SC state employee pay, type of tax cut among differences in House, Senate budget plans

What type of tax cut to give South Carolinians and how big of a raise to give state employees are among the differences between the House and Senate budgets which will need to be reconciled in a conference committee.

House members Wednesday adopted their second version of the 2024-25 budget, pushing a $13.3 billion spending plan.

Even though both chambers have some agreements, including how much to pay teachers, differences will need to be worked out.

The two chambers agree on raising the starting teacher salary in the state to $47,000, but disagree on how much state aid to classrooms should be sent to school districts.

The House wants $229 million in state aid to classrooms, which give school district more flexibility than the Senate plan for $200 million in state aid.

Under the Senate plan, any state employee earning $50,000 or less would receive a $1,375 raise. Those earning more than $50,000 a year would receive a 2.75% pay increase.

The House plan calls for giving a $1,000 raise to any state employee earning $66,667 or less. Anyone earning more than $66,667 would receive a 1.5% raise.

For taxpayers, the House wants to stick with its plan for a property tax cut, but scaled back how large of a tax credit homeowners could expect.

The House plan now shrinks the property tax credit for owner-occupied houses from $500 million to $150 million in an effort to avoid the appearance of property taxes going up the following year.

Ways and Means staff estimates providing $150 million for property tax relief from surplus sales tax revenue would allow the relief to be in place for 10 years. The cut is smaller per year, but it’s larger over time.

About $100 million in surplus sales tax revenue is generated into the homestead exemption fund.

The homestead exemption fund was created in 2006 as part of Act 388 passed created a tax swap that increased the state sales tax in exchange for a reduction in property taxes on owner-occupied houses.

Senate budget writers want to use $100 million of the homestead exemption fund surplus to accelerate the planned income tax cut, with $500 million used for infrastructure projects in its $13.8 billion spending plan.

Gov. Henry McMaster suggested using $500 million of the $600 million to address bridge repairs in the state.

Lawmakers have less new money this year to allocate than in previous years as economic growth has returned normal levels.

How much to spend on the state’s Medicaid program also is different.

The Senate only increased Medicaid spending by $56.1 million. The House wants to spend $105.2 million more on Medicaid to keep up with the cost of rising inflation on health care costs.

Health and Human Services would not be able to do as many of its new initiatives it proposed, such as using more money for behavioral health, if the Senate figure is adopted.

“We will be able to do a few of those and the rest will have to wait until next year,” said HHS Secretary Robbie Kerr said.

In an effort to avoid the fight from last year when a budget deal was delayed over how much to spend on Clemson’s veterinary school, the Senate proposed $175 million for the vet school construction and $100 million for construction the University of South Carolina’s health campus. Those figures would allow the schools avoid borrowing money for the project.

The House, however, only proposed $47 million each for the vet school and health campus.

The amount on tuition mitigation also is different both budgets, with $57 million proposed by the House and $77 million by the Senate to give to universities on the condition they freeze tuition next year.

The House also included only set aside $1 for the required general reserve fund contribution. The Senate set aside $24 million.

Under the Department of Corrections, the Senate wanted to spend an additional $28.6 million on the state prison system which includes money for a cell phone interdiction project. The House budget only included an additional $15.3 million for the department of corrections

Senate budget writers also include $20 million for the Department of Juvenile Justice’s master facility plan, $1 million for IT application assessment, and $1 million for the agency’s cybersecurity remediation plan. The House only put $1 for each of those projects.

Only $645 million of new annual dollars is available for lawmakers to allocate and $1.06 billion of one-time money is available.

However, the Board of Economic Advisors is slated to meet on May 20 and may certify additional dollars for budget writers to use in final spending plan.