What to watch in 2012

The new legislative session has officially begun, and scores of bills are scheduled for consideration. Here are just a few we’re keeping our eyes on.

TRANSPARENCY

H.4432 wouldn’t kill the “incentives racket” whereby well-positioned companies lobby for, and get, millions in taxpayer-supported favors that don’t apply to their competitors. What it would do is bring sunlight to a notoriously murky practice – an idea SCPC has taken the lead in promoting. Titled “Economic Incentive Transparency Act,” the bill would apply to all “incentives” and defines that term all-inclusively (“any tax credit, subsidy, tax exemption, loan, workforce training, or other service, grant, or property, as well as anything else that has a fair market value to a single recipient,” etc.).

In order to be eligible for an incentive, a beneficiary would have to submit a publicly available and detailed application, which would be subject to an open hearing, as well as submit annual reports to the Department of Revenue. The law would require any incentive to be introduced as a separate bill, subject to a public hearing, sunset after 5 years, and given as a forgivable loan (forgivable under the condition that the amount of jobs promised are actually created). Beneficiaries who fail to deliver their job creation promises are barred from further incentives. The bill also requires the BEA and an independent economist to prepare a comprehensive cost-benefit analysis of any incentive, and requires the Department of Revenue to publish an annual report outlining all economic development spending.

S.1007 would require the Department of Transportation to maintain a detailed online transaction register, updated monthly, of all the department’s expenditures. As the notoriously murky state of DOT’s finances make clear, the 2007 DOT reform law didn’t begin to address the agency’s dire lack of financial accountability. This bill would seem to be a step in that direction.

RETIREMENT SYSTEM

H.4479 and H.4453 seek to close the Teacher and Employee Retention Incentive (TERI) program to new participants and to repeal the legislation after five years. As we’ve pointed out many times before, the TERI program – a program that allows state employees to start drawing retirement while still working and drawing salaries – is in large measure to blame for the State Retirement System’s $17 billion unfunded liability. Ending the program ought to be a priority. It’s understandable that lawmakers don’t want to take the political risk of abolishing TERI – S.1027 would call for a referendum on the matter – in effect allowing lawmakers to avoid blame for ending a program that’s popular with many state employees. Surely, though, the financial sustainability of state government should be a matter lawmakers are capable of dealing with themselves.

FEDERAL CONTROL

S.1049 would disqualify unemployed persons from getting benefits if they don’t apply for or accept suitable work or approved community service work within 26 weeks of filing. S.1026, meanwhile, would eliminate unemployment benefits for people only seeking part-time work. Both bill are attempts to address the state’s unsustainable commitments in the area of unemployment benefits – commitments taken on in 2010 in order to draw down $97 million in federal stimulus money. As we’ve pointed out recently, the state’s law code shouldn’t be another tool for the federal government to pursue its own priorities.

EDUCATION

S.1010 bans school districts from issuing general obligation bonds to cover operating expenses – a practice one lawmaker (quoted at The Nerve) aptly likens to “paying off a credit card with a credit card.”

‘ECONOMIC DEVELOPMENT’

S.1013 proposes that economic development funds used by the Department of Commerce to bring new businesses into the state be equally available to existing South Carolina businesses. Essentially, when DoC makes a determination that a business is worthy of incentives because it would be beneficial to have a certain product or service provided in the state – a typical justification for incentives – then that money would have to also be made available to businesses in South Carolina capable of expanding into that market. The bill may be well intended, but a likely consequence would be that over time state officials, in order to comply, would simply increase the already massive amount spent on special incentives. But as we’ve pointed out before, the amount spent by South Carolina on incentives has exploded over the last fifteen years, to no discernible effect on economic growth or competitiveness.

GOVERNMENT SPENDING

H. 4478 would cap general fund at a rate of 6 percent, or population growth + inflation. The governor would be required by law to include an OSB certification saying that the law conforms to these standards. The General Assembly can suspend the spending limit in the case of an emergency. All the other money would go into Income Tax Rebate Fund, which can be used only to replenish the general reserve fund and pay for natural disaster relief. All other funds would go to individual and corporate income tax relief. While the bill improves on previous attempts to limit spending – it doesn’t, for example, place excess revenue in a “reserve fund” guaranteed to be spent by government – it’s still weak. It only caps General Fund growth, not revenue from fines and fees or from the federal government; and it has the potential to allow government to grow faster than incomes. (There’s more on the strengths and weaknesses of different spending caps elsewhere on our website.)

HEALTH CARE

H.4424

H. 4424 proposes to amend the state constitution by ballot item at the next general election. It states that no individual can be compelled to purchase health insurance or health care services, and prohibits fining or punishing those who pay directly for health care services without going through an insurer. Cash payment practices have been successful in other states, and the option should certainly be available to South Carolinians, but direct payment is unlikely to serve as a perfect replacement for insurance. This bill attempts to establish state protections against federal meddling in healthcare, but this alone will not create a true free market for health care in South Carolina. Real reform would require a far broader and more substantive approach.

REGULATION

H.3093 would create the South Carolina Board of Music Therapy to regulate the practice of music therapy and create new fees. Too many boards function as impediments to competition already, and in any case it’s hard to see why a practice as little-known and nebulous as music therapy needs protection from unlicensed competitors.

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