South Carolina Faces Multiple Budget Woes

Last Updated: March 30, 2011

This article appeared in the March 2011 Rural Policy Matters.

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South Carolina faces a state budget shortfall of $800 million and the consequences could be severe for schools that have already made dramatic cuts. Statewide more than 3,600 teaching positions have been eliminated, class sizes have increased, and many schools have reduced critical educational services and resources.

Compounding these difficulties is the fact that the state lost its chance to receive $143 million in stimulus funding that could be used for schools this year or next. In the first round of stimulus funding, then-governor, Mark Sanford publicly spurned the money, but the legislature took action to secure the funding despite the governor’s position. In this round of stimulus funding, South Carolina ran into a different set of troubles: it made cuts to higher education, a violation of a new stipulation in the stimulus package.

Former State Superintendent of Education Jim Rex had vowed to work with the state’s Congressional delegation to fix the problem. But the state’s two Republican senators, both of whom opposed the stimulus, have not indicated they will pursue a fix for the state. Meanwhile, the newly elected State Superintendent, Mick Zais, says districts do not need the stimulus funding and should use reserve funds to cover their budgets. Reserve funding in most districts, however, is committed to capital costs and other fixed budget items.

South Carolina’s revenue system is being blamed, at least in part, for the shortfalls in funding for schools. Five years ago, the state virtually eliminated property taxes on primary residences and shifted revenues for school funding to sales taxes. One percent of the state’s 7% sales tax is dedicated to education. Sales taxes are especially vulnerable to economic downturns and tend to fall more heavily on people who spend more of their income on necessities.

In addition, many items are exempted from sales tax altogether in South Carolina. But a lawsuit brought by a Columbia parent charges that current sales tax exemptions are arbitrary and have no rational basis. In pleadings, the lawsuit estimates that the state collects $2.19 billion and exempts $2.7 billion in sales tax annually. Among items exempted are parts for amusement park rides. In addition, sales taxes are capped at $300 on cars and boats, regardless of value, whether a 1996 jalopy or a yacht off Hilton Head.

Things might look up slightly this coming year. The state’s House of Representatives has passed an education budget that sets the Base Student Cost at $1,788. Last year the BSC was set at just over $1,600, about the same level as the 1995–1996 school year.

A separate bill to update the 1977 Education Finance Act (EFA), the state’s foundation funding formula, has passed the House and has been introduced in Senate subcommittee. The bill would add a small per-pupil weight for poverty, English Language Learners, and gifted and talented students, beginning in 2011. However, amendments were added in the House that would make the additional weights subject to available funding.

The House has approved an appropriation of $25 million in additional funding for the South Carolina Public Charter School District, a group of 11 charter schools in the state not sponsored or chartered by their local districts.

Read more:

Local coverage on stimulus funding issue:

Coverage of sales tax lawsuit:

Coverage on budget process and charter schools:

Read more from the March 2011 Rural Policy Matters.