S.C. Budget Stalling Over Vet School, Tax Relief

BY: SKYLAR LAIRD/S.C. Daily Gazette

COLUMBIA — Money for a new Clemson veterinary school is once again a sticking point in legislators’ negotiations over the state’s next spending plan.

The House and Senate were supposed to return to the Statehouse this week to approve a more than $14 billion state budget ahead of the July 1 start of the fiscal year.

But the six-member House-Senate negotiating committee has yet to come up with a deal between the two chambers’ spending versions, despite working late into the evening Thursday. So, on Friday, emails went out to all legislators canceling this week’s extended session.

The biggest point of contention is the Senate’s plan to put $175 million into Clemson’s new vet school, said Rep. Phillip Lowe, a Florence Republican who is on the compromise committee.

Unlike last year, though, when a standoff on aid to South Carolina’s rival universities threatened to derail the whole budget, legislators are confident a compromise will head to Gov. Henry McMaster’s desk before July 1, Lowe told the SC Daily Gazette on Monday.

As they do annually, the House and Senate passed a safeguard, called a continuing resolution, which keeps state government running and employees paid at current spending levels should the Legislature not pass a new budget in time.

Because of that, “it’s not the end of the world” to keep working after the 2024-25 fiscal year starts July 1, Lowe said.

“But I don’t expect it,” he added.

However, even if the Legislature passes a compromise before July 1, that’s not the end of the process. The budget can’t take effect until McMaster reviews the plan and issues any line-item vetoes of spending he opposes. He has five calendar days, excluding Sunday, to do so, once the Legislature’s budget lands on his desk.

No dates have been officially set for the House-Senate budget committee to finish negotiations, but the panel will likely finish its work by the end of the week, Lowe said. That would allow the House to come back and give its final OK next Tuesday, said House Majority Leader Davey Hiott.

“I think everyone’s 98% satisfied with everything,” the Pickens Republican said. “That 2% seems to be a sticking point.”

Vet school funding

Funding for Clemson’s new vet school gummed up the process last year as well, as legislators found themselves in a stalemate that involved how much to send the school. In the end, legislators agreed to give the college $103 million to build the state’s first veterinary school.

This year, the Senate set aside an additional $175 million for the project, while the House proposed $47 million. The vet school is a priority for Senate Finance Chairman Harvey Peeler, R-Gaffney, who graduated from Clemson.

After the Legislature put $103 million into the school last year, people would be disappointed to not see the state finish funding the project this year, said Senate Majority Leader Shane Massey. This would be the state’s final infusion of cash to get the school off the ground.

With the money, the vet school would wrap up construction in the fall of 2026. Without it, Clemson would build the school in phases, adding at least an extra year, officials said previously.

“We need a vet school,” Massey, R-Edgefield, said. “People are already expecting there to be a vet school built.”

In an attempt to even the score, the Senate’s budget would also set aside $100 million for a medical campus at the University of South Carolina. However, legislators are still trying to find a better balance among the state’s public universities, Lowe said.

“All the higher learning institutions would be jealous if one got more,” Lowe said.

Tax cut differences

Legislators also disagree on where the Senate’s getting the money for USC’s medical school. Just over half of it is coming from a surplus in state sales tax collections that has built up since 2020.

The cumulative surplus in money set aside for property tax relief under the 2006 law known by its number — Act 388 — is expected to top $600 million by the end of this month.

For years, the additional penny on the dollar added to state sales taxes didn’t fully cover the required reductions to homeowners’ property taxes, so legislators had to use other state tax collections to fully reimburse counties. But sales tax collections began rising in 2020, as federal aid amid the pandemic gave people more money to spend and inflation kept costs high.

Senators suggested using $53 million for the medical school campus. The rest, under the Senate’s proposal, would go toward roads, bridges, water and sewer projects, and an accelerated income tax cut.

The House, on the other hand, wants to use a chunk of it to provide a one-time credit on homeowners’ property tax bills. County tax officials have called that a potential logistical nightmare.

Legislators must ask: “Which one takes precedence over the other one?” Hiott said.

The House’s initial budget plan, passed in March, put $500 million toward the one-time reduction in property tax bills. But its May update ahead of budget negotiations reduced that to $150 million.

Both chambers propose putting $100 million toward fixing dilapidated bridges across South Carolina. That’s $100 million less than what the House put toward the effort in its first plan. While the amounts for bridge work now match, the chambers fund it differently. The House takes it from a separate pot of higher-than-expected tax collections.

“The sooner we’ve got our bridges fixed, the better off we’ll be,” Hiott said.

What happens without a deal

Despite their disagreements, legislators do not seem to be facing the same sort of stalemate they had last year. When legislators called it quits around 10:30 p.m. Thursday, after hours of negotiations, it was less so because they were at an impasse than because they were tired, Lowe said.

Whatever the reason, however, negotiations are lasting longer. While last year’s standoff was criticized as “childish,” it was over 2 ½ weeks ahead of July 1. Legislators gave final approval to last year’s deal on June 14.

With the end of June fast approaching, it is possible legislators will need to use the stopgap resolution to keep state agencies operating between the start of the fiscal year and a new budget taking effect, he said.

Keeping funding the same would mean no raises for state employees or teachers, or bumps in funding for state agencies — temporarily, at least.

“Everyone has needs, and it would impact those needs,” Lowe said.

House and Senate leaders do not want that to happen, Hiott and Massey said.

“I think they’ll get something worked out,” Massey said. “I’m not worried about that.”

The funding bridge may be needed for only a few hours.

If legislators can send a deal to McMaster’s desk on June 25, as is the House’s new goal, the governor would have until midnight July 1 to issue his line-item vetoes. The new budget would take effect with his message.

The last time legislators cut a budget deal so close to the fiscal year’s start was 2018. They sent McMaster their 2018-19 budget on June 28. The stopgap resolution kept government running until July 5, when McMaster issued his vetoes.

Differences between the chamber’ plans that year included whether to give K-12 teachers a 1% or 2% cost-of-living increase. Teacher salaries aren’t a point of contention this time. Both chambers’ plans provide a $4,500 boost to their minimum pay.

For the coming school year, first-year teachers can make no less than $47,000. That’s $15,000 above the salary floor for teachers in the 2018-19 state budget.