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Taxes: School finance reform would cut local rate 5% – in first year

By Charles Swenson
Coastal Observer

Owners of commercial property and second homes in Georgetown County would see their taxes drop 5 percent in the first year of an education finance reform plan due to be introduced in the state legislature next month. Owner-occupied residential property is already exempt from taxes for school operations, and that won’t change under the plan.

“People oftentimes don’t understand how bad the property tax mess is,” said Bick Halligan, a Columbia attorney who helped draft the plan for the S.C Jobs, Education and Tax Act. It has the support of the state School Boards Association and the state Association of School Administrators.

State Sen. Ray Cleary of Murrells Inlet, who serves on the senate Education Committee, said he hadn’t seen the plan but understands the concerns.

“With the present formulas, there are a lot of inequities,” he said. “When you look at the Corridor of Shame, it doesn’t seem fair.”

The Corridor of Shame is the name given to rural counties along Interstate 95. School districts there are among those challenging the state’s education funding formulas in court. Halligan said a ruling from the state Supreme Court in those cases, which have dragged on for years, could give added impetus to the reform bill if the current funding system is ruled unconstitutional.

“People are concerned about what the courts are going to come up with,” Cleary said.

The reform bill proposes a uniform statewide tax rate to fund school operations. Rates now vary between 300 mills in Hampton County to 90 mills in Beaufort County. The rate in Georgetown County is 99 mills, which equals $99 for every $1,000 of assessed property value.

Under the proposal, the uniform tax rate would be 100 mills. But in the first year, Georgetown County’s rate would drop to 94 mills. It would then rise 1 mill a year until it reaches 100.

Districts would be allowed to add up to 8 mills.

State funding would also be uniform: $5,295 per student. It now varies from $7,802 in Fairfield County to $3,889 in Dillon County. “It means the state is accepting responsibility,” Halligan said.

No district would lose funds under the plan, Halligan said. To achieve that will require $611 million in state funds. No source is identified for those funds, but Halligan said they could be raised by eliminating some of the state’s numerous sales tax exemptions, which are worth $2.7 billion.

A state commission looked at those exemptions in 2010, Cleary noted. The largest exemptions are on prescription medicine and electricity, which he doesn’t believe the legislature will eliminate.

Halligan said those sectors that receive exemptions are likely to oppose the plan, if that’s how it’s funded. But he cited the example of car dealers, who benefit from a $300 cap on sales tax. If that were eliminated as part of education finance reform, he said, the dealers would receive an offsetting benefit from the reduced property. They would also benefit because buyers would be paying lower taxes.

The plan would also lower the tax rate for manufacturers from 10.5 percent of assessed value to 4 percent. In exchange, they would pay the uniform tax rate rather than received fee-in-lieu-of-taxes deals.

“I think our state needs to get some more uniform way of funding education,” School Board Chairman Jim Dumm said.

But he was disappointed that Act 388 won’t be addressed by the plan. The 2006 law replaced residential taxes with a sales tax for school operations, capped the rise in property values during reassessment cycles and limits the ability of local government to raise taxes.

“We understood clearly, from a political standpoint, if you tax homes, it’s going to be dead,” Halligan said. “Politically, everybody wants to keep their benefits and pay no additional costs. That’s understandable.”

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