S.675 designates the Public Employee Benefit Authority (PEBA) and the Retirement System Investment Commission (RISC) as co-trustees of the assets of the state retirement system. Under current law PEBA and the Budget and Control Board (BCB) are co-trustees of the assets. The bill also removes the State Treasurer as the custodian of the assets of the retirement system in favor of the PEBA board.
The makeup of the 11-member PEBA board is altered slightly by reducing the governor’s appointments from three to two members and by making the executive director of the RISC an ex officio member. The terms of PEBA board members are also increased from two to five years. The PEBA board would also be required to employ an executive director charged with carrying out the policies and direction of the board.
S.675 furthermore alters requirements that the General Assembly annually include in the budget funds sufficient for the Office of Inspector General to employ a private firm to perform fiduciary audits of PEBA and the RISC. Under the new law the General Assembly would only have to provide these funds every four years rather than annually.
Another provision is even more flagrant in blurring lines of accountability. The bill deletes current law that says the administration of public retirement systems must be financed by their interest earnings, and the law requiring policy decisions made by PEBA to be approved by the Budget and Control Board.
The bill changes of the composition of the RISC by adding one member appointed by the House Speaker, adding another member appointed by the Senate President Pro Tem, and removing the State Treasurer in favor of a member appointed by the Treasurer. As with PEBA, the RISC would be required to employ an executive director to carry out the policies and direction of the board as established by the RISC.
Finally, the bill sunsets the current 7.5 percent assumed return on the investments of the retirement system. Beginning in 2016 the assumed rate of return will be set every 4 years by the PEBA board in consultation with the board’s actuary and the RISC. The General Assembly could thereafter alter this assumed rate by joint resolution.
The upshot of all these changes is they would make the retirement system less accountable to elected officials. This weakening of accountability is primarily achieved by increasing the powers of PEBA and RISC (and their new executive directors) and by weakening any oversight of the system from the statewide elected Treasurer. In recent years the state’s retirement system has been heavily invested in high risk and/or questionable investments, and its annual return on investment at 1.3 percent has been one of the lowest in the nation.
The current state of South Carolina’s retirement system is an argument for more accountability, not less. S.675 would achieve precisely the wrong aim.
(Note: S.527 is a near companion bill with a few differences.)]]>
How would a massive tax hike fix all our roads and bridges and cut our income taxes? It won’t. But that hasn’t stopped South Carolina politicians from pushing multiple versions of this discredited idea.
Governor Nikki Haley blessed the idea of raising the state’s gas tax – up to that point it was not seriously considered – and a slew of complicated “tax swap” and otherwise revenue-raising plans followed. Most of them promise to raise one tax now while cutting another down the road. The chief problem with the whole swap idea – apart from its fundamental disingenuousness – is that it depends on a robust economy. If the projected tax revenue doesn’t add up to the amount cut from other taxes – a very likely outcome if recent years are any indication of future economic growth – all you’ve accomplished is a tax increase.
So: what are these plans, and what kind of assumptions are they based on?
The current Senate plan that passed the Finance Committee does not contain any tax relief but rather imposes a huge gas tax hike and an increase in multiple other fees. But Senate Republicans have released a compromise plan, the details of which are available in a press release. The compromise is largely based on the Senate Finance plan, but with a tax swap component.
All the “swap plans” are based on projected collections, not actual rates. While the lump sum may average out, the actual rate costs won’t necessarily do so for many taxpayers.
And when considering the various funding plans on offer, remember, too, these salient facts:
Absent these reforms – without compromise or watering-down – there will be no change in how roads are managed. If that’s the case, taxpayers will be paying a massive tax increase with no improvement in their roads – and there is little chance the promised income tax cuts will materialize.
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With the introduction of S.771, the General Assembly is once again resorting to excessive industry regulation in order to “protect the public health, safety, and welfare of the residents of the State” and to “maintain competition.” These words, positioned at the very beginning of the bill, represent the economic philosophies that have plagued our state since the glory days of the 1980s, during which South Carolina’s economic growth rate climbed to 2.2% and ranked 15th nationally. Coincidentally, the state’s “economic freedom ranking” during the 1980s rose from 25th to 9th nationally. The economic freedom experienced by the state, followed by unprecedented economic growth, led to higher per capital incomes; improved health care; greater life expectancy; lower rates of divorce and crime; higher levels of education; and higher levels of job satisfaction. Since 2000, South Carolina’s economic growth rate has remained at or below 1.0% and our economic freedom ranking has fallen back to 25th.
The correlation between economic freedom and economic growth is indisputable. This relationship suggests why bills like S.771 will not “protect the public health, safety, and welfare of the residents of the State” and will not “maintain competition.” This bill seeks to regulate the relationship between recreational vehicle manufacturers, distributors, and dealers of recreational vehicles. The bill would require anyone engaging in business as a recreational vehicle dealer to obtain a license good for 12 months for a fee of $50. The bill also lists requirements on the physical place of business, stating that businesses eligible to obtain a license must have at least 96 square feet of floor space and a permanent sign displayed with letters at least 6 inches in height. Ask yourself, how do these two regulations protect my health and safety and promote healthy competition? In fact, they do not.
Our elected officials are trying to navigate the state’s economy. It is downright troubling that, in light of this reality, South Carolina remains at or near the bottom of nearly every relevant economic ranking.]]>
Last week, a majority of Senate Republicans produced a compromise on the subject of road funding. At this point, the legislation itself isn’t available to the public; we only have a press release. But if that release accurately reveals the plan’s details, the compromise is little better than a compilation of all the bad ideas put forward during this year’s debate over road funding.
The new proposal takes one of its most distinguishing features, a tax swap, from the “roads plan” suggested by Gov. Haley. Under the compromise proposal, as in Governor Haley’s plan, taxpayers would face a substantial increase in the gas tax in the near future and a promised income tax decrease phased in over a longer period of time. Also like the governor’s plan, the compromise proposal is based on a projected four percent growth in tax revenue by the BEA. Using the numbers associated with the governor’s plan, that growth was calculated on the assumption that the average taxable income would grow to $37,837 from $28,330, an increase of $9,607, or about 34 percent, over the 10-year period. The best that can be said for that assumption is that it’s unrealistically optimistic.
If the Senate Republican plan relies on the same BEA projections the governor’s plan relied on, the 1 percent income tax cut would be contingent on the average South Carolinian’s wages rising substantially.
The tax swap component of the compromise differs from Haley’s plan by proposing a larger gas tax increase (12 cents instead of a 10 cents), and a smaller income tax cut (a 1 percent decrease in tax brackets over five years instead of a 2 percent decrease over 10 years). Senate Republicans admitted in a press release that these changes meant the bill would generate $800 million in revenue, but provided only $709 million in net tax relief.
Finally, whatever their other differences or similarities, the tax swap components of each plan would make South Carolina’s tax code more regressive. One million South Carolina tax filers pay no state income tax. For these individuals – low income South Carolinians – both the Haley and compromise proposals would mean only a tax increase.
The compromise borrows all of its revenue-raising measures from the Senate Finance Committee bill designed to raise revenue for the Department of Transportation (DOT). The new and increased taxes and fees in the compromise proposal include:
The compromise takes its DOT “reform” provision from the gas tax bill passed by the House. This provision allows the governor to appoint the eight-member DOT commission (the body that sets DOT policy), who will in turn appoint the DOT Secretary. The legislatively controlled Joint Transportation Review Committee (JTRC), however, would still retain the power to screen and approve the DOT commissioners appointed by the governor. Retaining JTRC approval would ensure continued legislative control over the DOT. More specifically, it ensures continued control by the current House Speaker and Senate President Pro Tem, who appoint six of the JTRC’s 10 members.
But the reason South Carolina’s road system requires reform at all is that it’s dominated by lawmakers who can’t be held accountable by the vast majority of the state’s citizens. There is no reason to believe that, if House reform were to pass, the legislative leaders who control the JTRC would suddenly take a deferential or hands-off approach to the governor’s appointments. To put it bluntly: the JTRC is a major means by which legislative leaders maintain control over the state’s road system; it should be eliminated completely.
Indeed, true reform means reducing legislative control over the DOT, abolishing the DOT Commission, and allowing DOT policy to be set by a secretary appointed by the governor. That arrangement would force the department to foster a statewide mentality on road prioritization, and would provide a clear line of accountability from the secretary to the governor. Neither the House nor Senate compromise proposal achieves that aim.
The compromise proposed by Senate Republicans is nothing more than a reheating of bad policy. South Carolina roads don’t need a gas tax hike to function properly, and citizens don’t need a tax swap that merely reshuffles revenue and shifts more of the tax burden to the poor.
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S.759 is another attempt at Department of Transportation (DOT) “reform” that would only entrench existing legislative control over DOT. The bill increases the size of the DOT Commission (the entity which sets DOT policy) to 11 members with 1 of those members being appointed by the Governor and the remaining 10 being elected by legislative delegations of Regional Councils of Governments. Under current law the commission is comprised of 8 members, 1 appointed by the Governor and 7 elected by the legislative delegations of federal congressional districts. So under S.759 legislators would still elect all but one of the DOT commissioners, only the districts from which the commissioners are elected would change.
To make this change even more pointless, S.759 retains the screening process for DOT commission candidates carried out by the Joint Transportation Review Committee (JTRC). As SCPC has explained before the JTRC which must approve candidates for the DOT commission is effectively controlled by the current House Speaker and Senate President Pro Tem who combined appoint 6 out of its 10 members.
These parts of the bill essentially retain the status quo as it relates to transportation authorities. Other parts of the bill however, actually make the system even worse. If S.759 were to become law DOT Commissioners would be able to serve 2 consecutive terms rather than 1; this would make initial appointment to the board more valuable and would likely generate more political maneuvering in the qualification and election process. The bill would also make the qualification process less transparent by deleting a state law which requires the JTRC to release a verbatim copy of the testimony and documents submitted at DOT commission candidate hearings.
The DOT needs reform, but that reform must establish clear lines of accountability by vesting control of the agency in the executive branch where it belongs. This bill would not achieve that goal, it simply rearranges the look of existing legislative power, and promotes more horse trading and secrecy in the selection of DOT policy makers.]]>
H.4152 would cut all South Carolina income tax brackets by 1% over four years. The first 0.25% cut to each bracket would begin in 2015 and would continue for three more years until the full 1% cut had been achieved. The final effect of these cuts (if carried through) would be a lowering of the top tax bracket from 7% to 6% along with a lowering of all the brackets for lesser amounts of income.
While tax reformers would no doubt like to see a more significant cut, a 1% reduction in all tax brackets would allow hundreds of millions of dollars to be retained annually in the private sector. This retained income could be used on consumption or savings/investment thereby fueling economic growth.
This legislation also helps to demonstrate the difference between tax swaps and tax cuts, as it provides the exact same level of income tax relief as a compromise road plan suggested by Senate Republicans, but it does not couple these cuts with a gas tax hike, or hikes to any other taxes or fees.
The only problem with this bill is that in phases in its tax cut over time. Phased tax cuts will always be vulnerable to the possibility of legislative backsliding as the current legislature cannot bind the will of a future legislature. In other words, there is no guarantee phased in tax cuts will actually come to pass.]]>
Following the governor’s lead on tax swaps, more than 20 Senate Republicans unveiled the outline of a compromise amendment to the Senate Finance gas tax bill.
The heart of the proposal is the swap of a 1 percent cut to all income tax brackets for a variety of tax and fee increases, including a 12 cent increase in the gas tax, an increase in driver’s license fees, increasing the cap on vehicle sales tax from $300 to $600, increasing vehicle registration fees, and imposing new fees on hybrid and electric vehicles.
This policy should sound questionable to advocates of tax reform on these facts alone. But – as is almost always the case with tax swap proposals – the devil is in the details.
Tax swaps are designed to help spare politicians the political pain of raising taxes and shifting revenue from one “priority” to another. The newly announced gas tax compromise is no different. Politicians refuse to prioritize road maintenance and repair by taking funds away from other agencies, projects, and programs, and repurposing them for our infrastructure needs. But since road maintenance and repair is a real thing about which actual citizens demand action, they can’t do nothing – so they merely raise revenue in the general area of roads (car taxes, license fees, gas taxes) and claim it will be used to meet maintenance and repair needs.
Tax swaps deceive, first, by claiming that the swap in question produces either a net savings, or at worst no new costs for all taxpayers. This is the idea of “revenue neutrality.” In reality tax swaps will always produce winners and losers. The governor’s and Senate Republicans’ tax swap plans are no different.
The compromise amendment proposes to raise the gas tax (a tax paid by virtually all consumers) and several other fees that fall on a large number of South Carolinians, while cutting the income tax, a tax paid by far smaller numbers of individuals. According to the governor’s own numbers, as reported by The Nerve, over 1 million state tax filers (nearly 46 percent of all filers) will owe no income tax in 2016. That means these individuals will feel the sting of a gas tax increase with no offsetting relief. They are the tax “losers” in this plan. Middle class families may range from seeing a slight increase to a slight decrease in their tax burden. Nor will the proposal save money in the aggregate. In a press release promoting their plan, Senate Republicans admit they expect the plan to generate $800 million while providing only $709 million in tax cuts. The only guaranteed savers from this plan will be the wealthiest South Carolinians.
In short, the tax swap proposed by Senate Republicans would make South Carolina’s tax system more regressive and more burdensome as a whole.
Second, tax swaps are almost always designed so that the tax increase component is guaranteed, while the tax cut is only a promise. The reason for this isn’t complicated: the tax hike is always the true reason for the policy, while the cut is only included to ensure the hike becomes law. As Sen. Ray Cleary (R-Georgetown) said about an earlier gas tax bill, “the purpose of this bill is to raise revenue, anything else it does is just icing to make it more palatable to voters.”
That’s well said, and it’s true of the Senate Republican tax swap plan, too, which guarantees a 12 cent increase in the gas tax over three years while promising a 1 percent cut to income tax brackets phased in over five years. The annual 0.2 percent reduction in the tax bracket will only be realized if state revenue growth exceeds 4 percent each year. For reference, from 2003 to 2013 South Carolina’s compound annual growth rate (an average of economic growth) averaged less than 2 percent.
Third, a tax swap involving dedicated revenues is a more complicated, less efficient way to reprioritize a budget. Because the tax swap proposed by the Republican compromise amendment raises a dedicated revenue tax (all gas tax proceeds are directed by state law to DOT and a few other agencies) in exchange for lowering a tax that provides revenue to the General Fund, it will necessitate a reduction in General Fund money (at least in the short run). When looked at this way, it’s easy to see that lawmakers could achieve the same effect – more funds for DOT at the expense of other programs – by simply cutting back on existing budget items and directing the savings to DOT. Shifting existing budget resources wouldn’t require any change to state law, and would have the further advantage of not giving politicians the authority to choose tax winners and losers.
The tax swap method allows lawmakers and the governor to delay these spending reductions and the accompanying backlash. By reducing future revenue instead of shifting existing resources, lawmakers can plead necessity when they have to cutback spending on programs in the future. The swap method even gives lawmakers the opportunity to avoid making any spending cuts whatsoever, since they can always rescind their promised tax cuts.
In the final analysis, the purpose of tax swaps (especially those involving dedicated revenue taxes) is not to reform the tax code or to lower taxes; the purpose is to raise revenue for a desired state expenditure while provoking the fewest objections from influential constituencies. Tax swaps are a manifestation of the principles of taxation laid out by former French Minister of Finances Jean-Baptiste Colbert, who said that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
Tax swaps are pursued not for their soundness as policy, but for political reasons. As a result, taxpayers should be naturally wary of them. This is true in general, and it is especially true for a plan whose principle purpose is to raise money for a wasteful and inefficient transportation governance system in dire need of major reform before it receives new revenues.
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The debate over road funding has seen a number of outrageous and contradictory claims. On the one hand, for example, we’re told that the Department of Transportation (DOT) faces a $43 billion shortfall; on the other that it’s a flawlessly run agency with well-placed priorities and next to no waste.
Citizens can and should question these claims, as SCPC has on the shortfall and DOT management arguments. Toward that end, everyone wishing to engage in the roads debate should be aware of the basic mechanisms by which our state road system is currently maintained. This means a knowledge of current funding sources, the authorities who decide how road funds are spent, and who the authorities are accountable to.
Unfortunately, a citizen who understands these basic features of the controversy will know more than many policymakers do.
South Carolina road construction and maintenance is funded primarily through three different pools:
State gas tax revenues totaled $574 million in fiscal year 2015 (FY15). Out of this amount, $422.5 was available for use by the DOT. The remaining revenue was divided as follows.
State gas tax revenues are the only one of South Carolina’s three road funding sources that are free to be devoted to routine maintenance.
Federal funds are provided to the state DOT on a matching basis. The state DOT must begin federally funded construction projects (typically expansionary projects) using state gas tax revenues, and only then begin to use matching federal funds.
The DOT estimates it will receive around $900 million in federal matching funds in the current fiscal year. The DOT also states that the average state funding match requirement to receive federal funds is 20 percent of a project’s cost. This means we can roughly estimate the DOT will spend around $180 million in the current fiscal year in order to obtain federal funds.
Half of South Carolina roads, including secondary and rural routes, are not eligible to receive federal funds, and federal funds cannot be used for routine road maintenance. The state roads that are ineligible for federal funding also happen to be the class of South Carolina roads that are in the worst state of repair. Fifty percent of non-federal aid eligible secondary roads are rated as being in poor condition. In contrast, only 10 percent of interstate miles, which are federal aid eligible, are rated as being in poor condition.
In addition to these limitations, projects that receive federal funding must abide by federal laws governing project oversight and prevailing wage rates. Former head of the Federal Highway Administration Robert Farris suggests that these kinds of federal regulations increase project costs by 30 percent.
The DOT is giving up somewhere in the realm of $180 million, over which it would otherwise have full spending discretion, in order to receive federal funds. Even if we allow that some of the federal funds received by DOT are used for road repair, the state is undoubtedly parting with some funds that could be used for road maintenance and repair in order to co-finance expansionary road projects with the federal government.
Some federally funded SCDOT projects current underway include:
STIB debt financing is the third source of funds. The STIB is funded through Other Funds (fines and fee revenue) in the state budget. The specific funding sources for STIB include:
Since the passage of Act 98 in 2013, the STIB has also received a $50 million annual transfer from the DOT.
In the current fiscal year the STIB has a budget of $150 million. Budgets produced by House and Senate bodies for the upcoming fiscal year would give the STIB a budget of $255 million. Prior to the passage of Act 98 the STIB received an average budget of $50 million.
The official state budget numbers for the STIB may be less than trustworthy, however. Audit documents for fiscal year 2014 (FY14) indicate the STIB has received $220 million in revenue despite the state budget listing the STIB’s total budget for that same year at only $50 million. It’s unclear whether recent increases in the STIB’s budget, as given in state budget documents, are due to true funding increases or are due to including revenues that were previously left out of state budget documents. We suspect they are true increases, in which case the STIB could receive somewhere in the realm of $470 million in the upcoming fiscal year.
Once the STIB receives its funding, it bonds out the dollars it receives to up to ten times their original value in order to finance road projects of the STIB board’s choosing. This bonding process has allowed the STIB to create billions of dollars in debt over time. In fact, STIB bonds are the largest category of South Carolina’s bond debt, with total liabilities at over $2 billion dollars in FY14 (see page 230 of the PDF).
All of this bonding, of course, requires the STIB to make debt payments. The FY14 audit of the STIB reveals the agency spent $90 million on interest and other debt costs. This expenditure is just shy of double the amount ($48.5 million) the STIB spent on transportation project assistance.
In other words, the STIB pays more in interest on its debt than it spends on road projects.
Finally, STIB funds are used only for expansionary projects (never maintenance), and have historically been expended in only a handful of counties.
Some STIB funded projects currently underway include:
Other funding sources for roads include funds administered by the Coordinating Council for Economic Development. In 2014 alone the Council handed out $21.8 million in grants for roads. What distinguishes this funding source from the others (apart from its size) is its recipients. Every grant given out by the coordinating council, including grants for roads, is given out for the benefit of one selected business. So while the general public may have problems getting roads fixed, a large enough company can always try and get funding for new roads from our economic development authorities.
Even a cursory analysis of South Carolina’s road funding sources makes it clear where a major part of the problem with our road funding lies. South Carolina relies on a relatively small pool of funding from one dedicated revenue source to finance the majority of its road maintenance. And lest we forget, the roads that must be maintained by the state alone total some 41,459 miles, the fourth largest state road system in the country. To make matters worse, a portion (around $180 million) of the one small pool of funding that is free to be devoted to maintenance – gas tax revenue – is instead spent on expansionary projects in order to receive a federal funding match.
In short: South Carolina is giving up money that could be used for road maintenance and repair in order to finance road expansions. If in the upcoming fiscal year the DOT retained the money it will spend to receive federal matching funds, and received the funding that would otherwise go to STIB, the DOT would have over $700 million it could use entirely for maintenance and repair. As things stand now, the DOT has somewhere under $300 million free to be devoted to state maintenance. Even if the DOT continues to spend some of its funds to receive federal dollars, the state can clearly use the resources it has to do more for road maintenance and repair.
The majority of state gas tax revenues as well as matching federal transportation funds are spent by the state DOT. DOT leadership is comprised of the Secretary of Transportation, appointed by the governor, and the eight-member DOT commission, all but one of whom are elected by the state legislative delegations of each of South Carolina’s seven federal Congressional districts.
STIB funds are bonded out and spent by the STIB board comprised of seven directors: two members appointed by the governor, the chairman of the DOT Commission, two members appointed by the Senate President Pro Tem, and two members appointed by the House Speaker.
C Funds are distributed to the state’s 46 counties using a three-part formula. County transportation committees (CTC’s) are the authorities who determine how these distributed C-funds are spent, but state law stipulates that counties spend at least 25 percent of their allocation of C-funds on state-owned roads. Contrary to what might be assumed, CTC members are not selected at the county government level, but are appointed by the legislative delegations of each county.
In short, the legislature. To be more specific, most of South Carolina’s transportation authorities are accountable to only a few powerful legislative leaders.
The nominal head of the Department of Transportation is the Secretary of Transportation, appointed by the governor. In reality, though, the DOT secretary is a largely administrative position tasked with carrying out the policy of the true DOT authority, the DOT commission. Seven of the DOT commission’s eight members are elected by the state legislative delegations of South Carolina’s seven federal Congressional districts, and the one remaining member is appointed by the governor. However, in order for any candidate to be eligible for election to the DOT commission, he or she must first be screened and approved by the Joint Transportation Review Committee (JTRC).
The JTRC is a ten-member board composed entirely of legislators and legislative appointees, including: the chairman of the Senate Finance Committee, the chairman of the Senate Judiciary Committee, the chairman of the Senate Transportation Committee, two members appointed by the Senate President Pro Tempore, the chairman of the House Ways and Means Committee, the chairman of the House Education and Public Works Committee, and three members appointed by the Speaker of the House.
The House Speaker and Senate President Pro Tem, then, directly control half the appointments to the board that has the final say on whether any individual is even eligible to serve on the DOT Commission. In fact, today the two men who occupy these offices actually control six of the ten positions on the JTRC because the current Senate President Pro Tem Hugh Leatherman (R-Florence) is also the chairman of the Senate Finance Committee. The Speaker also indirectly controls two more of the appointments (the Education and Public Works chairman and Ways and Means chairmen) by virtue of his power to appoint committee memberships. In addition to nominating all DOT Commission candidates who are to be legislatively elected, the JTRC must approve the governor’s one appointment to the JTRC before he or she can be confirmed in his position.
To summarize, the DOT leadership is broadly accountable to legislative delegations, and more specifically accountable to the House Speaker and Senate President Pro Tem.
The State Transportation Infrastructure Bank, or STIB, is controlled by the seven-member STIB board. The members are appointed by a combination of the governor and legislative leadership. As with the DOT commission, the STIB board is primarily accountable to the House Speaker and Senate President Pro Tem. These two control more than half of the appointments to the board. Senate President Pro Tem Hugh Leatherman also serves on the STIB board.
The exact membership of different CTCs vary but in all cases the members are chosen by the legislative delegation of the county. CTC members owe their positions to, and are accountable to, a handful of state level legislators. CTCs are also accountable to the legislatively-controlled DOT as their countywide and regional transportation plans must be approved by the DOT.
Taken together, the most influential transportation authorities in South Carolina are all accountable to a small number of legislators, particularly the House Speaker and Senate President Pro Tem, who in turn are accountable only to the small number of citizens that make up their electoral district.
South Carolina government manages its roads by spending a fraction of the amount it spends on expansions on routine maintenance. It also makes the most powerful transportation authorities in the state accountable to a few legislative leaders, rather than an official who is accountable to the entire state electorate.
This is a formula for mismanagement and poor maintenance of roads – and that will not change simply by charging South Carolinians more at the pump. Indeed, dumping more money into this convoluted and unaccountable system will only perpetuate the mess.
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(1) There is no credible analysis of what road repairs will cost.
(2) Lawmakers have decreased the state’s road maintenance fund by 25 percent over the last four years!
(3) Instead of repairing and maintaining roads, lawmakers and the governor have funneled hundreds of millions of dollars to the unaccountable State Transportation Infrastructure Bank, or STIB, for needless expansions in politically influential counties. The agency should be eliminated, but lawmakers and the governor are massively increasing its budget.
(4) South Carolina’s addiction to federal money forces state officials to prioritize needless expansions over maintaining our existing road system.
(5) The state’s road funding system is almost totally controlled by lawmakers – who are only accountable to their districts, not to the entire state.
(6) There is no proposal to actually cut taxes – the so-called “swaps” raise taxes immediately while spreading small tax cuts over anywhere from 5 to 10 years. No politician can promise to deliver tax relief beyond the current year.
H.3250 is the most significant health care reform introduced so far this session. As it’s currently written (last updated May 6th), the bill would, beginning in 2018, repeal state laws that establish and regulate the Certificate of Needs (CON) program in South Carolina.
A quick background: CON laws require medical providers to get government approval (a proof of “need”) before offering new medical services, purchasing certain medical equipment, or generally expanding the size of a health care facility. There are currently a combined 20 different medical services and pieces of medical equipment requiring CON approval in South Carolina.
In addition to the repeal of CON laws in 2018, H.3250 would institute reforms to make the laws less burdensome in the interim period before their full repeal. These reforms include:
Finally, the bill would make several changes not directly related to CON law. The 14-member health planning committee that currently advises in the creation of the state health plan would be abolished. Instead, DHEC would prepare the state health plan internally. One negative provision of the bill would require accreditation and certification (by an agency approved by DHEC) as a prerequisite for applying to install and register an MRI machine. The bill would also impose an annual fee for the registration of an MRI machine.
The rationale behind the CON law is that, by restricting “unnecessary duplication of services,” the state can keep down health care costs, ensure that health care facilities are available where they’re needed, and promote quality health care service.
Sounds great. But artificially restricting supply in a market is no way to contain costs; in fact it ensures higher prices and lower quality of service. The ultimate beneficiary of governmental restrictions of supply is not the consumer but already existing businesses that, thanks to government intervention, are more insulated from competition than they would have been otherwise.
SCPC has explained these effects in detail elsewhere, and documented research that confirms basic economic logic on the CON issue. CON laws haven’t controlled health care spending or hospital costs in states where they’ve been enacted, nor has their repeal led to higher costs. Indeed the Heartland Institute has repeatedly pointed out that Kaiser Family Foundation data shows that health care costs are 11 percent higher in states with Certificate of Need laws than in states without them. Another study by the Mercatus center found that CON laws both raise the cost of medical services and reduce the availability of medical equipment and hospital beds
The health care industry is not an aberrant sector of the economy that operates by different economic rules. The health care sector, like all other sectors of our economy, provides the best quality service at the lowest possible prices when left untouched by government meddling. Entrepreneurs should have the right to create new businesses or facilities providing medical services without government permission, and consumers should have the right to enjoy the lower prices and higher quality of service that accompany this entrepreneurial freedom. Repealing South Carolina’s CON laws would be a major step towards achieving these goals, and a significant victory in the fight for health care freedom.]]>