Spending cap could prevent future budget crises

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House Speaker David Wilkins said the goal is to avoid overspending in years that produce tax revenue surpluses and to ensure sufficient savings to bridge years when tax revenues shrink.

Democratic leaders stood with the Republican speaker to support the bill.

House Minority Leader James Smith, D-Columbia, said that "in the past, the interest (among legislators) has been in the amount of money available to spend. We all share the belief we need to prevent that process from continuing."

But some lawmakers were skeptical of the caps.

Sen. Darrell Jackson, D-Columbia, said he's more concerned about tax rebates he says have been granted in the past decade, such as using state tax revenue to reimburse homeowners' local property taxes.

"This is commendable, but it must be done with some discipline as relates to tax cuts. It the midst of the mess we find ourselves in now, there are still bills being filed to cut taxes even more. That would put us in a bigger hole, and wouldn't help the Department of Corrections, the Department of Education and other state services," Jackson said.

"We cannot give away the farm and at the same time hold back spending," Jackson said.

House Ways and Means Committee Chairman Bobby Harrell, R-Charleston, said the plan would stabilize state government and sustain it through economically turbulent years.

"What we found, when we had $900 million in new money a couple of years ago, there is no discipline to keep the General Assembly from spending all that money," Harrell said.

The legislation, introduced Tuesday with support from leaders of both parties, included these provisions:

* Deletes our current spending limit formula which is set too high to be effective in limiting spending;

* Creates a new formula based on population and inflation growth and sets a maximum spending limit of six percent of annual appropriations;

* Establishes a spending limit reserve fund to first replenish our reserve funds and restricts spending those funds to infrastructure, school buildings, temporary tax reductions and natural disasters;

* Increases the general reserve fund up to four percent (currently three percent);

* Allows the General Assembly to declare a financial emergency and suspend the spending limitation, if supported by a two-thirds roll call vote in both chambers.

"Deeper cuts are becoming increasingly more difficult. We won't raise taxes. We can and must put the brakes on the growth of state government," Harrell said.

The bill as introduced in the House would take effect in 2005. Some constitutional amendments, to be approved or rejected by the voters, would be necessary.

In economically prosperous years, when tax revenues exceeded the six percent spending increase cap, excess funds would be credited to a "spending limit reserve fund."

The General Assembly could spend that reserve fund in the regular session in the year following the close of the applicable fiscal year, but only for specific purposes, including:

* Replenish the general reserve fund up to its maximum 4 percent of the budget;

* infrastructure improvements;

* temporary tax reductions;

* school buildings;

* expenses as a result of disasters declared by the president.