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Sponsors: Reps. G.R. Smith, Harrell, Merrill, Bedingfield, Haley, Bingham, Bowen, Cato, Duncan, Edge, Hamilton, Harrison, Haskins, Lowe, G.M. Smith, J.R. Smith, W.D. Smith, Stewart, Loftis, Toole and Sandifer
Document Path: l:\council\bills\bbm\9777htc07.doc
Introduced in the House on March 1, 2007
Currently residing in the House Committee on Ways and Means
Summary: Local Government Fiscal Accountability and Fairness Act
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number ------------------------------------------------------------------------------- 3/1/2007 House Introduced and read first time HJ-12 3/1/2007 House Referred to Committee on Ways and Means HJ-12 3/6/2007 House Member(s) request name added as sponsor: Loftis 3/7/2007 House Member(s) request name removed as sponsor: Gambrell 3/28/2007 House Member(s) request name removed as sponsor: Littlejohn, Talley 4/11/2007 House Member(s) request name removed as sponsor: Shoopman 4/25/2007 House Member(s) request name added as sponsor: Hagood 5/2/2007 House Member(s) request name added as sponsor: Toole 5/31/2007 House Member(s) request name removed as sponsor: Hagood 6/6/2007 House Member(s) request name added as sponsor: Sandifer 1/16/2008 House Member(s) request name added as sponsor: Mahaffey 2/5/2008 House Member(s) request name removed as sponsor: Mahaffey
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VERSIONS OF THIS BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, SO AS TO ENACT THE "LOCAL GOVERNMENT FISCAL ACCOUNTABILITY AND FAIRNESS ACT" BY ADDING SECTION 6-1-317 IMPOSING A LIMIT ON ANNUAL SPENDING INCREASES FOR OPERATING PURPOSES FOR POLITICAL SUBDIVISIONS AND SCHOOL DISTRICTS EQUAL TO ANNUAL INCREASES IN THE CONSUMER PRICE INDEX AND THE JURISDICTION'S POPULATION AND TO PROVIDE EXCEPTIONS; AND TO AMEND SECTIONS 11-11-155 AND 11-11-156, RELATING TO THE HOMESTEAD EXEMPTION FUND AND REIMBURSEMENTS TO SCHOOL DISTRICTS THEREFROM, SO AS TO ROLLBACK BY ONE YEAR THE BASE YEAR FOR PURPOSES OF A PORTION OF THESE REIMBURSEMENTS AND TO MAKE OTHER TECHNICAL AND CLARIFYING AMENDMENTS WITH RESPECT TO THESE REIMBURSEMENTS, THEIR SCHEDULE OF PAYMENT, AND THE OPERATION OF THE TAX CREDIT FOR COUNTY OPERATING MILLAGE IF ANY UNEXPENDED BALANCE REMAINS IN THE HOMESTEAD EXEMPTION FUND.
Whereas, the last three decades, South Carolina state and local governments have grown faster than revenues, and annual government growth also has outpaced the per capital growth; and
Whereas, despite the good intentions of state lawmakers who cut property taxes in 1995, local governments, including counties, municipalities, and school districts, have perpetually increased fees and property tax millage rates and have adopted local option sales taxes, all of which have increased the burden placed on taxpayers and business by local government; and
Whereas, during the 2006 legislation session, in response to the demand for property tax relief by the people of South Carolina, the General Assembly courageously acted by enacting meaningful property tax cuts; and
Whereas, at least twenty school districts and several municipal and county governments across the State have attempted to circumvent the tax relief provided by the General Assembly in 2006 by artificially increasing millage rates and thus taxes to offset the anticipated reduction in taxes; and
Whereas, the General Assembly must now act to ensure fiscal accountability, responsibility, and fairness at the local government level. Now, therefore,
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. This act may be cited as the "Local Government Fiscal Accountability and Fairness Act".
SECTION 2. Article 3, Chapter 1, Title 6 of the 1976 Code is amended by adding:
"Section 6-1-317. (A) Notwithstanding any other provision of law, a political subdivision and a school district may increase the amount of total expenditures made for all operating purposes above the amount expended for all these purposes for the preceding fiscal year only to the extent of the increase in the average of the twelve monthly consumer price indices for the most recent twelve-month period consisting of January through December of the preceding calendar year, plus the percentage increase in the previous year in the population of the political subdivision or school district, as determined by the Office of Research and Statistics of the State Budget and Control Board.
(B) Notwithstanding the limitation upon expenditure increases pursuant to subsection (A), the expenditure limit may be suspended and the amount of total expenditures may be increased upon a two-thirds vote of the entire membership of the political subdivision or school district governing body only if a state of emergency has been declared by the Governor in all or part of an area that is included within the boundaries of the political subdivision or school district. If the expenditure limit is suspended and expenditures are increased pursuant to this section, the suspension and increase may remain in effect only for the duration of the declared state of emergency. Upon the termination of a state of emergency, the expenditure limitation again applies and the amount of the total allowable expenditures must be reduced to the limit in existence at the time the state of emergency was declared.
(C) If the operation of the limit on millage increases provided pursuant to Section 6-1-320 has the effect of providing a limit on expenditures lower than the limit imposed by this section, then the lower limit applies."
SECTION 3. Section 11-11-155(B) and (C) of the 1976 Code, as added by Act 388 of 2006, is amended to read:
"(B) An amount equal to the total reimbursements paid pursuant to the provisions of Section 12-37-251 in fiscal year 2006-2007 and the school operating millage portion of the reimbursements paid pursuant to Section 12-37-270 in fiscal year
2006-2007 2005-2006 also must be credited to the Homestead Exemption Fund. Revenue deposited in the Homestead Exemption Fund each year in an amount equal to the total reimbursements paid pursuant to the provisions of Section 12-37-251 in fiscal year 2006-2007, the school operating portion of the reimbursement paid pursuant to Section 12-37-270 in fiscal year 2006-2007 shall 2005-2006 must be used together with the revenues from the additional sales and use tax imposed pursuant to Section 12-36-1110 to provide reimbursements to school districts in the manner required by law.
(C) Subject to the provisions of Section 11-11-156(C), an unexpended balance in the Homestead Exemption Fund at the end of a fiscal year must remain in the Homestead Exemption Fund."
SECTION 4. Section 11-11-156 of the 1976 Code, as added by Act 388 of 2006, is amended to read:
"Section 11-11-156. (A)(1) Beginning with fiscal year 2007-2008, school districts of this State must be reimbursed from the Homestead Exemption Fund in the manner provided in this subsection.
The Comptroller General shall pay these reimbursements upon application of the school district and the reimbursements The reimbursement due a school district for fiscal year 2007-2008 and thereafter shall be equal to the amount estimated to be collected or reimbursed in fiscal year 2007-2008 by the district from school operating millage imposed on owner-occupied residential property therein consists of three tiers. The tier one reimbursement is an amount equal to the amount received by the district pursuant to the provisions of Section 12-37-251 as those provisions applied for fiscal year 2006-2007. The tier one reimbursement is fixed at the fiscal year 2006-2007 amount and continues into succeeding fiscal years at this fixed amount. The tier two reimbursement is the amount to be received by the district pursuant to the provisions of Section 12-37-270 for fiscal year 2005-2006 for the school operating millage portion of the reimbursement for the homestead exemption allowed pursuant to Section 12-37-250. The tier two reimbursement is fixed at this fiscal year 2005-2006 amount and continues into succeeding fiscal years at this fixed amount. The tier three reimbursement is derived from the revenue of the tax imposed pursuant to Article 11, Chapter 36 of Title 12, and for fiscal year 2007-2008, consists of an amount equal dollar for dollar to the revenue that would have been collected by the district from property tax for school operating purposes imposed by the district on owner-occupied residential property for fiscal year 2005-2006 as if no reimbursed exemptions applied and using the operating millage imposed by or on behalf of the district for fiscal year 2005-2006, reduced by the total of the district's tier one and tier two reimbursements.
(2) Beginning in fiscal year
2008-2009 2007-2008 a school district shall receive in reimbursements the total of what it received in fiscal year 2007-2008 tier one and tier two reimbursements as provided in item (1) of this subsection plus the tier three reimbursement increases provided for in item (3). The tier three reimbursement increases of the several school districts as provided in item (3) for any year shall must be aggregated and the reimbursement increase a particular school district shall receive for that year shall must be equal to an amount that is the school district's proportionate share of such funds based on the district's weighted pupil units as a percentage of statewide weighted pupil units as determined annually pursuant to the Education Finance Act. For purposes of the reimbursement increases school districts receive under this subsection based on weighted pupil units determined pursuant to the Education Finance Act, an additional add-on weighting for students in poverty of 0.20 shall must be included in the weightings provided in Section 59-20-40(1)(c) of the 1976 Code. The weighting for poverty shall provide additional revenues for students in kindergarten through grade twelve who qualify for Medicaid or who qualify for reduced or free lunches, or both. Revenues generated by this weighting must be used by districts and schools to provide services and research-based strategies for addressing academic or health needs of these students to ensure their future academic success, to provide summer school, reduced class size, after school programs, extended day, instructional materials, or any other research-based educational strategy to improve student academic performance.
(3) Beginning with the fiscal year
2008-2009 2007-2008 reimbursements, these tier three reimbursements must be increased on an annual basis by an inflation factor equal to the percentage increase in the previous year of the Consumer Price Index, Southeast Region, as published by the United States Department of Labor, Bureau of Labor Statistics plus the percentage increase in the previous year in the population of the State as determined by the Office of Research and Statistics of the State Budget and Control Board. Distribution of these reimbursement increases shall must be as provided in this subsection.
(4) The percentage of population growth in any year for any school district entitled to reimbursements from the Homestead Exemption Fund
shall must be based on estimates for such growth in the county wherein the school district is located as determined by the Office of Research and Statistics of the State Budget and Control Board. Where the school district encompasses areas in more than one county, the population growth in that entity shall must be the average of the growth in each county weighted to reflect the existing population of the school district in that county as compared to the existing population of the school district as a whole.
Upon the beginning of reimbursements for a particular year, the reimbursements must be paid to a school district on or after January first of that year. (a) No later than December thirty-first of each year, the Office of Research and Statistics of the State Budget and Control Board shall provide each school district with a preliminary estimate of the district's reimbursements from the Homestead Exemption Fund for the fiscal year beginning the following July first. A final estimate must be provided to each district by February fifteenth. The February fifteenth forecast may be adjusted if the Office of Research and Statistics determines that changing conditions have affected the forecast.
(b) The Department of Revenue shall pay the reimbursements provided pursuant to this subsection to the county treasurer for the credit of each school district in the county. The reimbursement must be paid on the application of the county treasurer according to the following schedule:
(i) ninety percent of the tier one reimbursement must be paid in the last quarter of the calendar year no later than December first. The balance of the tier one reimbursement must be paid in the last quarter of the fiscal year that ends June thirtieth following the first tier one reimbursement date;
(ii) tier two reimbursements must be paid on the same schedule as the second tier one reimbursement;
(iii) tier three reimbursements must be paid in nine equal monthly installments based on one-tenth of the Office of Research and Statistics estimate, beginning not later than October fifteenth. A final adjustment balance payment must be made before the closing of the state's books for the fiscal year.
(6) To the extent revenues in the Homestead Exemption Fund are insufficient to pay all reimbursements to a school district required by this subsection (A) and subsection (B), the difference must be paid from the state general fund.
(7) Operating millage levied in a county for alternative schools, career and technology centers, and county boards of education whether or not levied countywide or on a school district by school district basis in a county also is considered school operating millage to which the reimbursements provided for in this section apply.
(8) Reimbursements to a school district under this subsection
shall must be considered in the computation of the required Education Improvement Act maintenance of local effort.
(B)(1) After the required reimbursements to school districts in a county have been made from the Homestead Exemption Fund for any year pursuant to subsection (A), a county, if the districts
therein in that county have not together received a total of at least two million five hundred thousand dollars in tier three reimbursements, the county must receive an additional disbursement from the Homestead Exemption Fund to bring the total reimbursements to the districts in that county to at least two million five hundred thousand dollars. This additional disbursement shall must be paid to the county for disbursement to the school districts located within that county. These distributions under this subsection to any district in the county shall must be equal to the one hundred thirty-five day average daily membership of the district divided by the total average daily membership of all students in the districts in the county times the required amount of funds to bring the total reimbursements to the school districts in that county to at least two million five hundred thousand dollars.
(2) If a school district encompasses more than one county, the one hundred thirty-five day average daily membership of the students from that county attending schools of the district must be used to compute the distributions required by this subsection.
(3) The distributions to a county and then to a school district under this subsection
shall must be considered to be outside of the Education Finance Act and shall must not be considered when computing the maintenance of local effort required of that district under the Education Improvement Act.
The When determined, any balance in the Homestead Exemption Fund remaining at the end of a fiscal year after the payments to school districts and counties pursuant to subsections (A) and (B) of this section must be segregated within the Homestead Exemption Trust Fund and remitted in the next fiscal year to counties in the proportion that the population of the county is to the total population of the State. Population data must be as determined in the decennial United States Census and the most recent update to that data as determined by the Office of Research and Statistics of the State Budget and Control Board. Revenues received by the county must be used to provide a property tax credit against the property tax liability for county operations on owner-occupied residential property classified for property tax purposes pursuant to Section 12-43-220(c). The credit is an amount determined by dividing the total estimated revenues credited to the county during the applicable fiscal year by the number of parcels in the county eligible for the credit. Credit that exceeds the tax due on a parcel must be reallocated in a uniform amount to remaining parcels with a property tax liability for county operations. The distributions under this subsection are not an obligation of the state general fund if sufficient funds are not available to make such distributions from the Homestead Exemption Fund.
(D) Notwithstanding any other provision of this section, the reimbursements provided pursuant to this section for the property tax exemption allowed by Section 12-37-220(B)(47) must include full payment to each taxing entity for the incremental property tax that, in the absence of such exemption, would otherwise be payable to such taxing entity with respect to owner-occupied residential real property located in a redevelopment project area pursuant to the tax increment financing law for cities, counties, or redevelopment authorities. Such payment for incremental property taxes shall be calculated in accordance with the applicable tax increment financing law and shall be based on the assessed value of, and the school operating millage rate otherwise applicable to, the owner-occupied residential property in question."
SECTION 5. If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 6. This act takes effect upon approval by the Governor except that the provisions of Section 6-1-317 of the 1976 Code, as added by this act, first apply for expenditures made for fiscal year 2008-2009.
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