For the 2017 S.C. General Assembly session, infrastructure improvement funding is certain to be at the forefront of debate.
Chamber of commerce officials in the Upstate said their legislative agenda includes advocating for gas tax increases to offset the mounting costs attributed to fixing South Carolina roads. But, another part of the legislative advocacy plan for those chambers includes monitoring the state’s growing pension liability.
According to a recent report in the Charleston Regional Business Journal, if the state does not infuse the fund with state dollars, the unfunded liability could reach as high as $23.6 billion by 2022. As it stands, the unfunded liability with the fund will be $19.45 billion in 2017.
Jason Zacher, executive director of the Upstate Chamber Coalition and vice president for business advocacy at the Greenville Chamber of Commerce, said the pension issue “has to be dealt with and dealt with immediately.” In the Upstate Chamber Coalition’s state legislative agenda, the issues involving the state pension are classified as a “crisis.”
“The employer contribution is going to have to go up and those costs will be passed from the state through the school districts, cities and counties and that means cuts to services or hikes in taxes,” Zacher said.
The Joint Committee on Pension Systems Review — six state senators and six state representatives — is currently looking at the funding issue and is tasked with recommending improvements.
“Ultimately, business and our employees will be footing the bill for this,” Zacher said. “If the state has to start passing costs down, there are only so many places they can go and that is property taxes. That will directly impact small businesses and that will hurt.”
According to the S.C. Public Employee Benefit Authority, employee and employer contributions have slowly increased, but not to the pace cost-of-living benefits have been increased. Coupled with a reduction in the amount of time employees are required to pay into the system, the state has found itself in a deep hole that officials said will take time to fix.
Zacher said the pension issue could be viewed as more pressing than that of infrastructure funding. Lawmakers passed a package to dedicate up to $4 billion toward fixing the state’s roads and bridges.
“As far as the complexity, I would say the pension crisis is more serious,” Zacher said. “The General Assembly can get a long way by raising the gas tax and a huge portion of that problem is taken care of. The pension issue is bigger as employee contributions and taxpayer contributions are getting higher.”
As with the transportation issue, Pam Christopher, president and CEO of the Anderson Chamber of Commerce, said infrastructure will remain a topic of concern with Upstate chambers.
“We are always going to continue to focus on roads because our businesses rely on our transportation system,” Christopher said. “It is very critical for our businesses to have good roads, bridges and roadways.”
One change this year that some suggest will be a bright spot in the infrastructure funding debate is the exodus of Gov. Nikki Haley — pending the U.S. Senate confirming her as the next U.N ambassador — and the elevation of Lt. Gov. Henry McMaster as the state’s chief executive.
During the last session, Haley said she was willing to implement a steady rise in the state’s gas tax, but not without a corresponding cut to other taxes such as income taxes. Additionally, the roads bill was hampered by debate over reforming the S.C. Department of Transportation’s oversight. The latter prompted contention between Haley and leadership in the House and Senate.
In the end, Haley signed a bill providing $4 billion in infrastructure funding and a slight overhaul of oversight that included giving the governor power to appoint DOT commissioners, but those appointments can be rejected by the legislative delegation the appointee is representing.
“He (McMaster) has a long working relationship with the Senate and those may be relationships Gov. Haley didn’t have when she took over,” Zacher said. “I think there is a feeling that McMaster understands how to grease the skids.”
Both Zacher and Christopher said their conversations with state lawmakers have yielded a strong consensus on the roads issue to find a longer-term solution.