S 1112 General Bill, By Giese and Matthews
 A BILL TO ENACT THE "SOUTH CAROLINA EQUALIZED EDUCATION FINANCE AND FUNDING
 ACT" INCLUDING PROVISIONS TO AMEND CHAPTER 20, TITLE 59, CODE OF LAWS OF SOUTH
 CAROLINA, 1976, RELATING TO THE EDUCATION FINANCE ACT OF 1977, SO AS TO RENAME
 THE CHAPTER THE SOUTH CAROLINA EQUALIZED EDUCATION FINANCE ACT OF 2004,
 PROVIDE FOR THE ACHIEVEMENT OF OBJECTIVES FOR HIGH ACADEMIC ACHIEVEMENT
 REQUIRED BY THE EDUCATION ACCOUNTABILITY ACT OF 1998, DEFINE CERTAIN
 ADDITIONAL TERMS, PROVIDE FOR EQUALIZED SCHOOL MILLAGE, EQUALIZED REVENUE, AND
 EQUALIZED STATE FUNDING THROUGHOUT THE STATE TO BE PHASED IN OVER THE NEXT TWO
 YEARS, PROVIDE THAT THE BASE STUDENT COST FOR THE 2004-05 SCHOOL YEAR IS FIVE
 THOUSAND ONE HUNDRED SEVENTY-FIVE DOLLARS, ADD A NEW WEIGHTING FOR POVERTY,
 PROVIDE THAT EQUALIZED SCHOOL MILLAGE OF ONE HUNDRED MILLS MUST BE LEVIED IN
 ALL SCHOOL DISTRICTS, PROVIDE THAT THE DIVISION OF RESEARCH AND STATISTICS OF
 THE BUDGET AND CONTROL BOARD SHALL SUBMIT TO THE GENERAL ASSEMBLY AND THE
 GOVERNOR ESTIMATES OF THE EQUALIZED MILLAGE REVENUE AND OTHER STATE FUNDS TO
 FUND THE AMOUNT OF EQUALIZED STATE FUNDING FOR THE FOUNDATION PROGRAM, PROVIDE
 WHAT CONSTITUTES ADDITIONAL STATE EFFORT, PROVIDE FOR THE STATE MINIMUM SALARY
 SCHEDULE TO BE ADJUSTED BASED ON THE AVERAGE SALARY OF AT LEAST THE
 GEORGIA/NORTH CAROLINA AVERAGE SALARY, PROVIDE THE SPENDING PRIORITY OF FUNDS
 ALLOCATED TO IMPLEMENT THE FOUNDATION PROGRAM, AND MAKE OTHER CONFORMING
 CHANGES; BY ADDING ARTICLE 11 TO CHAPTER 36, TITLE 12, SO AS TO IMPOSE AN
 ADDITIONAL STATE SALES, USE, AND CASUAL EXCISE TAX EQUAL TO TWO PERCENT OF
 GROSS PROCEEDS OF SALES OR SALES PRICE, AND TO PROVIDE THAT THIS ADDITIONAL
 TWO PERCENT TAX DOES NOT APPLY TO THE SALE OF UNPREPARED FOOD AND ON
 ACCOMMODATIONS FOR TRANSIENTS; BY ADDING SECTION 11-11-155 SO AS TO CREATE THE
 SCHOOL MILLAGE TAX EXEMPTION TRUST FUND (THE SCHOOL TRUST FUND) AND REQUIRE
 REVENUES OF THE ADDITIONAL SALES AND USE TAX AND ADDITIONAL REVENUE GENERATED
 BY ELIMINATING OR REVISING SALES TAX EXEMPTIONS AND CAPS TO BE CREDITED TO
 THIS FUND AND USED FOR THE PURPOSES OF CHAPTER 20 OF TITLE 59; BY ADDING
 SECTION 12-6-1145 SO AS TO PROVIDE THAT A DEDUCTION IS ALLOWED FROM SOUTH
 CAROLINA TAXABLE INCOME FOR CASH CONTRIBUTIONS FOR ANY EDUCATIONAL PURPOSE
 MADE TO A PUBLIC SCHOOL OR TO A SCHOOL DISTRICT OF THE STATE, OR MADE TO THE
 SCHOOL TRUST FUND; BY AMENDING SECTIONS 12-36-60 AND 12-36-90, BOTH AS
 AMENDED, RELATING TO THE DEFINITIONS OF "TANGIBLE PERSONAL PROPERTY" AND
 "GROSS PROCEEDS OF SALES" FOR PURPOSES OF THE IMPOSITION OF THE SALES AND USE
 TAX AND EXEMPTIONS FROM THE SALES TAX, SO AS TO PROVIDE THAT THE SALE OF SOUTH
 CAROLINA EDUCATION LOTTERY TICKETS IS A SALE OF TANGIBLE PERSONAL PROPERTY
 GIVING RISE TO GROSS PROCEEDS OF SALES IN THE AMOUNT OF THE TICKET PRICE AND
 IS SUBJECT TO THE SALES TAX EXCEPT FOR LOCAL SALES TAXES; BY AMENDING SECTION
 12-36-2110, AS AMENDED, RELATING TO THE MAXIMUM SALES, USE, AND CASUAL EXCISE
 TAX ON VARIOUS ITEMS OF TANGIBLE PERSONAL PROPERTY, INCLUDING MOTOR VEHICLES,
 SO AS TO RAISE THE MAXIMUM TAX; BY AMENDING SECTION 12-36-2120, AS AMENDED,
 RELATING TO SALES TAX EXEMPTIONS, SO AS TO DELETE CERTAIN EXEMPTIONS.

   03/31/04  Senate Introduced and read first time SJ-8
   03/31/04  Senate Referred to Committee on Finance SJ-8

TO ENACT THE "SOUTH CAROLINA EQUALIZED EDUCATION FINANCE AND FUNDING ACT" INCLUDING PROVISIONS TO AMEND CHAPTER 20, TITLE 59, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE EDUCATION FINANCE ACT OF 1977, SO AS TO RENAME THE CHAPTER THE SOUTH CAROLINA EQUALIZED EDUCATION FINANCE ACT OF 2004, PROVIDE FOR THE ACHIEVEMENT OF OBJECTIVES FOR HIGH ACADEMIC ACHIEVEMENT REQUIRED BY THE EDUCATION ACCOUNTABILITY ACT OF 1998, DEFINE CERTAIN ADDITIONAL TERMS, PROVIDE FOR EQUALIZED SCHOOL MILLAGE, EQUALIZED REVENUE, AND EQUALIZED STATE FUNDING THROUGHOUT THE STATE TO BE PHASED IN OVER THE NEXT TWO YEARS, PROVIDE THAT THE BASE STUDENT COST FOR THE 2004-05 SCHOOL YEAR IS FIVE THOUSAND ONE HUNDRED SEVENTY-FIVE DOLLARS, ADD A NEW WEIGHTING FOR POVERTY, PROVIDE THAT EQUALIZED SCHOOL MILLAGE OF ONE HUNDRED MILLS MUST BE LEVIED IN ALL SCHOOL DISTRICTS, PROVIDE THAT THE DIVISION OF RESEARCH AND STATISTICS OF THE BUDGET AND CONTROL BOARD SHALL SUBMIT TO THE GENERAL ASSEMBLY AND THE GOVERNOR ESTIMATES OF THE EQUALIZED MILLAGE REVENUE AND OTHER STATE FUNDS TO FUND THE AMOUNT OF EQUALIZED STATE FUNDING FOR THE FOUNDATION PROGRAM, PROVIDE WHAT CONSTITUTES ADDITIONAL STATE EFFORT, PROVIDE FOR THE STATE MINIMUM SALARY SCHEDULE TO BE ADJUSTED BASED ON THE AVERAGE SALARY OF AT LEAST THE GEORGIA/NORTH CAROLINA AVERAGE SALARY, PROVIDE THE SPENDING PRIORITY OF FUNDS ALLOCATED TO IMPLEMENT THE FOUNDATION PROGRAM, AND MAKE OTHER CONFORMING CHANGES; BY ADDING ARTICLE 11 TO CHAPTER 36, TITLE 12, SO AS TO IMPOSE AN ADDITIONAL STATE SALES, USE, AND CASUAL EXCISE TAX EQUAL TO TWO PERCENT OF GROSS PROCEEDS OF SALES OR SALES PRICE, AND TO PROVIDE THAT THIS ADDITIONAL TWO PERCENT TAX DOES NOT APPLY TO THE SALE OF UNPREPARED FOOD AND ON ACCOMMODATIONS FOR TRANSIENTS; BY ADDING SECTION 11-11-155 SO AS TO CREATE THE SCHOOL MILLAGE TAX EXEMPTION TRUST FUND (THE SCHOOL TRUST FUND) AND REQUIRE REVENUES OF THE ADDITIONAL SALES AND USE TAX AND ADDITIONAL REVENUE GENERATED BY ELIMINATING OR REVISING SALES TAX EXEMPTIONS AND CAPS TO BE CREDITED TO THIS FUND AND USED FOR THE PURPOSES OF CHAPTER 20 OF TITLE 59; BY ADDING SECTION 12-6-1145 SO AS TO PROVIDE THAT A DEDUCTION IS ALLOWED FROM SOUTH CAROLINA TAXABLE INCOME FOR CASH CONTRIBUTIONS FOR ANY EDUCATIONAL PURPOSE MADE TO A PUBLIC SCHOOL OR TO A SCHOOL DISTRICT OF THE STATE, OR MADE TO THE SCHOOL TRUST FUND; BY AMENDING SECTIONS 12-36-60 AND 12-36-90, BOTH AS AMENDED, RELATING TO THE DEFINITIONS OF "TANGIBLE PERSONAL PROPERTY" AND "GROSS PROCEEDS OF SALES" FOR PURPOSES OF THE IMPOSITION OF THE SALES AND USE TAX AND EXEMPTIONS FROM THE SALES TAX, SO AS TO PROVIDE THAT THE SALE OF SOUTH CAROLINA EDUCATION LOTTERY TICKETS IS A SALE OF TANGIBLE PERSONAL PROPERTY GIVING RISE TO GROSS PROCEEDS OF SALES IN THE AMOUNT OF THE TICKET PRICE AND IS SUBJECT TO THE SALES TAX EXCEPT FOR LOCAL SALES TAXES; BY AMENDING SECTION 12-36-2110, AS AMENDED, RELATING TO THE MAXIMUM SALES, USE, AND CASUAL EXCISE TAX ON VARIOUS ITEMS OF TANGIBLE PERSONAL PROPERTY, INCLUDING MOTOR VEHICLES, SO AS TO RAISE THE MAXIMUM TAX; BY AMENDING SECTION 12-36-2120, AS AMENDED, RELATING TO SALES TAX EXEMPTIONS, SO AS TO DELETE CERTAIN EXEMPTIONS.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION    1.    This act is known and may be cited as the "South Carolina Equalized Education Finance and Funding Act".

SECTION    2.    Chapter 20, Title 59 of the 1976 Code is amended to read:

Section 59-20-10.    This chapter shall be known and may be cited as the 'South Carolina Equalized Education Finance Act of 1977 2004'.

Section 59-20-20.    As used in this chapter:

(1)    'Foundation program' means the program proposed to establish substantially equitable current operation funding levels for programs for South Carolina's public school students, regardless of their geographic location, after the students are transported to school and housed in school plants, adequate to achieve the objectives for high academic achievement required by the South Carolina Education Accountability Act of 1998.

(2)    'Educational programs or elements of programs not included in the foundation program' means:

(a)    'Transportation', which shall mean transportation to and from public schools for the students of South Carolina's public schools provided by state, local or federal funds, or a combination thereof.

(b)    'Capital outlay', which shall mean those funds used for the construction, improving, equipping, renovating or major repairing of school buildings or other school facilities, or the cost of acquisition of land whereon to construct or establish such school facilities in accordance with the definition provided in Section 59-21-310.

(c)    'Pilot programs', which shall mean programs of a pilot or experimental nature usually designed for special purposes and for a specified period of time other than those included in the foundation program.

(d)    'Adult education', which shall mean public education dealing primarily with students above eighteen years of age not enrolled as full-time public school students and not classified as students of technical schools, colleges or universities of the State.

(e)    'Text books', 'Textbooks' which shall mean books distributed under that system of rental and free text books textbooks now operated by the Department of Education.

(f)    'Food service programs', which shall mean those programs dealing directly with the nutritional welfare of the student, such as the school lunch and school breakfast programs.

(g)    'Employee benefits', which shall mean those benefits received by employees of the state public school systems and paid at least in part by the State, such as retirement, social security and health insurance. 'EIA' which means the Education Improvement Act of 1984.

(h)    'EAA' which means the Education Accountability Act of 1998.

(3)    'Index of taxpaying ability' means an index of a local district's relative fiscal capacity in relation to that of all other districts of the State based on the full market value of all taxable property of the district assessed on the basis of property classification assessment ratios set forth in Article 3, Chapter 43 of Title 12 for the second completed taxable year preceding the fiscal year in which the index is used and these assessments must be the audited assessments by school district contained in the annual report submitted yearly to the Comptroller General's office. The county auditor shall provide fiscal year-end audited assessments of real and personal property to the Property Division of the Department of Revenue for each of the school districts of the county for the second completed taxable year preceding the fiscal year in which the index is used not later than October first of each year. The index must be used to calculate each district's share of the revenue to be raised locally for the foundation program. The index must include an imputed value for the property tax base implicitly generating impact aid revenue. The property tax base must be imputed at two-thirds the average ratio of all true value assessed property value statewide to prior year local revenue statewide in the foundation program, the resulting product multiplied times the average impact aid receipts during the prior three years. If impact aid receipts during the federal fiscal year are less than the average receipts for the prior three years, then state aid to the impact aid districts must be adjusted in the final payment for the state fiscal year. If the State Department of Education determines from fiscal simulations that the school finance system does not meet requirements of Section 5(D) of P. L. 81-874, the Department of Revenue shall exclude an imputed value of impact aid receipts from the index of taxpaying ability.

The index must be determined annually by the Department of Revenue from sales ratio data based on the most recent studies made which correspond with the base year assessments used to compute the current index pursuant to Section 12-43-250 for assessed property within a school district. The base year is the second completed taxable year preceding the fiscal year in which the index is used. The Department of Revenue shall provide a preliminary index by December first of each year end and a final index by February first of each year to the State Department of Education and to the auditor of each county who shall provide the index to any governmental entity responsible for approving or levying of millages for school purposes. Changes and corrections may be made to the index before February first but no change is allowed after that date. When the assessment of property is under appeal and the appeal extends beyond the year in which the assessment made pursuant to Section 12-43-305 is applied, the Department of Revenue shall adjust the index of taxpaying ability in the year in which the appeal is resolved by the amount of any difference between the assessments. Any school district is entitled to a hearing before the Department of Revenue to review its designated index of taxpaying ability within thirty days of filing a request for the hearing. The data gathered by the Department of Revenue for the purpose of determining an annual index must be preserved as public records in the offices of the Department of Revenue for four years. The raw information gathered from the various county officers reflecting the representative sales within the school districts, the consideration, and the reported market value or assessed value for each sale are a part of the public records so preserved. The Department of Revenue shall file a statement stating the methodology employed in making the annual determination of the index and refer to all sources of factual information used in making the determination. All work sheets, computer printouts, and the actual calculation must be included as the public records to be preserved by the Department of Revenue. In determining sales to assessment ratio, the Department of Revenue shall use only reported consideration on sales for which deeds have been placed on public record. Where sufficient sales data is not available, the Department of Revenue shall make appraisals in lieu of sales in order to determine the index. The appraisals, including all working papers, must be included as the public records to be preserved by the Department of Revenue. With respect to school districts within counties where abstracts of duplicates reflecting the assessed value have been filed pursuant to Section 12-39-290, the same having been adopted by the auditors under Article 3, Chapter 43 of Title 12, the index must be on the basis of the value of the property as stated in the abstracts as adjusted by sales ratio studies up to full assessments based on full fair market value.

The index of taxpaying ability for a particular current year shall not include the assessed value of property in a school district which is classified under Section 12-43-220(a) and Section 12-43-220(e), which is at least fifteen percent of the total assessed value of real property in the school district, which on February first of the year has been in bankruptcy status for a minimum of thirty consecutive months, and on which no local school property taxes have been collected for at least two consecutive fiscal years. It is the responsibility of the county auditor to report such exclusions from the index to the Department of Revenue and to immediately notify the Department of Revenue of any change in the bankruptcy status of such real property or any collection of school property taxes from such real property.

For purposes of disbursing EFA funding and for purposes of the index of taxpaying ability, the value of a fee in lieu of taxes shall be computed by the Department of Revenue by basing the computation on the net fee received and retained by the school district. The value thus computed shall not be inflated by any portion of the fee shared with or used by any other local taxing authority. Provided, however, any revenue received by a taxing entity as a result of this section must be considered taxable property for purposes of bonded indebtedness pursuant to Sections 14 and 15 of Article X of the Constitution of this State, and for purposes of computing the "index of taxpaying ability" pursuant to item (3) of this section. 'Equalized school millage' means the annual ad valorem property tax millage rate levied in the school districts of the State pursuant to Section 59-20-40(e) for the operation of each school district.

(4)    'Equalized revenue' means the amount of ad valorem property tax revenue derived from the equalized millage levied within each school district.

(5)    'Defined minimum program (DMP) Foundation program' means the program established annually by the State Board of Education that is necessary to provide public school students in the State with minimum educational programs designed to meet their needs and adequate to achieve the objectives for high academic achievement required by the EAA. The State Board of Education shall transmit a per-weighted pupil estimate of the full implementation of the defined minimum foundation program to the State Budget and Control Board and the General Assembly for each proposed budgetary year. The State Board of Education shall transmit any suggested changes in the basic programs and their weightings as evidenced by changing requirements and practices.

(5)(6)    'Weightings' means those cost figures assigned to student classifications in Section 59-20-40(1)(c) which are based on different relative cost of their educational programs in relation to that of the base student which is given the weighting of 1.00.

(6)(7)    'Base student' means that student classification that represents the most economically educated pupil in the school system, those in grades four through eight in regular classroom settings. 'Base student cost' is the funding level necessary for providing a minimum foundation program which includes the funding level necessary for supporting the defined minimum foundation program and to meet, as funds are available, needs identified by each district board of trustees' annual report, which reflects the needs identified in the annual school reports of the district and other assessments, and which is calculated in 1976 dollars to be six hundred sixty-five for 2004-2005 to be five thousand one hundred seventy-five dollars.

Provided, however, by July 1, 1983, that of the state and local monies generated by the base student cost above the cost of the defined minimum program, not more than fifty percent shall be used by the local school districts to meet the needs identified by the board of trustees' annual report. Monies generated by weightings above 1.00 shall not be used for revisions of the defined minimum program.

(8)    'Equalized state funding' means the total amount of equalized revenue and other state funds to be distributed to school districts to fund the foundation program for the weighted pupil units at the base student cost.

Section 59-20-23.    When an appeal of the assessed value of property assessed pursuant to Section 12-43-220(a) extends for more than two years and the amount in dispute is more than thirty percent of the total of assessed value of property in the school district in which the property under appeal is located, the index of taxpaying ability for the school district must be calculated using the value asserted by the taxpayer in the appeal.

If the final settlement of the appeal provides for an assessed value greater than the value asserted in the taxpayer's appeal, the local school district, within twelve months, must remit to the general fund of the State any additional funds received from the State Department of Education due to the utilization of the value of the facility asserted in the taxpayer's appeal.

Any funds remitted to the general fund of the State pursuant to this section are considered current fiscal year funds appropriated under the Education Finance Act and must be included in the next distribution of such funds to school districts.

Section 59-20-25.    For the purposes of computing the 'index of taxpaying ability' pursuant to item (3) of Section 3 of Act 163 of 1977 (South Carolina Education Finance Act) for any area in which tax increment financing plan is in effect the value to be used shall be the original assessed value plus any portion of the captured assessed value which is distributed among taxing authorities pursuant to Section 31-8-120.

Section 59-20-30.    It is the purpose of the General Assembly in this chapter to:

(1)    To guarantee to each student in the public schools of South Carolina the availability of at least minimum educational programs and services appropriate to his needs and adequate to achieve the objectives for high academic achievement required by the EAA, and which are substantially equal to those available to other students with similar needs and reasonably comparable from a program standpoint to those students of all other classifications, notwithstanding geographic differences and varying local economic factors.;

(2)    To encourage school district initiative in seeking more effective and efficient means of achieving the goals of the various programs.;

(3)    To establish a procedure for the distribution of a specified portion of the state education funds so as to ensure that the funds are provided on the basis of need to the extent set forth by this chapter in order to guarantee a minimum level of funding for each weighted pupil unit in the State.;

(4)    To make it possible for each school district to provide the defined minimum foundation program within approximately five two years from July 2, 1978 1, 2004, and to do so with an equal local tax effort.;

(5)    To establish a reasonable balance between the portion of the funds to be paid by the State and the portion of the funds to be paid by the districts collectively in support of the foundation program. For the initial stage of this program the proportionate state share of the funds for this program shall be approximately seventy percent statewide and the remainder of the program shall be financed from local revenue sources. fund the foundation program by tax revenue from a statewide equalized school ad valorem property tax millage rate and additional state funds, with increases over time to meet the cost increases caused by inflation and increasing teachers' salaries to match those in adjoining states, as the first budget priority of our State;

(6)    To require each local school district to contribute its fair share to the required local effort, which is to be in direct proportion to its relative taxpaying ability. encourage excellence and high standards of achievement reflecting the aspirations of the people of each school district, by not restricting efforts of school districts to generate additional resources;

(7)    To ensure that tax dollars spent in public schools are utilized effectively and to ensure that adequate programs serve all children of the State.

Section 59-20-40.    The annual allocation to each school district for the operation of the foundation program as it relates to the school district shall must be determined as follows:

(1)    Computation of the basic amount to be included for current operation in the foundation program:

(a)    Each school district shall maintain a program membership of each school by compiling the student membership of each classification. The cumulative one hundred thirty-five day average daily membership of each school district by program classification will determine its monetary entitlement. The district's average daily membership (ADM) will be computed, currently maintained, and reported in accordance with the regulations of the State Board of Education. Funds for the state's portion of the per-pupil cost of the foundation program shall must be disbursed monthly to the various school districts. End-of-year adjustments in state funds shall must be made based on the one hundred thirty-five day student average daily membership in each classification.

(b)    The base student cost shall be established annually by the General Assembly. The base student cost shall be established in such a manner that five years after July 2, 1978, the funding level shall approximate the cost of the defined minimum program as set forth by the State Board of Education.

After the 2004-2005 school year in which the base student cost is established at $5,175, each year the Division of Research and Statistics of the Budget and Control Board shall submit to the Legislature an estimate of calculate the projected rate of inflation for the fiscal year to be budgeted, and the base student cost shall must be adjusted to incorporate the inflated by the projected rate of inflation and changes in the cost of providing the Defined Minimum foundation program.

(c)    Weightings, used to provide for relative cost differences, between programs for different students are established in order that funds may be equitably distributed on the basis of pupil needs. The criteria for qualifications for each special classification must be established by the State Board of Education according to definitions established in this article and in accordance with Sections 59-21-510, 59-35-10, 59-53-1860, and 59-53-1900. Cost factors enumerated in this section must be used to fund programs approved by the State Board of Education. Pupil data received by the Department of Education is subject to audit by the department. Cost factors or weightings are as follows:

Pupil Classification            Weightings

(1)    Kindergarten pupils        1.30

(2)    Primary pupils (grades 1 through 3)    1.24

(3)    Elementary pupils (grades 4 through 8)

base students            1.00

(4)    High school pupils (grades 9 through 12)    1.25

Special Programs for Exceptional Students        Weightings

(5)    Handicapped            1.74

a. Educable mentally handicapped pupils

b. Learning disabilities pupils

(6)    Handicapped            2.04

a. Trainable mentally handicapped pupils

b. Emotionally handicapped pupils

c. Orthopedically handicapped pupils

(7)    Handicapped            2.57

a. Visually handicapped pupils

b. Hearing handicapped pupils

c. Pupils with autism.

(8)    Speech handicapped pupils        1.90

(9)    Homebound pupils        2.10

a. Pupils who are homebound

b. Pupils who reside in emergency shelters

Vocational Technical Programs

(10)    Pre-vocational            1.20

(11)    Vocational            1.29

Add-on Weights for Early Childhood Development,

and Academic Assistance, and Poverty        Weightings

(12)    Early Childhood Assistance        0.26

(13)    Grades 4-12 Academic Assistance        0.114

(14)    Poverty            0.15

Adult Education

(14)(15) Adult Education            0.15

No A local match is not required for adult education and the number of weighted pupil units funded depends on funding available from the general fund of the State and the Education Improvement Act of 1984 Fund.

Each student in the State must be counted in only one of the first eleven pupil classifications. Students shall generate funds for early childhood assistance and grades 4-12 academic assistance in accordance with Section 59-139-20. Students shall generate funds for poverty according to Section 59-139-30. The State Board of Education must shall determine the qualifications for each classification in accordance with Sections 59-21-510, 59-35-10, 59-53-1860, 59-53-1900, and Chapter 30 of this title. The program for each classification must meet specifications approved by the State Board of Education.

School districts may count each student who is instructed at home under pursuant to the provisions of Section 59-65-40 in the district's weighted pupil units at a weighting of .25 for supervising, overseeing, or reviewing the student's program of home instruction. No A local match is not required for students instructed at home under pursuant to the provisions of Section 59-65-40.

(d)    The basic equalized state funding amount for the foundation program for each district shall must be computed as follows:

(1)    The calculated average daily membership in each student classification shall must be multiplied by the weighting factor for that respective classification.

(2)    The subtotals (totals in each student classification) in all the classifications shall must be added to get the district's total weighted pupil units.

(3)    The district's weighted pupil units shall must be multiplied by the base student cost figure as established annually by the General Assembly.

(e)    Computation of the required local equalized revenue in support of the foundation program.

The amount that each school district shall provide toward the cost of the South Carolina foundation program shall be computed by determining the total statewide collective local share (approximately thirty percent) of the total cost of the foundation program, and multiplying this by the index of taxpaying ability of each district as defined in Section 59-20-20. Beginning in 2005, equalized school millage of one hundred mills must be levied in all school districts of the State. The equalized school millage must be imposed and the equalized revenue collected in the same manner as other ad valorem property taxes are imposed and collected. The equalized revenue must be used for the foundation program for the school district in which the equalized school millage is levied.

(f)    Computation of the required additional state effort.

The additional amount that the State shall provide to each school district toward the cost of the foundation program shall must be the difference between the district's basic equalized state funding amount as computed in subsection (d) minus the required amount raised locally equalized revenue as computed in subsection (e).

Notwithstanding the provisions of this section, state aid to any school district shall be reduced in proportion to the ratio that its local school tax effort falls below that required by subsection (2) of Section 59-20-50.

(2)    Reserved. Each year, the Division of Research and Statistics of the Budget and Control Board shall submit to the General Assembly and the Governor estimates of the equalized millage revenue and of other state funds to fund the amount of equalized state funding for the foundation program, for the fiscal year to be budgeted. In the absence of other state funds, the General Assembly in the annual general appropriations act shall adjust the equalized school millage to provide the revenue necessary to pay the equalized state funding for the inflated base student cost for the foundation program.

(3)    Provisions for a phase-in plan of implementation:

(a)    As a result of the cost of implementing the foundation program at both state and local level levels as calculated in this section, there will be a phase-in implementation period of five two years to assist in implementing the equalized education finance program.

(b)    Each year of the phase-in period the General Assembly shall specify the base student cost and the percentage of the difference between current funding and full funding of the defined minimum foundation program, which shall must be achieved each year. It is the intent of this chapter that the full implementation of the foundation program from present funding level in present financing plans, in terms of real dollars, be achieved in substantially equal annual intervals over a period of five two years; provided, that if a district increases its local effort annually by at least five percent in real dollars, the period of time for full implementation may be extended five years. However, it is recognized that, during periods of abnormally low growth in state revenue, appropriations may necessarily have to be reduced below the anticipated trend and that during periods of abnormally high revenue growth an effort would be made to restore progress in funding to achieve full implementation during the five year phase period. It is recognized further that, should the trend of growth in state revenue diverge substantially from historical experience, then the length of the phase period might be increased or decreased accordingly. Each local school district shall progress annually in eliminating the difference between its current funding and full funding of the defined minimum program at the same percentage as mandated by the General Assembly for statewide progress toward full funding; provided, that each district shall increase its local effort annually by at least the amount required in this section or by five percent in real dollar terms, or shall increase its millage for the local share of expenditures under the foundation program by at least two and one-half mills. Any district failing to make either the required local effort or the five percent increase in real dollars terms or the two and one-half mill increase will have its entitled increase in state aid reduced by the proportion that its actual increase in local effort falls below its required increase of five percent in real dollars, or two and one-half mills, whichever is less.

(4)    Impact aid revenue shall must be counted as local effort equalized revenue for purposes of computing actual local effort, in order to meet requirements of Section 59-20-40(3) (b) Section 59-20-40(1)(e). Provided, however, that should the degree of equality achieved under this chapter prove insufficient to qualify South Carolina for utilizing impact aid in the school finance equalization plan, then impact aid would not be counted as local revenue.

(5)    To qualify for funds provided in this chapter, each district must shall attain an average pupil-teacher ratio based on average daily membership in the basic skills of reading and mathematics in grades one through three of 21:1.

Provided, that any a local district may apply to the State Board of Education for approval of a waiver to this subsection by submitting and justifying an alternative educational program to serve the basic skill needs of average daily membership in grades one through three.

The State Board of Education shall approve or disapprove of such this waiver forty-five days after receipt of such the application. Provided, further, that beginning with Fiscal Year 1978-79 1978-1979, if a school district violates the provisions of this subsection, the state aid for the ensuing fiscal year to such the school district shall be reduced by the percentage variance that the actual pupil-teacher ratios in such the school district has to the required pupil-teacher ratios mandated in this subsection.

Provided, that notwithstanding the provisions of this section, the State Board of Education is authorized to waive the pupil-teacher requirements specified herein in this section upon a finding that a good faith effort is being made by the school district concerned to comply with the ratio provisions but that for lack of classroom space which was beyond its control it is physically impossible for the district to comply for the Fiscal Years 1978-1979 and 1979-1980 and the cost of temporary classroom space cannot be justified.

It is the intent of the General Assembly that the average daily membership pupil-teacher ratio for grades 1 one through 3 three stipulated in the chapter be implemented to the extent possible on an individual class basis and that the pupil enrollment in these grades should not exceed twenty-eight pupils in each class.

(6)    No district shall be required to increase local revenue if combined state and local revenue exceeds the amount necessary to meet the base student cost of the minimum foundation program at full implementation State revenue from the following categories shall constitute the additional state effort pursuant to Section 59-20-40(f): APT/ADEPT; health and dental part-time teachers; employer contributions; Education Finance Act; nurse program; attendance supervisor; school lunch supervisor; lunch program; PL99-457; aid to school districts; pilot extended year; retiree insurance; Property Tax Relief Act of 1995, wherein the Trust Fund for Tax Relief was established, and all new revenue provided by Sections 3 through 9 of the South Carolina Equalized Education Finance and Funding Act including the School Tax Millage Exemption Trust Fund established by Section 11-11-155. Notwithstanding any other provisions of law, these funds constituting this additional state effort are directed or redirected to and must be used for this purpose at the time required.

(7)    [Deleted]

(8)    The General Assembly shall annually provide the portion of the local required support of the foundation program required by the South Carolina Education Improvement Act of 1984 on the basis of the district's taxpaying ability in the annual general appropriation act.

Section 59-20-41.    Notwithstanding any other another provision of law:, all school districts providing educational services to children admitted or committed to residential institutions of the Department of Mental Health are authorized to count children admitted or committed to residential institutions of the Department of Mental Health from the first day of residency in such these institutions, provided, that the first day is within the particular district's school year. The inclusion of these children is for the purpose of participation in the districts' educational programs for handicapped children supported under pursuant to the Education Finance Act of South Carolina.

Section 59-20-50.    (1)(A)    Notwithstanding the computations prescribed in Section 59-20-40, the level of state contributions to amount of equalized state funding per weighted pupil unit for each district shall must not be reduced to a per-pupil level of foundation program funds below that per-pupil level the amount of state and local funding of per weighted pupil unit for programs for the fiscal years prior to implementation of this chapter which will be incorporated in the foundation program for the fiscal years before implementation of this chapter.

Provided, no a district shall may not receive annually an increase in state funds less than the full rate of the inflationary adjustment in the base student cost specified in Section 59-20-40(1)(b). This increase shall must be computed annually over and above the amount actually received from the State for the foundation program in the prior fiscal year.

Provided, further, after the fiscal year 1982-83 no district shall receive annually an increase in state funds less than four-fifths of the inflationary adjustment in the base student cost specified in Section 59-20-40(1)(b). This increase shall be computed annually over and above the amount actually received from the State for the foundation program in the prior fiscal year.

Beginning July 1, 1994, no additional school district shall receive hold-harmless funds under this subsection due to decreases in student numbers or upward adjustments in the index of taxpaying ability.

(2)(B)    Notwithstanding any the provisions of this chapter, any a local school district may increase the local effort above the foundation program funding level as deemed considered necessary to meet the aspirations of the people of the district.

(3)    Eighty-five percent of the funds appropriated through state and local effort for each weighted classification shall be spent in direct and indirect aid in the specific area of the program planned to serve those children who generated the funds. Districts expending less than the required eighty-five percent of the appropriated amount shall be subject to a penalty the following fiscal year in the amount equal to the difference between the amount spent and the required eighty-five percent figure.

However, this requirement shall not apply to the funds generated by children in the pupil classification "Speech Handicapped Pupils".

(4)(a)(C)(1)    Each school district shall pay each certified teacher or administrator an annual salary at least equal to the salary stated in the statewide minimum salary schedule for the person's experience and class. No A teacher or administrator employed in the same position, over the same time period, shall may not receive less total salary, including any a normal incremental increase, than that teacher or administrator received for the fiscal year before the implementation of this article.

(b)(2)    The state minimum salary schedule must be based on the state minimum salary schedule index in effect as of July 1, 1984. In Fiscal Year 1985, the 1.000 figure in the index is $14,172. (This figure is based on a 10.27% increase pursuant to the South Carolina Education Improvement Act of 1984.) adjusted to provide an average salary of at least the Georgia/North Carolina average. Beginning with Fiscal Year 1986 2005, the 1.000 figure in the index must be adjusted on a schedule to stay at the southeastern Georgia/North Carolina average as projected by the Division of Research and Statistical Services Office of Research and Statistics and provided to the Budget and Control Board and General Assembly during their deliberations on the annual appropriations bill. The southeastern Georgia/North Carolina average teacher salary is the average simple mean of the average teachers' salaries of the southeastern these two states. In projecting the southeastern Georgia/North Carolina average, the division shall include in the South Carolina base teacher salary all local teacher supplements and all incentive pay, excluding National Board Certification, and shall include compensation associated with expanding the normal contract year from one hundred ninety days to the number of days in the school term as required by law, at a rate of one additional day per year beginning with the school year 2005-2006, but must not include compensation for teaching summer school or for incidental awards such as reimbursement for equipment or school supplies. Under this schedule, school districts are required to maintain local salary supplements per teacher no less than their prior fiscal level. In Fiscal Year 1986 and thereafter teacher pay raises through adjustments in the state's minimum salary schedule may be provided only to teachers who demonstrate minimum knowledge proficiency by meeting one of the following criteria:

(1)(a)    holding a valid professional certificate;

(2)(b)    having a score of 425 or greater on the Commons Examination of the National Teachers Examinations;

(3)(c)    meeting the minimum qualifying score on the appropriate area teaching examination; or

(4)(d)    meeting the minimum standards on the basic skills examinations as prescribed by the State Board of Education provided in Section 59-26-20.

Section 59-20-55.    Beginning July 1, 1986, and thereafter, employment may be provided only to teachers who demonstrate minimum knowledge proficiency by meeting one of the criteria outlined in Section 59-20-50(4)(b)(C)(2). The criteria do not have to be met by teachers having twenty-five years or more of teaching service as of the effective date of the South Carolina Education Improvement Act of 1984 in order for them to be employed.

Section 59-20-60.    (1)(A)    School districts shall give first spending priority of funds allocated under pursuant to this chapter to full implementation of the defined minimum foundation program including:

(1)    a computer-adaptive assessment and data system that is vertically scaled, linked with South Carolina curriculum standards, and nationally normed, and provides diagnostic information to support sound instructional decisions for individual students;

(2)    reduction in class size;

(3)    intensive and focused instructional programs for students not meeting the requirement of adequate yearly progress pursuant to federal law;

(4)    standards-based professional development for teachers in specific curriculum areas, a new teacher induction and mentoring program, a teacher advancement program providing for a career continuum for teachers, differentiated compensation for hard-to-staff schools, paid internships for teacher candidates, and targeted teacher recruitment assistance;

(5)    a four-year-old, full-day kindergarten program for all students and a three-year-old kindergarten program for at-risk students for those not currently served under special needs programs.

(2)(B)    The State Board of Education shall audit the programmatic and fiscal aspects of this chapter, including the degree to which a school meets all the prescribed standards of the defined minimum program and shall report the results in the Annual Report of the State Superintendent of Education. Schools which that have been classified as 'dropped' by the defined minimum program accreditation procedures are not eligible for funding in the following fiscal year until an acceptable plan to eliminate the deficiencies is submitted and approved by the State Board of Education.

(3)(C)    Each school district board of trustees shall cause the district and each school in the district to develop comprehensive five-year plans with annual updates to outline the District and School Improvement Plans. Districts which that have not begun a strategic planning cycle must do so and develop a plan no later than the 1994-95 1994-1995 school year. Districts which that have undertaken such a this planning process may continue in their planning cycle as long as the process meets the intent of this section and the long-range plans developed or under development can be amended to encompass the requirements of this section. For school year 1993-94 1993-1994, districts may submit either the improvement plan consistent with State Department guidelines or their five-year comprehensive plan.

The State Board of Education shall recommend a format for the plans which will be flexible and adaptable to local planning needs while encompassing certain state mandates, including the early childhood and academic assistance initiative plans pursuant to Section 59-139-10. All district District and school plans must be reviewed and approved by the board of trustees. The District Plan should integrate the needs, goals, objectives, strategies, and evaluation methods outlined in the School Plans. Measures of effectiveness must include outcome and process indicators of improvement and must provide data regarding what difference the strategies have made. Staff professional development must be a priority in the development and implementation of the plans and must be based on an assessment of needs. Long and short-range goals, objectives, strategies, and time lines need to be included.

(4)(D)    Each plan shall provide for an Innovation Initiative, designed to encourage innovative and comprehensive approaches based on strategies identified in the research literature to be effective. The Innovation Initiative must be utilized by school districts to implement innovative approaches designed to improve student learning and accelerate the performance of all students. Funds may be expended on strategies in one or more of the following four categories:

(a)(1)    new approaches to what and how students learn by changing schooling in ways that provide a creative, flexible, and challenging education for all students, especially for those at risk. Performance-based outcomes which that support a pedagogy of thinking and active approaches for learning must be supported;

(b)(2)    applying different teaching methods permitting professional educators at every level to focus on educational success for all students and on critical thinking skills and providing the necessary support for educational successes are encouraged;

(c)(3)    redefining how schools operate resulting in the decentralization of authority to the school site and allowing those closest to the students the flexibility to design the most appropriate education location and practice;

(d)(4)    creating appropriate relationships between schools and other social service agencies by improving relationships between the school and community agencies (health, social, mental health), parents and the business community, and by establishing procedures that cooperatively focus the resources of the greater community upon barriers to success in school, particularly in the areas of early childhood and parenting programs, after-school programs, and adolescent services.

Funds for the Innovation Initiative must be allocated to districts based upon a fifty percent average daily membership and fifty percent pursuant to the Education Finance Act formula. At least seventy percent of the funds must be allocated on a per school basis for school based innovation in accord with the District-School Improvement Plan. Up to thirty percent may be spent for district-wide projects with direct services to schools. District and school administrators must work together to determine the allocation of funds.

For 1993-94 1993-1994, districts and schools may use these funds for designing their Innovation Initiatives to be submitted to the peer review process established in Section 59-139-10 prior to implementation of the innovations in 1994-95 1994-1995. Notwithstanding any other provisions another provision of law, districts may carry over all unexpended funds in 1993-94 1993-1994, and up to twenty-five percent of allocated funds each year thereafter after that in order to build funds for an approved program initiative.

(5)(E)    An annual district programmatic report to the parents and constituents of the school district must be developed by the local school board. Each report shall include the goals and objectives of the school district, the strategies implemented to meet the goals and objectives, and an evaluation of the outcomes. An annual school report to the parents and constituents of the school must be developed by the School Improvement Council and shall provide information on the school's progress on meeting the school and district goals and objectives. These reports shall must be provided by November fifteenth of each year.

(6)(F)    Each school board of trustees shall establish an improvement council at each school in the district and this council is to be involved in improvement and innovation efforts at the school. The council shall must be composed of at least two parents, elected by the parents of the children enrolled in the school; at least two teachers, elected by the faculty; at least two students in schools with grades nine and above elected by the students; other representatives of the community and persons appointed by the principal. The elected members of the council shall comprise at least a two-thirds majority of the elected and appointed membership of the council. The council should also include ex-officio members such as the principal and others holding positions of leadership in the school or school organizations, such as parent-teacher groups, booster clubs, and federal program advisory groups. Each council shall assist in the preparation of the five-year plan and annual updates required in this section, assist with the development and monitoring of school improvement and innovation, provide advice on the use of school incentive grant awards, and provide assistance as the principal may request as well as carrying out any other duties prescribed by the local school board. The local school board shall make provisions to allow any a council to file a separate report to the local school board if the council considers it necessary. However, no a council has any of does not have the powers and duties reserved by law or regulation to the local school board. Notwithstanding any other provisions another provision of this subsection, an area vocational center's school improvement council must be composed as defined exclusively by federal law. The council shall perform all the duties and responsibilities provided for in any a state or federal law which that applies to these councils.

In order to provide additional accountability for funds expended under pursuant to statutory requirements, the elected members of the school improvement council shall serve a minimum term of two years. Parents of students or students in their last year of enrollment at an individual school may serve terms of one year only. The terms must be staggered and initially determined by lot. Elections of members to school improvement councils shall must occur no later than October fifteenth of the school year. The elections must be organized to ensure that every parent and faculty member has an opportunity to vote each year. Within thirty days following the election, the names, addresses, terms of service, and status of all council members as a parent, teacher, student, or representative of the community must be provided to the School Improvement Council Assistance at the University of South Carolina for the purpose of sharing information. The district board of trustees shall include in its annual district report a summary of the training opportunities provided or to be provided for school improvement council members and professional educators in regard to council-related tasks and a summary of programs and activities involving parents and citizens in the school.

(7)(G)    Each school district board of trustees shall:

(a)(1)    review each school improvement plan and the annual updates for integration with district plans and objectives and school progress in meeting those goals and objectives;

(b)(2)    cause to be prepared an annual written report to account for funds expended in each pupil classification as prescribed by the State Board of Education;

(c)(3)    participate in the statewide testing program as prescribed by the State Board of Education;

(d)(4)    maintain an ongoing systematic evaluation of the educational program needs in the district and shall develop a comprehensive annual and long-range plan for meeting these program needs. These plans shall include an assessment of needs. At minimum, the process of assessing needs and establishing goals and objectives must be carried out for each of the program classifications specified in Section 59-20-40(1)(c). Each school district board of trustees shall develop and execute a method of evaluating the extent to which the goals and objectives specified in its comprehensive plan are being achieved and shall annually shall report the results of its evaluation to the people of the school district and to the State Board of Education.;

(e)(5)    provide a program for staff development for all educational personnel. A portion of the funds in the foundation program must be used for this staff development that may include, but not be limited to:

(1)(a)    college courses in education, subject area of certification or management;

(2)(b)    teaching center offerings;

(3)(c)    State Department of Education workshops; and

(4)(d)    district-wide or in-school training for the purpose of fostering professional growth or improving the competency of all educational personnel.;

(f)(6)    in accordance with the format approved by the State Board of Education, annually submit to the State Board of Education and to the people of the district that district's fiscal report.

(8)(H)    The State Department of Education shall:

(a)(1)    develop, by September, 1993, a plan for offering help to districts and schools in designing and implementing the district and school comprehensive improvement plan;

(b)(2)    develop, by December, 1993, with approval by the State Board of Education, criteria for monitoring the district and school plans;

(c)(3)    review each district's annual fiscal report;

(d)(4)    provide assistance to school districts in improving the programs, correcting the deficiencies, and in carrying out its staff development program;

(e)(5)    develop or select and field test a competency-based student assessment program;

(f)(6)    prepare an annual fiscal and programmatic report to the Governor and the General Assembly each year to assess compliance with this chapter and to make recommendations concerning necessary changes in this chapter;

(g)(7)    in compliance with the intent of the chapter, waive the prescribed reporting practices if considered necessary by the State Board of Education and authorize the substitution of alternate reporting practices which that accomplish the objectives implied in this section. This waiver may must not be utilized to avoid full accountability and implementation of this chapter.

(9)(I)    The Legislative Audit Council shall audit to assess compliance with this chapter as requested by the General Assembly. On the basis of these audits, the Legislative Audit Council shall make recommendations to the General Assembly concerning necessary changes in this chapter.

(10)(J)    A twelve-member Education Finance Review Committee must be established to advise the General Assembly and review its implementation of this chapter. This advice and review may include, but not be limited to:

(a)(1)    the cost of the defined minimum foundation program;

(b)(2)    provisions included in the defined minimum foundation program;

(c)(3)    the pupil classification weights in Section 59-20-40;

(d)(4)    the formula for computing required local effort;

(e)(5)    the ongoing evaluation of the education program needs of the school districts.

The committee must be made up of three representatives from each of the following committees of the General Assembly-Senate Education, Senate Finance, House Education and Public Works, and House Ways and Means-appointed by each respective chairman. The committee shall seek the advice of professional educators and all other interested persons when formulating its recommendations.

Section 59-20-65.    The State Board of Education, acting through the existing School Council Assistance Project at the University of South Carolina, shall provide services and training activities to support school improvement councils and their efforts in preparing an annual school improvement report as required in this section.

Section 59-20-70.    Notwithstanding any other provisions another provision of law, any a school district which that complies with the provisions of Section 59-20-60 is exempted from the provisions of Article 15 of Chapter 1 of Title 1 relating to the fiscal accountability of state agencies, departments, and institutions.

Section 59-20-80.    Notwithstanding any other another provision of law, each school board of trustees in this State shall annually shall make available to the general public its budget for that year, which budget shall include an itemized list of the average salaries paid to the superintendents, supervisors, administrators, principals, consultants, counselors, and teachers employed by the district. No State aid shall must not be given to any a school district whose board of trustees fails to comply with the provisions of this chapter."

SECTION    3.    Chapter 36, Title 12 of the 1976 Code is amended by adding:

Section 12-36-1110.    An additional sales, use, and casual excise tax equal to two percent is imposed on amounts taxable pursuant to this chapter, except that this additional two percent tax does not apply to the sale of unprepared food which can be purchased with USDA food coupons nor does it apply to amounts taxed pursuant to Section 12-36-920, the tax on accommodations for transients."

SECTION    4.    Chapter 11, Title 11 of the 1976 Code is amended by adding:

"Section 11-11-155.    (A)    Beginning with fiscal year 2004, the revenue from the tax imposed pursuant to Section 12-36-1110, and all estimated additional sales, use, and casual excise tax revenue collected as a result of tax exemptions and tax caps deleted, revised, or repealed effective July 1, 2004, by the South Carolina Equalized Education Finance and Funding Act as determined by the Board of Economic Advisors, are automatically credited to a fund separate and distinct from the state general fund known as the 'School Tax Millage Exemption Trust Fund' (the School Trust Fund). The Board of Economic Advisors shall account for the School Trust Fund revenue separately from general fund revenues in reports to the Governor and the General Assembly. No portion of these revenues shall be credited to the Education Improvement Act (EIA) Fund.

(B)    An unexpended balance in the School Trust Fund at the end of a fiscal year must remain in the School Trust Fund.

(C)    Earnings on the School Trust Fund must be credited to the School Trust Fund.

(D)    Nothing in this section prohibits appropriations by the General Assembly of additional revenues to the School Trust Fund.

(E)    The School Trust Fund may also accept cash contributions from taxpayers authorized by Section 12-6-1145 and these contributions must be used and applied in the same manner other School Trust Fund revenues are used and applied.

(F)    Funds in this School Trust Fund must be used in the manner and for the purposes provided in Chapter 20 of Title 59."

SECTION    5.    Chapter 6 of Title 12 of the 1976 Code is amended by adding:

"Section 12-6-1145.    A deduction is allowed from South Carolina taxable income for cash contributions for any educational purpose made to a public school or to a school district of the State, or made to the School Tax Millage Exemption Trust Fund established by Section 11-11-155."

SECTION    6.    Section 12-36-60 of the 1976 Code is amended to read:

"Section 12-36-60.    'Tangible personal property' means personal property which may be seen, weighed, measured, felt, touched, or which is in any other manner perceptible to the senses. It also includes a South Carolina Education Lottery Ticket sold by a lottery retailer as provided in Chapter 150 of Title 59. It also includes services and intangibles, including communications, laundry and related services, furnishing of accommodations, and sales of electricity, the sale or use of which is subject to tax under this chapter and does not include stocks, notes, bonds, mortgages, or other evidences of debt. Tangible personal property does not include the transmission of computer database information by a cooperative service when the database information has been assembled by and for the exclusive use of the members of the cooperative service."

SECTION    7.    Section 12-36-90(1) of the 1976 Code is amended by adding a subitem appropriately lettered at the end to read:

"( )    the proceeds from the sale of a South Carolina Education Lottery Ticket. The ticket prices shall must be in whole dollar amounts to which the required sales tax shall must be added. However, the proceeds from the sale of lottery tickets are not subject to any local sales or use taxes."

SECTION    8.    Section 12-36-2110 of the 1976 Code, as last amended by Act 283 of 2000, is further amended to read:

"Section 12-36-2110.    (A)    The maximum tax imposed by this chapter is three eight hundred dollars for each sale made or lease executed after June 30, 1984, or lease executed after August 31, 1985 2004, of each:

(1)    aircraft, including unassembled aircraft which that is to be assembled by the purchaser, but not items to be added to the unassembled aircraft;

(2)    motor vehicle;

(3)    motorcycle;

(4)    boat;

(5)    trailer or semitrailer, pulled by a truck tractor, as defined in Section 56-3-20, and horse trailers but not including house trailers or campers as defined in Section 56-3-710;

(6)    recreational vehicle, including tent campers, travel trailer, park model, park trailer, motor home, and fifth wheel; or

(7)    self-propelled light construction equipment with compatible attachments limited to a maximum of one hundred sixty net engine horsepower.

In the case of a lease, the total tax rate required by law applies on each payment until the total tax paid equals three eight hundred dollars. Nothing in this section prohibits a taxpayer from paying the total tax due at the time of execution of the lease, or with any a payment under the lease. To qualify for the tax limitation provided by this section, a lease must be in writing and specifically state the term of, and remain in force for, a period in excess of ninety continuous days.

(B)    For the sale of a manufactured home, as defined in Section 40-29-20, the tax is calculated as follows:

(1)    subtract trade-in allowance from the sales price;

(2)    multiply the result from (1) by sixty-five percent;

(3)    if the result from (2) is no not greater than six sixteen thousand dollars, multiply by five percent for the amount of tax due;

(4)    if the result from (2) is greater than six sixteen thousand dollars, the tax due is three eight hundred dollars plus two percent of the amount greater than six sixteen thousand dollars.

However, a manufactured home is exempt from any tax that may be due above three eight hundred dollars as a result of the calculation in item (4) if it meets these energy efficiency levels: storm or double pane glass windows, insulated or storm doors, a minimum thermal resistance rating of the insulation only of R-11 for walls, R-19 for floors, and R-30 for ceilings. However, variations in the energy efficiency levels for walls, floors, and ceilings are allowed and the exemption on tax due above three eight hundred dollars applies if the total heat loss does not exceed that calculated using the levels of R-11 for walls, R-19 for floors, and R-30 for ceilings. The edition of the American Society of Heating, Refrigerating, and Air Conditioning Engineers Guide in effect at the time is the source for heat loss calculation. The dealer selling the manufactured home must maintain records, on forms provided by the State Energy Office, on each manufactured home sold which contains the above calculations and verifying whether or not the manufactured home met the energy efficiency levels provided for in this subsection. These records must be maintained for three years and must be made available for inspection upon request of the Department of Consumer Affairs or the State Energy Office. Modular homes are also subject to the sales tax in the same manner manufactured homes are subject to the sales tax pursuant to this subsection, mutates mutandi.

(C)    For the sale of each musical instrument, or each piece of office equipment, purchased by a religious organization exempt under Internal Revenue Code Section 501(c)(3), the maximum tax imposed by this chapter is three eight hundred dollars. The musical instrument or office equipment must be located on church property and used exclusively for the organization's exempt purpose. The religious organization must furnish to the seller an affidavit on forms prescribed by the department. The affidavit must be retained by the seller.

(D)    Repealed Reserved.

(E)    Equipment provided, supplied, or installed on a firefighting vehicle is included with the vehicle for purposes of calculating the maximum tax due under this section.

(F)    Effective July 1, 2005, the maximum sales tax cap pursuant to this section is increased by one hundred dollars and by an additional one hundred dollars effective July 1, 2006, and the revenue generated from these increases must be credited to the School Trust Fund established pursuant to Section 11-11-155. Appropriate adjustments in the maximum sales tax cap on modular and manufactured homes shall also must be made to reflect these increases."

SECTION    9.    Section 12-36-2120 of the 1976 Code, as last amended by Act 356 of 2002, is further amended to read:

"Section 12-36-2120.    Exempted from the taxes imposed by this chapter are the gross proceeds of sales or sales price of:

(1)    tangible personal property or receipts of any a business which the State is prohibited from taxing by the Constitution or laws of the United States of America or by the Constitution or laws of this State;

(2)    tangible personal property sold to the federal government;

(3)(a)    textbooks, books, magazines, periodicals, newspapers, and access to on-line information systems used in a course of study in primary and secondary schools and institutions of higher learning or for students' use in the school library of these schools and institutions;

(b)    books, magazines, periodicals, newspapers, and access to on-line information systems sold to publicly supported state, county, or regional libraries.

Items in this category may be in any form, including microfilm, microfiche, and CD ROM; however, transactions subject to tax under Sections 12-36-910(B)(3) and 12-36-1310(B)(3) do not fall within this exemption;

(4)    livestock. 'Livestock' is defined as domesticated animals customarily raised on South Carolina farms for use primarily as beasts of burden, or food, and certain mammals when raised for their pelts or fur. Animals such as dogs, cats, reptiles, fowls (except baby chicks and poults), and animals of a wild nature, are not considered livestock;

(5)    feed used for the production and maintenance of poultry and livestock;

(6)    insecticides, chemicals, fertilizers, soil conditioners, seeds, or seedlings, or nursery stock, used solely in the production for sale of farm, dairy, grove, vineyard, or garden products or in the cultivation of poultry or livestock feed;

(7)    containers and labels used in:

(a)    preparing agricultural, dairy, grove, or garden products for sale; or

(b)    preparing turpentine gum, gum spirits of turpentine, and gum resin for sale.

For purposes of this exemption, containers mean boxes, crates, bags, bagging, ties, barrels, and other containers;

(8)    newsprint paper, newspapers, and religious publications, including the Holy Bible and the South Carolina Department of Agriculture's The Market Bulletin;

(9)    coal, coke, or other fuel sold to manufacturers, electric power companies, and transportation companies for:

(a)    use or consumption in the production of by-products;

(b)    the generation of heat or power used in manufacturing tangible personal property for sale. For purposes of this item, 'manufacturer' or 'manufacturing' includes the activities of a processor;

(c)    the generation of electric power or energy for use in manufacturing tangible personal property for sale; or

(d)    the generation of motive power for transportation. For the purposes of this exemption, 'manufacturer' or 'manufacturing' includes the activities of mining and quarrying;

(10)(a)    meals or foodstuffs used in furnishing meals to school children, if the sales or use are within school buildings and are not for profit;

(b)    meals or foodstuffs provided to elderly or disabled persons at home by nonprofit organizations that receive only charitable contributions in addition to sale proceeds from the meals;

(c)    foodstuffs, either prepared or packaged for the homeless or needy that are sold to nonprofit organizations, or foodstuffs that are subsequently sold or donated by a nonprofit organization to another nonprofit organization. This subitem is only applicable to foodstuffs which are eligible for purchase under the USDA food stamp program;

(d)    meals or foodstuffs prepared or packaged that are sold to public or nonprofit organizations for congregate or in-home service to the homeless or needy or disabled adults over eighteen years of age or individuals over sixty years of age. This subitem only applies to meals and foodstuffs eligible for purchase under the USDA food stamp program.;

(11)[Reserved](a)    toll charges for the transmission of voice or messages between telephone exchanges;

(b)    charges for telegraph messages;

(c)    carrier access charges and customer access line charges established by the Federal Communications department or the South Carolina Public Service department; and

(d)transactions involving automatic teller machines;

(12)    [Reserved]water sold by public utilities, if rates and charges are of the kind determined by the Public Service Commission, or water sold by nonprofit corporations organized pursuant to Chapter 36 of Title 33;

(13)    [Reserved]fuel, lubricants, and supplies for use or consumption aboard ships in intercoastal trade or foreign commerce. This exemption does not exempt or exclude from the tax the sale of materials and supplies used in fulfilling a contract for the painting, repair or reconditioning of ships and other watercraft;

(14)    [Reserved]wrapping paper, wrapping twine, paper bags, and containers, used incident to the sale and delivery of tangible personal property;

(15)(a)    motor fuel, blended fuel, and alternative fuel subject to tax under Chapter 28 of Title 12; however, gasoline used in aircraft is not exempt from the sales and use tax;

(b)    if the fuel tax is subsequently refunded under pursuant to Section 12-28-710, the sales or use tax is due unless otherwise exempt, and the person receiving the refund is liable for the sales or use tax;

(c)    fuels used in farm machinery and farm tractors; and

(d)    fuels used in commercial fishing vessels.;

(16)    farm machinery and their replacement parts and attachments, used in planting, cultivating or harvesting farm crops, including bulk coolers (farm dairy tanks) used in the production and preservation of milk on dairy farms, and machines used in the production of poultry and poultry products on poultry farms, when such products are sold in the original state of production or preparation for sale. This exemption does not include automobiles or trucks;

(17)    machines used in manufacturing, processing, recycling, compounding, mining, or quarrying tangible personal property for sale. 'Machines' include the parts of machines, attachments, and replacements used, or manufactured for use, on or in the operation of the machines and which (a) are necessary to the operation of the machines and are customarily so used, or (b) are necessary to comply with the order of an agency of the United States or of this State for the prevention or abatement of pollution of air, water, or noise that is caused or threatened by any a machine used as provided in this section. This exemption does not include automobiles or trucks. As used in this item 'recycling' means a process by which materials that otherwise would become solid waste are collected, separated, or processed and reused, or returned to use in the form of raw materials or products, including composting, for sale. In applying this exemption to machines used in recycling, the following percentage of the gross proceeds of sale, or sales price of, machines used in recycling are exempt from the taxes imposed by this chapter:

Fiscal Year of Sale     Percentage

Fiscal year 1997-98 fifty percent

After June 30, 1998 one hundred percent;

(18)    fuel used exclusively to cure agricultural products;

(19)    electricity used by cotton gins, manufacturers, miners, or quarriers to manufacture, mine, or quarry tangible personal property for sale. For purposes of this item, 'manufacture' or 'manufacture' includes the activities of processors;

(20)    [Reserved]railroad cars, locomotives, and their parts, monorail cars, and the engines or motors that propel them, and their parts;

(21)    [Reserved]vessels and barges of more than fifty tons burden;

(22)    materials necessary to assemble missiles to be used by the Armed Forces of the United States;

(23)    farm, grove, vineyard, and garden products, if sold in the original state of production or preparation for sale, when sold by the producer or by members of the producers immediate family;

(24)    supplies and machinery used by laundries, cleaning, dyeing, pressing, or garment or other textile rental establishments in the direct performance of their primary function, but not sales of supplies and machinery used by coin-operated laundromats;

(25)    motor vehicles (excluding trucks) or motorcycles, which are required to be licensed to be used on the highways, sold to a resident of another state, but who is located in South Carolina by reason of orders of the United States Armed Forces. This exemption is allowed only if within ten days of the sale the vendor is furnished a statement from a commissioned officer of the armed forces of a higher rank than the purchaser certifying that the buyer is a member of the armed forces on active duty and a resident of another state or if the buyer furnishes a leave and earnings statement from the appropriate department of the armed services which designates the state of residence of the buyer;

(26)    [Reserved]all supplies, technical equipment, machinery, and electricity sold to radio and television stations, and cable television systems, for use in producing, broadcasting, or distributing programs. For the purpose of this exemption, radio stations, television stations, and cable television systems are deemed to be manufacturers;

(27)    all plants and animals sold to any a publicly supported zoological park or garden or to any of its nonprofit support corporations;

(28)(a)    medicine and prosthetic devices sold by prescription, prescription medicines used to prevent respiratory syncytial virus, prescription medicines and therapeutic radiopharmaceuticals used in the treatment of cancer, lymphoma, leukemia, or related diseases, including prescription medicines used to relieve the effects of any such this treatment, and free samples of prescription medicine distributed by its manufacturer and any the use of these free samples;

(b)    hypodermic needles, insulin, alcohol swabs, blood sugar testing strips, monolet lancets, dextrometer supplies, blood glucose meters, and other similar diabetic supplies sold to diabetics under the authorization and direction of a physician;

(c)    disposable medical supplies such as bags, tubing, needles, and syringes, which are dispensed by a licensed pharmacist in accordance with an individual prescription written for the use of a human being by a licensed health care provider, which are used for the intravenous administration of a prescription drug or medicine, and which come into direct contact with the prescription drug or medicine. This exemption applies only to supplies used in the treatment of a patient outside of a hospital, skilled nursing facility, or ambulatory surgical treatment center;

(d)    medicine donated by its manufacturer to a public institution of higher education for research or for the treatment of indigent patients; and

(e)    dental prosthetic devices;

(29)    tangible personal property purchased by persons under a written contract with the federal government when the contract necessitating the purchase provides that title and possession of the property is to transfer from the contractor to the federal government at the time of purchase or after the time of purchase. This exemption also applies to purchases of tangible personal property which becomes part of real or personal property owned by the federal government or, as provided in the written contract, is to transfer to the federal government. This exemption does not apply to purchases of tangible personal property used or consumed by the purchaser;

(30)    office supplies, or other commodities, and services resold by the Division of General Services of the State Budget and Control Board to departments and agencies of the state government, if the tax was paid on the division's original purchase;

(31)    vacation time sharing plans, vacation multiple ownership interests, and exchanges of interests in vacation time sharing plans and vacation multiple ownership interests as provided by Chapter 32 of Title 27, and any other exchange of accommodations in which the accommodations to be exchanged are the primary consideration;

(32)    natural and liquefied petroleum gas and electricity used exclusively in the production of poultry, livestock, swine, and milk;

(33)    [Reserved]electricity, natural gas, fuel oil, kerosene, LP gas, coal, or any other combustible heating material or substance used for residential purposes. Individual sales of kerosene or LP gas of twenty gallons or less by retailers are considered used for residential heating purposes;

(34)    thirty-five percent of the gross proceeds of the sale of modular homes as defined in Section 31-17-20;

(35)    [Reserved]motion picture film sold or rented to or by theaters;

(36)    tangible personal property where the seller, by contract of sale, is obligated to deliver to the buyer, or to an agent or donee of the buyer, at a point outside this State or to deliver it to a carrier or to the mails for transportation to the buyer, or to an agent or donee of the buyer, at a point outside this State;

(37)    [Reserved]petroleum asphalt products, commonly used in paving, purchased in this State, which are transported and consumed out of this State;

(38)    hearing aids, as defined by Section 40-25-20(5);

(39)    concession sales at a festival by an organization devoted exclusively to public or charitable purposes, if:

(a)    all the net proceeds are used for those purposes;

(b)    in advance of the festival, its organizers provide the department, on a form it prescribes, information necessary to ensure compliance with this item.

For purposes of this item, a 'festival' does not include a recognized state or county fair;

(40)    [Reserved]containers and chassis, including all parts, components, and attachments, sold to international shipping lines which have a contractual relationship with the South Carolina State Ports Authority and which are used in the import or export of goods to and from this State;

(41)    items sold by organizations exempt under pursuant to Section 12-37-220A(3) and (4) and B(5), (6), (7), (8), (12), (16), (19), (22), and (24), if the net proceeds are used exclusively for exempt purposes and no benefit inures to any individual. An organization whose sales are exempted by this item is also exempt from the retail license tax provided in Article 5 of this chapter;

(42)    depreciable assets, used in the operation of a business, pursuant to the sale of the business. This exemption only applies when the entire business is sold by the owner of it, pursuant to a written contract and the purchaser continues operation of the business;

(43)    all supplies, technical equipment, machinery, and electricity sold to motion picture companies for use in filming or producing motion pictures. For the purposes of this item, 'motion picture' means any audiovisual work with a series of related images either on film, tape, or other embodiment, where the images shown in succession impart an impression of motion together with accompanying sound, if any, which is produced, adapted, or altered for exploitation as entertainment, advertising, promotional, industrial, or educational media; and a 'motion picture company' means a company generally engaged in the business of filming or producing motion pictures;

(44)    electricity used to irrigate crops;

(45)    building materials, supplies, fixtures, and equipment for the construction, repair, or improvement of or that become a part of a self-contained enclosure or structure specifically designed, constructed, and used for the commercial housing of poultry or livestock.

(46)    war memorials or monuments honoring units or contingents of the Armed Forces of the United States or of the National Guard, including United States military vessels, which memorials or monuments are affixed to public property;

(47)    tangible personal property sold to charitable hospitals predominantly serving children exempt under pursuant to Section 12-37-220, where care is provided without charge to the patient.;

(48)    solid waste disposal collection bags required pursuant to the solid waste disposal plan of a county or other political subdivision if the plan requires the purchase of a specifically designated containment bag for solid waste disposal;

(49)    [Reserved]postage purchased by a person engaged in the business of selling advertising services for clients consisting of mailing, or directing the mailing of, printed advertising material through the United States mail directly to the client's customers or potential customers or by a person to mail or direct the mailing of printed advertising material through the United States mail to a potential customer;

(50)(a)    recycling property;

(b)    electricity, natural gas, propane, or fuels of any type, oxygen, hydrogen, nitrogen, or gasses of any type, and fluids and lubricants used by a qualified recycling facility;

(c)    tangible personal property which becomes, or will become, an ingredient or component part of products manufactured for sale by a qualified recycling facility;

(d)    tangible personal property of or for a qualified recycling facility which is or will be used (1) for the handling or transfer of postconsumer waste material, (2) in or for the manufacturing process, or (3) in or for the handling or transfer of manufactured products;

(e)    machinery and equipment foundations used or to be used by a qualified recycling facility;

(f)    as used in this item, 'recycling property', 'qualified recycling facility', and 'postconsumer waste material' have the meanings provided in Section 12-6-3460;

(51)    material handling systems and material handling equipment including, but not limited to, racks used in the operation of a distribution facility or a manufacturing facility and either used or not used to support a facility structure or part of it. To qualify for this exemption, the taxpayer shall notify the department before the first month it uses the exemption and shall invest at least thirty-five million dollars in real or personal property in this State over the five-year period beginning on the date provided by the taxpayer to the department in its notices. The taxpayer shall notify the department in writing that it has met the thirty-five million dollar investment requirement or, after the expiration of the five years, that it has not met the thirty-five million dollar investment requirement. The department may assess any tax due on material handling systems and material handling equipment purchased tax-free pursuant to this item but due the State as a result of the taxpayer's failure to meet the thirty-five million dollar investment requirement. The running of the periods of limitations for assessment of taxes provided in Section 12-54-85 is suspended for the time period beginning with notice to the department before the taxpayer uses the exemption and ending with notice to the department that the taxpayer either has met or has not met the thirty-five million dollar investment requirement.;

(52)    parts and supplies used by persons engaged in the business of repairing or reconditioning aircraft owned by or leased to the federal government or commercial air carriers. This exemption does not extend to tools and other equipment not attached to or that do not become a part of the aircraft.;

(53)    [Reserved]motor vehicle extended service contracts and motor vehicle extended warranty contracts.

(54)    [Reserved]clothing and other attire required for working in a Class 100 or better as defined in Federal Standard 209E clean room environment.

(55)    [Reserved]audiovisual masters made or used by a production company in making visual and audio images for first generation reproduction. For purposes of this item:

(a)    'Audiovisual master' means an audio or video film, tape, or disk, or another audio or video storage device from which all other copies are made.

(b)    'Production company' means a person or entity engaged in the business of making motion picture, television, or radio images for theatrical, commercial, advertising, or education purposes.;

(56)    Machines used in research and development. 'Machines' includes machines and parts of machines, attachments, and replacements which are used or manufactured for use on or in the operation of the machines, which are necessary to the operation of the machines, and which are customarily used in that way. 'Machines used in research and development' means machines used directly and primarily in research and development, in the experimental or laboratory sense, of new products, new uses for existing products, or improvement of existing products.;

(57)[Reserved](a)    sales taking place during a period beginning 12:01 a.m. on the first Friday in August and ending at twelve midnight the following Sunday of:

(i)        clothing;

(ii)    clothing accessories including, but not limited to, hats, scarves, hosiery, and handbags;

(iii)    footwear;

(iv)    school supplies including, but not limited to, pens, pencils, paper, binders, notebooks, books, bookbags, lunchboxes, and calculators;

(v)    computers, printers and printer supplies, and computer software.;

(b)    the exemption allowed by this item does not apply to:

(i)        sales of jewelry, cosmetics, eyewear, wallets, and watches;

(ii)    sales of furniture;

(iii)    a sale of an item placed on layaway or similar deferred payment and delivery plan however described;

(iv)    rental of clothing or footwear;

(v)    a sale or lease of an item for use in a trade or business.;

(c)    before July tenth of each year, the department shall publish and make available to the public and retailers a list of those articles qualifying for the exemption allowed by this item.;

(58)    [Reserved]cooperative direct mail promotional advertising materials delivered by means of interstate carrier, a mailing house, or a United States Post Office to residents of this State from locations both inside and outside the State. For purposes of this item, "cooperative direct mail promotional advertising materials" means discount coupons, advertising leaflets, and similar printed advertising, including any accompanying envelopes and labels which are distributed with promotional advertising materials of more than one business in a single package to potential customers, at no charge to the potential customer, of the businesses paying for the delivery of the material.

(59)    [Reserved]facilities for transmitting electricity that is transferred, sold, or exchanged by electrical utilities, municipalities, electric cooperatives, or political subdivisions to a limited liability company which is subject to regulation under the Federal Power Act (16 U.S.C. Section 791(a)) and which is formed to operate or to take functional control of electric transmission assets as defined in the Federal Power Act;

(60)    [Reserved]a lottery ticket sold pursuant to Chapter 150 of Title 59;

(61)    copies of or access to legislation or other informational documents provided to the general public or any other person by a legislative agency when a charge for these copies is made reflecting the agency's cost of the copies."

SECTION    10.    This act takes effect July 1, 2004.