Tax shift: State lawmakers have created the financial crisis faced by local governments

The S.C. General Assembly is the body politic responsible for state law. During the past five years, there have been many changes to state law that, intentionally, might have looked good on the surface but wreaked havoc on school and government revenues.

The most recent example was the 2000 referendum reducing automobile taxes. Everyone wants to pay fewer taxes, so this referendum was easily approved. Citizens, however, were not told that this revenue would have to be replaced to keep schools and local governments operating.

Furthermore, schools are mandated to maintain "local effort" by spending at least the same amount per pupil as the previous year, thus they are in a position where they generally cannot reduce spending per child. This "local effort" mandate comes from state law and many times results in a school tax increase at the local level.

The automobile tax reduction resulted in a tax shift. The tax burden shifted to other classes of property, most notably real property -- homes and business property -- hence, a tax increase to homeowners and business owners. The S.C. General Assembly used an enticingly worded referendum to create a tax shift to homeowners and local businesses, while lawmakers get credit for a tax break that they knew could never realistically materialize to begin with.

Sen. John Kuhn states that "while our state government has been cutting back for the past five years, our local governments have been crucifying their citizens and businesses with extraordinarily higher taxes." Sen. Kuhn would be well advised to ask why the state has made unprecedented cuts and reductions in the past few years, and then often to local rather than state revenues. Why has the state announced mid-year budget cuts and end-of-year revenue shortfalls?

Could it be because the General Assembly has continually used one-time, nonrecurring revenue to fund on-going programs and services? Could it be because the state has used overly optimistic revenue projections to balance the budget? Could it be that the General Assembly has not planned for the economic downturn experienced in recent years? Since legislators have done such an outstanding job in managing the state budget, are they now uniquely, or even remotely, qualified to run local government?

State budget cuts affect counties and municipalities through the Local Government Fund, also called state aid to subdivisions. The Local Government Fund is a revenue source shared by the state with counties and cities. It was created to provide predictability of revenue and to lessen the counties' dependence on local property taxes.

During the past four years, S.C. counties have lost millions due to legislative changes to the fund made by the General Assembly and to mid-year budget cuts in the amounts appropriated to the counties. These losses also must be made up from the local tax base. Ultimately, citizens are picking up the tab for the state's planning failures and inadequate fiscal policies in the form of state-forced, local tax increases.

While the General Assembly has been busy tinkering with the tax system, to no avail, and causing local tax increases, county and school officials also have been busy. Local government officials work in the trenches daily, delivering vital services such as education, police and fire protection, water, roadwork and sewer services.

Local government officials are closest to the citizens. They live it every day by listening and talking to citizens about their concerns, complaints and ideas. This is where the rubber hits the road.

Furthermore, local governments and schools do not have the luxury of simply deciding to stop providing a service or the luxury of passing the responsibility and the cost for the service down the line, as the state has done, which lately has been one of the General Assembly's strategies.

I disagree with Sen. Kuhn and his jaded viewpoint on local government. The root of our local financial problems lies with the General Assembly, which has passed legislation that shifted tax burdens and resulted in negative consequences.

It is apparent to me that there is a plan: Phase I of that plan is to drain local government of its stable revenue sources. Phase II of the plan is to deflect the blame for tax issues to local governments and schools. Phase III will be the complete extinction of home rule and the services that local governments provide.

Joey R. Preston, with 18 years of city and county government experience, is administrator

for Anderson County.

Click for larger image

More Headlines