and time of the conference committee meeting when it becomes available.

State Budget – H. 5150.

The House debated and amended the Senate version of the budget this week. The current version of the budget increased funding to the Local Government Fund (LGF) by $12,583,080 statewide. This represents full funding to the LGF under the statutory formula. The House also directed $12 million into the rural stabilization fund (discussed below), $2 million more than the General Assembly allocated last year.

Other funding of note in the House budget includes:

• $72 million to cover a 3 percent base pay increase for all state employees, including county auditors and county treasurers, as well as over $45 million to cover a one-time $1,500 bonus for state employees;
• $850,000 to the Department of Labor, Licensing, & Regulation (LLR) for EMT training;
• $37 million to cover the state’s share of the 1 percent retirement contribution increase;
• $101 million for the state’s share of the state health plan, including expanded well visits;
• $500,000 for PTSD treatment for first responders;
• $3.5 million for the Firefighter Cancer Benefit Plan;
• $373,000 for a mental health for incarcerated individuals pilot program;
• $15 million for destination-specific tourism grants;
• $4 million in additional funds for tourism advertising;
• $20 million to the Department of Public Safety for grants to fund local law enforcement body cameras and vests;
• $10.66 million to the Office of Resiliency for disaster relief;
• $1.6 million to coroners to fund the local child fatality review team program;
• $1 million to supplement the Councils of Governments (COGs);
• $617,550 to supplement the clerks of court;
• $617,550 to supplement the sheriffs; and
• $617,550 to supplement the probate judges.

Rural County Stabilization Fund – Due to the recent census and the shifting of population into the state and throughout the state the House put $12 million into a Rural County Stabilization Fund. The Senate allocated $10 million into this fund. Under this proviso, any county that had a population growth, as determined by the 2020 Census, of less than 5.35 percent since the 2010 Census shall be eligible to receive monies from the fund as follows:

1. a baseline of $300,000 to each eligible county;
2. an additional $100,000 to eligible counties with a population between 50,000 and 99,999; and
3. an additional $200,000 to eligible counties with a population of more than 100,000.

After disbursal of funds, any monies remaining shall be distributed to each eligible county on a pro rata basis. In the event the amount of funds in the fund is not sufficient to provide monies to counties according to the above formula, the amounts distributed to counties shall be reduced on a pro rata basis.

View a list of new provisos and amended provisos adopted by the House.

Local Option Sales Tax Flexibility – H. 3948. This bill, an SCAC policy position, would allow counties that impose a Transportation Penny Tax pursuant to Chapter 37, Title 4 to also conduct a referendum to impose a 1 percent Capital Project Sales Tax. The bill deletes the restriction that the area of the county can only be subject to one of those authorizations. Counties with the Capital Project Sales Tax may also conduct a referendum to impose the Transportation Penny as well. This would provide flexibility to all counties across the state. The Senate passed H. 3948 this week and the bill has been enrolled for ratification.

Continuing Resolution – H. 5278. This joint resolution would provide that if the 2022-2023 state fiscal year begins with no annual general appropriations act in effect for that year, the authority to pay the recurring expenses of state government would continue at the level of amounts appropriated in Act 94 of 2021 (FY 21-22 Appropriations Bill). The continuing resolution would further provide for appropriations from the general fund of the state in whatever amount is necessary for timely debt service on state obligations and other amounts that are constitutionally required to be appropriated, including the Capital Reserve Fund. The House gave H. 5278 a second and third reading and the bill was sent to the Senate.

Sine Die Resolution – S. 1325. The Senate and House passed S. 1325, the Sine Die resolution. Under this resolution, the General Assembly will reconvene on June 15–17, and again on June 28–30 to take up the following:

• the budget bill (H. 5150) and Capital Reserve Fund (H. 5151);
• any supplemental appropriations and continuing resolutions until a budget is passed;
• vetoes by the Governor;
• conference reports; and
• redistricting bills.

Between July 1, 2022, and November 13, 2022, the President of the Senate and Speaker of the House may call the General Assembly back into session to address any of the matters listed above, as well as to ratify acts and consider legislation in response to a decision by the US Supreme Court in the abortion case of Dobbs v. Women’s Health Organization.

American Rescue Plan Act (ARPA) – H. 4408. This legislation would authorize the expenditure of the first phase of the state’s ARPA funds. The Senate amended H. 4408 with a strike and insert amendment that would apply the Senate’s plan of allocating the first phase of funds as passed earlier this year in S. 952.

Under phase one of the Senate’s plan, over $453 million in funding would be allocated to SCDOT, $400 million to the Office of Regulatory Staff (ORS) for the State Broadband Office to expand access to high-speed broadband internet, and $900 million to the South Carolina Rural Infrastructure Authority (RIA). The RIA would be directed to use approximately $800 million of the designated funds to establish three separate grant programs for water, wastewater, and stormwater projects to provide local governments with opportunities to build and update aging infrastructure across the state. The RIA would also designate $100 million of its allotment for projects that are deemed significant to economic development. Additionally, the RIA would be required to transfer $500,000 to each of the 10 Councils of Governments (COGs) for planning assistance, development of grant proposals, and compliance assistance related to improvements in water, wastewater, and stormwater infrastructure for smaller systems.

The House took up H. 4408 once again last week and amended the bill back to the House’s original version which would reduce the amount allocated to the RIA from $900 million to $800 million. This $100 million would instead be sent to the South Carolina Office of Resilience to be used for stormwater infrastructure projects and for the acquisition of property in floodplains throughout the state to lessen the impacts of future flood events. The Senate concurred with the House amendments to H. 4408 and the bill was enrolled for ratification.

Tax Exemptions – S. 1087. This bill, titled the “Comprehensive Tax Cut Act of 2022,” would reduce the top marginal income tax rate in South Carolina to 5.7 percent, exempt all military retirement income, and exempt 42.8571 percent of manufacturing property from property tax. The revenue loss resulting from the property tax exemption would be reimbursed to political subdivisions from the Trust Fund for Tax Relief.

The House Ways and Means Committee adopted a strike all and insert amendment to S. 1087 to replace the bill’s language with the House version of the income tax break. Under the House plan, the bill would lower the individual income tax marginal tax rate for the current 4 percent, 5 percent, and 6 percent brackets to 3 percent. The current 7 percent tax bracket would also be lowered to 6.5 percent in tax year 2022 with additional triggers that could lower the rate for this tax bracket by an additional 0.1 percent beginning in 2023 until the rate hits 6 percent. The bill would also allow taxpayers to claim a full deduction of military retirement income. S. 1087 received a favorable report, as amended.

This week, the House debated S. 1087 and gave the bill second and third readings and sent it back to the Senate with amendments. The Senate amended the bill back to their version and the House insisted on its version. The House appointed Reps. Simrill, Murrell Smith, and Rutherford for the conference committee for S. 1087. The Senate appointed Sens. Peeler, Setzler, and Alexander as conferees.

Electrical Utility Storm Recovery Fees – S. 1077. This legislation would allow the Public Service Commission (PSC) to authorize an electric utility's issuance of securitized bonds to offset and reduce costs incurred for storm recovery activity. The PSC would be responsible for reviewing securitization mechanisms to determine approval, which may only be granted if the electric utility's use of this mechanism provides quantifiable net benefits to customers and would result in the lowest storm recovery charges. The bill further establishes the processes for the authorization of these bonds, and as part of the requirements, electric utilities would be required to provide functional exhibits and workpapers to the PSC and to the Office of Regulatory Staff (ORS) supporting any petitions, testimony, and exhibits. The House Labor, Commerce and Industry Committee amended the bill this week to further define the term “storm recovery costs” and to allow electric utilities to apply to the Public Service Commission for financing orders only if certain requirements are contained in the petition. Last week, S. 1077 received a favorable report as amended.

This week, the House gave the bill second and third readings and sent it back to the Senate with amendments. The Senate voted to non-concur with the House amendments. The House insisted on its amendments and appointed Reps. West, Ott, and Jeff Johnson for the conference committee on S. 1077. The Senate appointed Senators Rankin, Talley, and Hutto as conferees.

License Tax Credits Allowed for Contributions to Qualifying Infrastructure and Development Projects – H. 3340. This legislation would increase the maximum annual license tax credit amount for eligible infrastructure projects for utility companies beginning in tax year 2021 from $400,000 to $600,000. The bill would also expand the definition of qualifying infrastructure improvements and provide for an additional higher maximum license tax credit at graduated amounts up to an additional $150,000 for eligible projects in Tier II, III, and IV counties based upon the Jobs Tax Credit. The Senate Finance Committee amended the bill to allow utility companies to enter into multi-year commitments to pay cash for eligible infrastructure projects and retain the tax credit. They would also be allowed to make cash payments to a county for the purpose of defraying public debt to pay for infrastructure. H. 3340 was given a second and third reading and was returned to the House as amended. The House concurred with the Senate amendments and H. 3340 was enrolled for ratification.

Housing Tax Credits – H. 5075. H. 5075 would cap the state’s Workforce and Senior Affordable Housing Tax Credit Program. In January, a moratorium was put in place on this tax credit program after demand exceeded financial expectations by hundreds of millions of dollars. The Senate amended H. 5075 to increase the cap to $20 million and would preserve no less than 50 percent of that amount for projects in rural areas that apply for the 9 percent federal low-income housing tax credit. A new scoring program through the Joint Bond Review Committee would also be implemented to award funds to projects that are deemed to be the highest priority setting up a more competitive process for developers to receive tax credits. The House made some technical amendments to H. 5075, the Senate concurred with those amendments, and H. 5075 has been enrolled for ratification.

County Green Space – S. 152. This legislation would allow counties to impose by ordinance, subject to referendum approval in the county during a general election, a Green Space Sales and Use Tax of up to 1 percent for land preservation. A county would also be prohibited from imposing this tax when two or more existing sales and use taxes are in effect. S. 152 was given a second and third reading and returned to the Senate as amended. The Senate concurred with the House amendments and the bill will be enrolled for ratification.

Tax Conformity – H. 5057. This bill conforms the state tax code with any changes to the federal tax code and updates the reference year to 2021. The Senate gave H. 5057 a second and third reading and the bill was enrolled for the ratification.

Telephone Cooperative Property Tax Exemption – H. 5144. H. 5144 would amend Section 12-37-220(B)(10) of the S.C. Code that currently provides a property tax exemption to telephone companies and rural telephone cooperatives that were exempt from property taxes as of December 31, 1973. H. 5144 would further exempt all property of these cooperatives, including property used for broadband and other services, which essentially codifies the Farmers Telephone court case. The Senate concurred with House amendments to the bill and it has been enrolled for ratification.

Land Use, Natural Resources and Transportation