Upstate business leaders say it’s time to raise South Carolina’s gas tax to fund improvements for the state’s deteriorating roads and move new public employees to a 401(k)-style retirement plan to ease mounting pressure on the state’s retirement system.
Those views surfaced in the Upstate Chamber Coalition’s 2017 Legislative Agenda Survey, whose results will be discussed at a Greenville Chamber breakfast Friday.
Just what will be accomplished in the next legislative session, which begins in January, remains to be seen. But area lawmakers and business leaders are optimistic, even as Lt. Gov. Henry McMaster prepares to succeed Gov. Nikki Haley, who’s moving to Washington to take a job as U.S. ambassador to the United Nations.
The domino effect may affect legislative leadership both in committees and at the top, although it’s doubtful Sen. Hugh Leatherman will vacate his position as Senate president to become lieutenant governor. In addition, several new lawmakers will be joining the House and Senate — including local Republicans Jason Elliott, William Timmons and Scott Talley — to complete a political makeover in Columbia.
Issue 1: Roads
Priorities for the next legislative session won’t come as much of a surprise to many residents. Transportation and infrastructure, particularly related to roads, rank highly among business leaders, according to the Chamber Coalition’s survey.
The state’s roads have long been a hot-button issue for business leaders.
“The roads in this state are a disgrace,” Pete Selleck, chairman and president of Greenville-based Michelin North America, told an audience at USC’s Darla Moore School of Business in 2014. “If that does not get solved, then Michelin is going to have to look about further expansion in this state.”
To help fund road improvements, 44.8 percent of the Chamber Coalition’s survey respondents support raising the gasoline user fee, or gas tax, by 10 to 12 cents. Nearly 20 percent support raising the gas tax up to 12 cents, with a corresponding “revenue neutral” income tax cut — meaning that the cut in tax revenue would be offset by an increase in tax revenue elsewhere.
The Upstate Chamber Coalition is calling for the gas tax to be indexed for inflation to ensure the buying power of the tax revenue keeps up with road-building costs.
“There’s broad support for more revenue, and the Greenville Chamber board has long supported a 10- to 12-cent gas tax increase,” said Jason Zacher, the Greenville Chamber’s vice president of business advocacy and executive director of the Upstate Chamber Coalition. “We want a substantial, sustainable and recurring revenue source.”
The answer could rest with the gas tax or a hybrid-vehicle fee, he said.
“We’re willing to come to the table with legislators on those issues to figure out what is politically palatable and what they think is the best option,” Zacher said. “There are hundreds of ways that they could come up with the $400, $500, $600 million that we would think is needed to help put a dent in our crumbling road system.”
But Zacher conceded the state lawmakers haven’t shown a penchant for raising the gas tax, which hasn’t increased since 1987 and ranks among the lowest in the nation. In the 2016 session, the S.C. House passed a bill that included raising the gas tax, but in the face of a promised veto by Gov. Nikki Haley, the bill did not pass the Senate. And in 2014, Greenville County voters rejected a penny sales tax to fund road projects.
“Politically, there clearly are headwinds on that,” he said. “However, politically to a person, everyone in the General Assembly agrees that something has to be done.”
Another option being discussed is getting rid of the sales tax exemption on gasoline, which would be the equivalent of about 12 cents, Zacher said.
The money should not come out of the general fund, Zacher said. “I don’t think the general fund is the proper way because then we’re taking money out of education, we’re taking money out of public safety, we’re taking money out of other issues,” he said.
Poor roads cost each driver in the Greenville-Spartanburg metro area an additional $1,248 each year, according to data released by the Greenville Chamber, but it’ll cost South Carolina a lot more than that if companies like Michelin decide to leave the state.
Issue 2: Workforce
Concerns about the state’s workforce — finding enough workers amid a 4.7 percent unemployment rate in October — also drew attention.
“When we are talking to our members, infrastructure and workforce are the two top items that small business, large business, all sectors, everything, tell us are a problem and need to be fixed. So that’s where we are focusing our efforts next year,” Zacher said.
One idea explored by other states to expand workforces is to expunge the records of certain, nonviolent, one-time, low-level felons. Among survey respondents, 82 percent agree the Upstate Chamber Coalition should explore legislation addressing that issue.
With state unemployment below 5 percent, Chamber officials estimate tens of thousands jobs are going unfilled, and half of those don’t require college degrees. Business leaders need to challenge the status quo and look at innovative ways to expand the workforce, the officials say.
“Expungement is part of workforce development in our eyes,” Zacher said.
State Rep. Eddie Tallon, R-Spartanburg, said the House and Senate are working with SLED and other agencies to determine what crimes can be expunged.
“We’re trying to come up with a list that everyone can agree on,” Tallon said. “You can’t just say ‘nonviolent’ and boom, that’s it. It’s a very complicated issue. We’re moving forward, but not with the shotgun approach that was done last year.”
Issue 3: Pensions
To deal with the gap in pension funding, nearly two of every three Chamber survey respondents said new public employees should be part of a 401(k)-style retirement plan.
Another 18.7 percent said employee contributions should be raised by 2 to 3 percent, although contributions already are 8.66 percent and higher than the national median.
Nearly 21 percent of respondents said employer contributions should be raised two to three percent, although contributions already are 11.56 percent and in line with the national median.
More than 20 percent of respondents favor using the state’s general fund revenues to cover the pension gap. The unfunded liability has been estimated at $20 billion, but The State newspaper reported in October the figure could be nearly twice as large — $40 billion.
The shortfall is the “state’s biggest problem of the decade,” Sen. Kevin Bryant, R-Anderson, co-chairman of the Joint Committee on Pension Systems Review, told the Charleston Post and Courier.
The state’s unfunded public pension liability is “a fiscal crisis that could dramatically increase costs” for the business community, according to Greenville Chamber officials.
“The General Assembly needs to tackle the issue in 2017 with realistic assumptions that will minimize the impact on the private sector,” the officials said in their advocacy agenda. “Failure to address this crisis will mean fewer resources to apply to education, infrastructure and public safety.”
Who’s new in 2017?
The Upstate’s legislative delegation will have new members after longtime senators Mike Fair and Larry Martin were defeated in bids for re-election. Fair had been chairman of the Senate Corrections and Penology Committee, while Martin was chairman of the Senate Judiciary Committee.
“In the seniority-dominated Senate, we do lose a little bit of prestige and a little bit of power,” Zacher said.
But he said Rex Rice, who defeated Martin, and Scott Talley, who beat incumbent Sen. Lee Bright, are former state representatives and experienced Upstate legislators.
“They understand how the process works. They know the people in the Senate. They already know those folks. They understand how that works.”
“A lot of Upstate lawmakers are very respected with their colleagues behind closed doors,” Zacher said. “We do have lot of these guys who in their caucus meetings, in their committee hearings, in their private conversations in the hallway do carry a lot of weight down there.”
William Timmons, a former prosecutor from Greenville who defeated Fair, said he is eager to get started.
Road funding, state pensions and education will be among his top issues, Timmons said. He isn’t opposed to expungement but said he expects lawmakers to take “a very limited approach.”
What happened last session?
Chamber officials said legislative victories in lawmakers’ last session included removal of the Confederate flag and a roads bond bill that redirects revenue from the Department of Motor Vehicles and the sales tax on automobiles to fund $2.3 billion in bonds. The bonding will pay for extensive work on interstates 85 and 26, both of which help Upstate manufacturers get goods to the Port of Charleston, and repair nearly 400 deficient and load-restricted bridges on the state’s primary roads.
Missed opportunities included tort and business license reform and legislation to close a loophole in a bill passed several years ago that disallows individuals and environmental groups to sue businesses for emissions, even if no permit was required, Chamber officials said.
What will get done next year?
Asked if he is optimistic lawmakers will get more accomplished in the next legislative session, Zacher said, “There’s a lot of momentum behind some transportation issues, behind some of the workforce development issues.”
The potential for a lieutenant governor’s successor could slow that momentum, he said.
“The legislators we have spoken to around the state in the last couple months have a mood that they want to start getting some things done,” Zacher said. “We are going to work for whatever we are supporting. But is everything going to happen according to what we want? Perhaps not. We are here to compromise on some of these issues and work on what we can do to get things done and try to get some solutions to move South Carolina forward.”