States' Rights, Anti-Tax Officials Block Local Efforts for South Carolina Schools, Reject Federal Funding

Last Updated: August 25, 2011

This article appeared in the August 2011 Rural Policy Matters.

Editor's note: Links are free and current at time of posting, but may require registration or expire over time.

South Carolina Governor Nikki Haley and State Schools Superintendent Mick Zais are making good on campaign promises to block taxes and reject federal investments in the state. While neither government official has the power to act fully on these promises, both have taken action on school funding matters to fulfill their stated goals.

Governor vetoes state and local initiatives

Schools anticipated some relief from ongoing financial cutbacks when better than expected revenue projections brought an additional $200 million to the state’s year-end budgeting process. Schools and some legislators called for a majority of the surplus to be added to per-pupil spending, which has been reduced to 1996 levels.

Governor Nikki Haley, however, promised to veto any proposal that did not use the $200 million for tax cuts or to pay off the state’s debt. Despite Haley’s threats, the legislature allocated $56 million of the surplus to schools and provided businesses with $144 million in tax relief. Haley then used a line item veto to eliminate the surplus funding for schools. Legislators overrode that and several of her other line-item budget vetoes and increased the state’s per-pupil allocation from $1617 to $1880. The recommended per-pupil amount as calculated by the South Carolina Education Finance Act of 1977 was $2790 for 2011.

In the mean time, several rural school districts seeking to address historically low state funding levels requested permission from the legislature to issue bonds for operating expenses. South Carolina, like many southern states, places strict limitations on the taxing authority of local jurisdictions. Under state statute, the only bonding authority of school districts is to issue voter approved general obligation bonds for capital expenditures.

The legislature approved the request and passed the needed legislation, but Governor Haley vetoed the bills, saying, "We should not fund short-term operational costs with long-term debt backed by taxpayers.”

Rejection of federal funds

Despite South Carolina’s massive cuts to education funding, which have resulted in widespread teacher layoffs, pay cuts, reductions in course offerings, and increases in class size, State Superintendent Mick Zais has refused or jeopardized several federal funding streams for education.

Earlier this month Zais formally turned down the state’s $144 million Edujobs allocation, making South Carolina the only state to refuse the funds. Edujobs is the program that followed up the federal stimulus program; it provides funds to states to help pay teacher salaries and reduce layoffs among the state’s education workforce. When the U.S. Department of Education sent Superintendent Zais a letter reminding the state of the August 15th deadline to accept the $144 million allocated to South Carolina, Zais responded with a letter back to the Department in which he wrote, “I regret that your agency wasted taxpayers’ resources to inform the state again about something it and USDE already knew. Instead, your letter appears as another attempt to inject Washington politics into South Carolina’s affairs.”

Zais also failed to address the pending issue of insufficient allocation of state funds for special education, costing the state $36 million in penalties. States are required to maintain funding levels for speciaI education in order to receive federal special education dollars. But in serious economic circumstances, states may request a “maintenance of effort waiver.” Several states requested such waivers early in the current recession, but South Carolina is the only state to request such a waiver three years in a row.

The state was granted the waiver the first year and granted a partial waiver the second year. But last year’s request was completely denied. In a letter to the South Carolina Department of Education, federal officials pointed out that the state asked to cut state special education funding at a rate higher than it cut overall education funding.

The potential penalty to the state was $111 million, the sum of this year’s $75 million underfunding and last year’s $36 million underfunding. State education officials scrambled to move funding from various programs before the end of the fiscal year June 30 in order to distribute $75 million to school districts for special education programs. The $36 million remaining that should have been spent in ’09-’10 will be deducted from South Carolina’s special education funding in 2012.

Finally, Zais has said that South Carolina will not apply for a federal Race to the Top (RTTP) grant or for a new $50 million RTTT initiative for early childhood education. Last year South Carolina was one of the finalists in the national RTTT competition.

Zais has been very public in his disdain for federal funds, calling federal funding opportunities “pieces of silver,” “pennywise and pound foolish” and “federal intrusion into our schools.”


In the face of so many financial woes, several state leaders are calling for the consolidation of school districts. Some smaller poorer districts with few economic resources are also exploring consolidation with larger wealthier districts, in part, as the only foreseeable means to improve their financial circumstances.

The Florence 4 school district in Timmonsville is one such district. Saddled with significant debt from years of underfunding, Florence 4 faced an exceptionally dire situation. Leaders approached the larger Florence 1 School District to explore merging the two districts. But Florence 1 leadership rejected the plan and its interim Superintendent Allie Brooks called on the state to fulfill its responsibility to educate children. “If we’re going to support public education, then we’ve got to put the money where our mouths are,” said Brooks, adding, “We’re going to have to stop all the posturing and look at the community and do what’s best for every child.”

Florence 1 officials also noted that state legislation is required to alter school districts. In response, local legislators drafted amendments to the Florence 4 bond bill that would have required consolidation. But the governor’s veto of the bond bill also ended the effort to force the merger. In July, Florence County Council agreed to lend Florence 4 enough money to cover their shortfall.

Read more:

End-of-year budget debate:

Bond issues and consolidation:

Race to the Top and Edujobs funding:

Special education:

Read more from the August 2011 Rural Policy Matters.