The Associated Press January 13, 2012, 2:20PM ET

Tax cuts, no raise for SC workers in gov's budget

Corporations and people would get a break on their income taxes and public workers in South Carolina would go a fourth year without a pay raise under a budget proposal Gov. Nikki Haley released Friday.

Haley's recommendations for a $5.7 billion state budget for 2012-13 would reduce a key funding stream for public schools that primarily pays teachers' salaries, while adding $10 million for charter schools.

She wants to add about 100 law enforcement officers and several family court judges, and put money toward mental health treatment.

Haley said state employees should look for a raise in 2013-14.

"You can't give everything you want to give. Do I want state employees to have more? Yes. Was this year the year to do it? No," Haley told reporters. "I think they deserve it. We have some of the hardest-working state employees out there. What's more important is we get these agencies in order, and we give them stronger agencies to go into every day."

Haley, a former state House member, recognized that legislators ignored former Gov. Mark Sanford's executive budgets, but she said she wants budget-writers to use her budget as a template.

"While I like a lot of things she's put in there, we'll see what happens," said House Ways and Means Chairman Brian White, R-Anderson, noting the process is just starting. "You may see this year more things in line with the governor's budget than in the past."

Haley, who didn't propose a budget her first year, has said repeatedly that she wants additional revenue to either pay down debt or be returned to taxpayers. Her plan for the fiscal year that starts July 1 would begin eliminating the state's corporate income taxes, something she touted on the campaign trail in 2010 as a top priority. Her budget plan puts $62 million into the first of a four-year phase out.

It would give most taxpayers an $84 reduction in their state income taxes, at a cost of $78 million, by streamlining six income tax brackets into three. More tax relief is coming next year, she said.

"We have to include tax reform," she said. "This is individual tax reform where every person across the state is going to benefit, and that's incredibly important."

Actually, a substantial number of tax filers would receive no break, which would go to people paying in four tax brackets between 4 percent and 7 percent.

More than 40 percent of South Carolina filers pay no state income tax. Of those who do, 45 percent -- representing 900,000 tax returns -- fall into the bottom paying tax bracket of 3 percent, according to the state Department of Revenue.

Haley wants to put $75 million toward encouraging counties to take over the maintenance of some state roads, saying that fits into her pledge to pay down debt. The state Department of Transportation would use the incentive money to divest the responsibility of state roads to counties, on a voluntary basis through what Haley called a reverse auction system.

"The state owns a lot of roads we have no business owning," Haley said.

Budget advisers expect an additional $913.4 million in one-time and recurring revenue for 2012-13 because of surplus from the fiscal year that closed June 30, along with more money coming in this year than legislators budgeted and continued growth. But they warned legislators earlier this week the outlook is not nearly as rosy as it seems because required increases -- including in property tax relief and reserve funds -- gobble up most of that money.

Her budget would put nearly $100 million into a state savings account, about $60 million more than state law requires this year.

Haley's plan would cut $76 million from a pot of education money distributed based on district property tax values. Haley vetoed that money last year, when legislators used one-time money to boost the so-called base student cost to $1,880 per student, but they overrode those vetoes. Budget cuts over the past few years have cut into that per-student allocation, which is supposed to be $2,790 per a state funding formula.

Haley's budget would take base student cost to less than $1,790 per student.

Kathy Maness of the Palmetto State Teachers Association said the slide could result in more teacher layoffs.

"A good education system is economic development," she said.

Haley insists her plan adds money for education.

Her plan would put $5 million toward leasing new school buses, as the first step in a shift toward transferring responsibility for school buses to the districts, a process expected to take several years. In the meantime, the money would lease buses in order to get relics from the mid-80s off the road, most of which transport students with disabilities.

She wants to leave it to districts to decide whether to run their own bus operation, contract with a private company or combine with nearby districts for a regional approach.

South Carolina is the only state in the nation to own and maintain a bus fleet for schools.

State schools Superintendent Zais told legislators earlier this week he supports a move to privatize the bus fleet, but that the governor wanted to be in charge of that issue, and he'd received no update. So his budget sought $36 million to buy enough new school buses to comply with the state's 15-year replacement cycle, which legislators have ignored since passing it in 2007.

Haley said her plan would redirect that $30 million difference from not buying buses toward specific education programs recommended by Zais and the Education Oversight Committee.


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