SC lawmakers cut taxes, fret over health care cuts

By JIM DAVENPORT

COLUMBIA, S.C.

As South Carolina legislators scrambled Thursday to come up with ways to spare health care programs from gut-wrenching budget cuts, they rushed to approve huge breaks for businesses that include doing away with the state's corporate income tax.

The breaks, including phasing out the state's corporate income tax, won key approval with a 105-9 vote over the objections of a handful of Democrats and will get routine final approval Friday before being sent to the Senate.

The state collects $167.9 million yearly in corporate income taxes. That 5 percent tax rate yields the third largest source of state taxes behind sales and individual income taxes.

Beginning in July 2011, the state would cut $16.8 million from those collections and phase out the tax entirely over 10 years. The legislation also provides economic development incentives and gives the state Commerce Department more money to close deals for industries the state is recruiting.

But that 2012 fiscal year also will begin with a big problem: Legislators expect they'll have to come up with ways to cut $1 billion in state spending as federal budget stabilization money disappears.

House Ways and Means Committee Chairman Dan Cooper said everyone wants to find ways to spur economic activity. "This will make South Carolina more attractive" and generate jobs that will more than offset costs, he said. "I hope it brings in way more revenue."

Cooper said incentives will help a nuclear power plant in Cherokee County and a biomass company in Sumter County. Meanwhile, he says doing away with corporate income taxes immediately for any company moving its headquarters to the state should lure high-paying jobs.

The breaks come as human services programs are being slashed. Legislators have been besieged with calls from disabled residents and their advocates after Cooper's committee approved a $5 billion spending plan last week that would end programs for nearly 26,000 people getting help from the Department of Disabilities and Special Needs.

"We keep passing all this corporate welfare," said state Rep. Gilda Cobb-Hunter, an Orangeburg Democrat who voted against the measure. "What about the welfare of the citizens of our state?"

State Rep. Joe Neal, D-Hopkins, reminded House members that the lobby Wednesday was packed with people with disabilities asking that their programs be spared cuts. "They have every right to be concerned because it ain't over," Neal said.

Continued spending cuts only make things worse, Neal said.

"You explain to the parents of some of these children who are disabled how we got where we are and why we can't give them the services that they need to keep their children alive," Neal said.

Those families are not the only ones losing health care help. The budget committee cut $10.7 million from Medicaid by imposing a three-drug prescription cap in a program for adults that now allows up to 10 drugs. The panel also eliminated the $2.4 million the state spends on AIDS drug treatments that now serve about 2,055 people monthly and slashed $35 million from the Department of Mental Health's $161 million budget.

As the tax break debate played out, state Rep. Tracy Edge searched through spreadsheets for ways to spare the Department of Disabilities and Special Needs from shutting all but its residential programs and cutting off services to nearly 26,000 children and adults.

Edge, who writes the health care budget, was hoping a six-month extension of federal Medicaid assistance would be approved before the House budget debate begins so he can nearly erase the cuts. "I'm a lot more confident today," Edge said. "A week ago, I wasn't so sure."

Cobb-Hunter and Rep. Chip Limehouse, R-Charleston, say the state needs to put those health care programs on firmer footing next year as federal stabilization and Medicaid cash disappear. They're both pushing increases in the state's cigarette tax.

The budget committee approved a 30 cents-per-pack increase to the nation's lowest cigarette tax of 7 cents a pack. That would raise about $85 million for Medicaid programs. Limehouse and Edge want to use that money to head off Medicaid cuts in the 2012 fiscal year.

Cobb-Hunter and Limehouse both plan to introduce budget amendments to raise the tax even further. Cobb-Hunter wants it to increase by more than $1 a pack and Limehouse to at least 57 cents a pack.

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Associated Press Writer Seanna Adcox contributed to this story.