The Palmetto Insider

As we mentioned yesterday, we have been closely following H 4478 (to learn more about the bill read here).

According to the House’s Friday journal, members gave final passage to H 4478. The bill was given a second reading Thursday with a roll call vote of 105 to 9. After the vote, Rep. Cooper asked unanimous consent to have the bill read for the final time Friday – a day when representatives are not even required to be physically present in the chamber. The result: the bill “passed” on third reading with no recorded vote. Now, the measure moves on to the Senate for consideration.

Such tactics  are the reason we need recorded votes on the second and third reading of every bill. This is especially the case when it comes to economic incentives legislation, such as H 4478. In fact, a new bill in the Senate, The Economic Incentive Transparency Act, would require recorded votes on the second and third reading of economic incentives legislation.

The end story is this: until S.C. law requires recorded votes, the General Assembly will continue to use its own “rules” to circumvent accountability and transparency – and then call this democracy. But in a real democracy every vote counts.

Dillon County’s government features a legislator who is also a high school football coach. Oh, and by the way, he also is in charge of selecting the county’s school board. It just gets weirder. He’s one of a few South Carolina legislators who can single-handedly override a gubernatorial veto.

Read what Investigative Reporter Geoff Pallay learned only on The Nerve.

On Tuesday, Richland County joined the growing list (19 so far) of city and county governments that have put their check registers on line. Nice job Richland County!

We wondered in our Tuesday blog when the City of Columbia’s long awaited promise to post its check registers would be fulfilled. That day, interestingly enough, is today. Coincidence?  The immense power of our blog post? Sure, why not?

Welcome, Columbia, to the ranks of more-transparent governments.

Yet much more needs to be done. The state still has not enacted several important transparency reforms, including the Truth in Spending Act, which would require every state agency and local government to post their check registries online.

Does the South Carolina electricity market need privatizing?  The last time South Carolina approved electricity deregulation was in 1997 with House bill 3414.  Yet consider what Texas has accomplished in recent years through privatization.

According to information released by the Texas Public Policy Foundation, privatizing the electricity market has lowered consumer prices, increased reliability, and fostered consumer choice through competition.

• Data gathered from the U.S. Energy Information Administration (EIA) reveals a reduction in prices for Texas residents under a competition-based electricity market.  The report shows, “Today, the average competitive price is 8.71% below the national average.”  The national average refers to the national regulated average.

• Competition has also increased reliability.  For example, private electric companies trying to turn a profit build new generators as their customer base increases.  More generators mean more capacity for stored/reserved electricity.  Reserved electricity is quite valuable during unexpected heat waves that often occur in summer months, especially in Texas. The same would be the case in South Carolina.

• The competition-based market in Texas is far more popular than the regulated electricity market.  In fact, “Almost 82% of consumers have actively chosen competitive rate plans.”

If South Carolina were to follow Texas’s lead, privatizing could lower consumer prices by encouraging competition and increasing reliability/power reserves.

Moreover, by monopolizing the electricity market, the state is directly competing with would-be private entrepreneurs. If state leaders are serious about growing the economy and stimulating free enterprise, they might start by deregulating the electricity industry.

The president’s new federal budget is chock full of wild assumptions and rhetoric.

Stating that the administration “steered the economy back from the brink of a depression,” the new budget will “change the way Washington does business.”

Well, much like when the stimulus numbers were fudged and found in phantom districts, this budget seems like more of the same from Washington.

In this fact sheet for South Carolina, the president’s budget claims to be a silver bullet for our troubles.

Apparently, 1.7 million families in South Carolina will receive a tax cut. A shocking number, considering that the latest census figures show only 1.7 million total households in South Carolina. Does that mean every single household gets a tax cut? A quite improbable and implausible scenario to imagine.

Just another example of made-up government figures meant to make their estimates sound better.

The fact sheet further claims that the budget will lead to “lower taxes, better teachers and classrooms, and important investments in our roads, highways, and airports.”

This is just more of the same from a president who has been all talk for his first year+ in office.

What can South Carolinian’s really expect from this budget? More federal spending, higher taxes, more debt for our children, and more local dependence on the federal government.  As it stands, South Carolina’s $21 billion budget includes more than $7 billion in federal spending.

In a bill full of twists and turns, one of the more salient points to come out of H 4478 is the presumption that state-driven economic development is a fait accompli – and, under the current legislative leadership, that may very well be the case. Of particular note are amendments to: the tax code, in particular regarding job tax credits; as well as changes to the Enterprise Zone Act (EZA) of 1995 and the Economic Impact Zone Community Development Act of 1995.

Changes to the latter are particularly important in that they broaden applicable investment tax credits to include all qualifying manufacturing and productive equipment property – as opposed to just investments in communities affected by military base closures (§ 17-18).

In short, H 4478 would make the entire state an economic development zone.

The alternative, of course, is to make the entire state a free-market development zone, as detailed in Unleashing Capitalism. In other words, instead of continuing to pick winners and losers through tax credits and other such incentives, why not just lower taxes? In particular, the Legislature should cut the state’s highest-in-the-nation effective manufacturing property tax of 3.73 percent.

Members of the House Ways & Means committee will be discussing the bill tomorrow at 9 am.

From South Carolinians for Responsible Government:

“The annual list of South Carolina’s most persistently failing public schools has been released and is now online:

http://www.voiceforschoolchoice.com/2010/02/03/south-carolinas-worst-public-schools-2009-10-edition/

In late January, it was announced that hundreds of local public schools failed to meet minimal improvement goals set by state and federal officials, known as Adequate Yearly Progress (or “AYP”).

This list of the most persistently failing schools details those schools which have consistently failed to meet their annual goals, some for up to six years in a row.”

Tuesday’s release of the Legislative Audit Council report on mismanagement and negligence by the S.C. Employment Security Commission was big news in our state. The report lays blame squarely at the commission’s feet for taking the state’s once-healthy unemployment insurance fund to nearly $750 million in federal debt and climbing. (Keep your calculator handy, because the debt is increasing by about $2 million a day.)

Now, let’s be clear about this story. The report by the LAC is news, and The Nerve was first to release a comprehensive story on the findings. But the fact that the ESC has managed to take a once solvent unemployment fund and run it into the ground is not news—at least not new news.

In 2000, the fund had a balance of $800 million. On Jan. 15, 2010, the fund was in debt to the U.S. Department of Labor in the amount of $723.7 million; on Jan. 26, the last time the Labor Department updated its web site, South Carolina’s debt had risen to $747,889,544.00.

Ten years and a swing, from being in the black to drowning in red ink, of more than $1.5 billion.

Eleven days, and another $24 million in the hole.

Thank goodness our legislature was here to alert us to this gargantuan failure.

But the timing could have been better. Perhaps a Tuesday in 2001 when the fund had fallen below its required reserves? How about a Tuesday in 2004 when the unemployment fund had fallen to about half of its required reserves? Or perhaps a Tuesday in 2008, when the recession caused an already tanking trust fund to really go into free fall.

Again, just to be clear, the Legislative Audit Council is a government watchdog working for the General Assembly, and the S.C. Employment Security Commission operates under the direction of – not the executive branch – but the General Assembly. So it should come as no surprise that the second bullet in the LAC’s condemnation of the ESC gives the legislature political cover.  Here’s what it says:

“ESC’s annual assessment reports to the General Assembly did not provide adequate information about the declining trust fund balance. Nor did ESC make recommendations to prevent the trust fund’s decline as required by … the S.C. Code of Laws.”

Our legislators are busy, what with all the hundreds of millions of dollars in taxpayer funded special interest giveaways they’re working on. So maybe it’s understandable that they didn’t see the problem in 2000. At that time the fund reserve was just a smidge under what’s required. Neither did the legislature act in 2003, when the fund reserves had fallen from more than $800 million to around $400 million, nor in 2008 when South Carolina first had to borrow from the Department of Labor.

This is precisely why the people who write the laws and control the purse strings aren’t supposed to be the same people who enforce the laws and write the checks. The General Assembly has taken upon itself the roles of both the legislative and executive branch, in this case and many others in South Carolina.

Yes, ESC deserves blame for mismanaging of the fund and, yes, the commission needs the top-to-bottom overhaul lawmakers say is going to happen. But the “top” of the ESC is the General Assembly, and it’s disingenuous for South Carolina lawmakers to pretend they don’t share responsibility or say they were given inadequate information.

To its credit, or perhaps because the General Assembly wants to distance itself from the whole mess, the LAC’s first recommendation is to make the ESC a cabinet agency. That’s a good first step, especially since the General Assembly hasn’t done its job in managing the commission. But the long-term solution is to allow free market reforms suggested in the Policy Council’s Fast Facts on ESC posted yesterday to reduce the staggering rate – and cost – of unemployment in South Carolina.

Boeing’s fourth quarter earnings came out yesterday and the company earned $1.3 billion.

Seems like South Carolina should be the one getting incentives from Boeing, not the other way around.

Yesterday, the Legislative Audit Council released a report slamming the ESC for mismanaging the state’s unemployment fund – resulting in a massive debt of $736 million.

Unfortunately, this trend is common among many states. Propublica.org released a report earlier this month which tracks the unemployment situation of each state. What did they find?

Already 25 states have run out of unemployment funding and have had to borrow from the federal government, raise taxes, or cut benefits. South Carolina is one of those states that squandered prior surpluses in recent years.

The Nerve was first on the hunt yesterday with an analysis of the LAC report:

Among the most shocking findings detailed in the report:

• “While agency management knew as early as 2001 that fund reserves were inadequate, management did not aggressively pursue changes to benefits, or the tax structure, in order to prevent the insolvency of the trust fund.”
• “ESC’s annual assessment reports to the General Assembly did not provide adequate information about the declining trust fund balance. Nor did ESC make recommendations to prevent the trust fund’s decline as required by … the S.C. Code of Laws.”
• “ESC did not follow (U.S.) Department of Labor (DOL) guidance regarding minimum reserves.” Had the ESC done so, the unemployment fund “would still have a significant surplus.”
• “Employees who were terminated for misconduct, illegal acts or other offenses have been paid more than $171 million in state unemployment benefits during the last three fiscal years.”
• “In 2008, ESC stopped referring claimants for criminal prosecution who had fraudulently obtained unemployment benefits. Claimants defrauded the agency out of $7.3 million” in FY08-2009.

Just because South Carolina is not alone in its mismanagement of funds does not excuse the waste of taxpayer dollars. As The Nerve pointed out last week, this ESC boondoggle has been years in the making. And the key difference here in South Carolina is that the General Assembly, which appoints the members of the ESC, is squarely to blame.