Columbia—Today the ad hoc legislative committee working to overhaul the South Carolina tax code met. State Treasurer Grady Patterson, testified before the committee and presented a comprehensive outline of how South Carolina could reform its fiscal policy.

State Treasurer Patterson told the committee, "You are undertaking a noble cause for our State and I pledge my support to your efforts." He informed the committee that he met with all three credit rating agencies in June after which the agencies affirmed our state’s coveted AAA credit rating.

Mr. Patterson also mentioned that the rating agencies are extremely impressed with the financial controls such as the balanced budget requirements and Reserve Funds, which he originally proposed. "The rating agencies have great respect for our financial controls, and they particularly like the fact that we are required to respond quickly whenever revenues don’t meet expectations. However, they also expressed concerns about our year-end deficits and recent financial trends."

State Treasurer Patterson asserted that the General Assembly should take the following steps to bring our state’s budget crisis into control and reverse the recent financial trends. " I think a better alternative would be to increase the Capital Reserve Fund by an additional one-percent. This increase would provide a greater cushion in the budget for unexpected expenditures or economic downturns."

Before State Treasurer Patterson concluded his testimony he asked the committee to review the State’s Income Tax Withholding Tables. He expressed the belief that this would enable South Carolina to reduce Year-End Liabilities for income tax refunds by 50% over a five year period. While these reductions would decrease budgetary revenue during the first two years of implementation, the long-term benefit outweighs the revenue reduction. If this increase were in place now, South Carolina would be in even better shape than it is today.

The State Treasurer concluded by asking the committee to look for ways to:

1. Limit recurring spending to recurring revenue.
2. Fund new programs only when new revenue becomes available
3. Maintain the integrity of the reserve structure that protects us whenever the inevitable downturns occur.