Thursday, January 03, 2013

SC Legislature 2013 outlook

I'll be updating this post throughout the day from the S.C. Press Association's annual legislative update. It's in the form of notes, so some of it may be a tad disjointed. This is not a running transcript, so I will be leaving out some of the less-relevant comments,

Les Boles, state budget director

(State budget details)

State is a little bit ahead of initial revenue projections. Growth went from 4.2% to 4/% = 47.1 million surplus in FY12 available for FY13.

General fund for FY13 is $6.3 billion, or 2.7% growth. (Growth is slowing, from 4.7% in FY13, 5.2% FY12, 6.4% FY11)

Will take $50.9 million to get back to full local government funding - Legislature must decide on that.

Medicaid growth estimated at $142 million.

Total recurring revenue $263 million + $47 million surplus = $310 million new recurring and nonrecurring revenue.

When various funding issues taken into account, the state is $182 million short. (Medicaid being $142 million of that.)

Some additional revenue: $80 million from tobacco settlement, $112.6 million from capital reserve fund, $16 million in Education Improvement Act. But lottery projected to be $30.6 million in the hole.

Budget Panel 
Senators: Harvey Peeler (R-majority leader), Thomas Alexander  (R-chairman Labor, Commerce and Industry), Yancey McGill (D), Kevin Bryant (R- chairman cybersecurity subcommittee) - all are members of the Finance Committee.

Reps: Brian White (R-Chairman House Ways and Means), Gilda Cobb-Hunter (D), Rita Allison (R-chairwoman sales/income tax subcommittee), Murrell Smith (R-chairman health care finance subcommittee), Harry Ott (D - minority leader), Bruce Bannister (R-majority leader).

Discussion begins with review of what is happening with SC Revenue Department data breach that in which hackers stole the private tax information of millions of South Caroilinians.
- South Carolina was apparently a target because of the lack of security it should have had.
- Could have had a temporary password, key fob system and could have segmented access to database instead of allowing everyone access to the whole thing.
The committee is probably going to approve some type of credit ID protection beyond the initial year. Experian has said it can extend the current protection for $10 million a year. but this seems expensive

We get to the bottom of what it seems happened and then we find more.

Doing many of the same things inHouse as Bryant's committee in Senate. We're going to spend a lot of time looking across all agencies nd what they should be doing.

We apparently haven't been doing basic education of workforce. You should know not to open suspicious email with attachments.

In too many cases, no one is monitoring the network. Important to have common protocols for security. Finally, need to look at how we respond to a breach - need a centralized protocol. Revenue knew there was a "bad" email and took that computer off line, but then no one monitored the network.

Need to stop "knee-jerk" reaction to latest headlines. Need to look at what already is in place. State already has a budget proviso creating a technology committee - need to look at how that' working. Also need to look at State Information Office under the Budget and Control Board. We should not allow agencies to maintain their own security; it should all be under that office.

No one has stepped up and accepted the overall responsibility. "I'm still waiting on a full explanation on how we got intuit he mess." No one's told us what the protocol was to deal with bad emails. Until we know that, we are still vulnerable.

Key panel members say they don't have total costs estimates yet. Butt Cobb-Hunter says she's still nagged by the fact the deal with Experian was a no-bid contract (Gov. Nikki Haley's administration has said it was an emergency). Thinks at least some of the services being provided already were available for free under the Dodd-Frank Act.

Doesn't see this as more likely the Legislature will give governor more power by creating a Department of Administration. Says Haley and her predecessor, Republican Gov. Mark Sanford, haven't well-used the powers they already have.

We need a Department of Administration - governor should administer and Legislature should legislature - the separation needs to be made in this state. Says Y2K never happened though millions were spent on it.

Says Peeler is trying to distract attention with Y2K, but Y2K never happened, while the Revenue Department hacking did.
"You all can stick your head in the sand all you want to, but it happened and South Carolinians are angry about it."

I expect every agency will come forward asking for money for cyber security and we should pay what is needed, but the control needs to be centralized.

This wasn't difficult to do - took a skill level of about 4 out of 10. But the problem is that once we knew we had a bad email, we didn't know what to do. It wouldn't have taken millions of dollars. "This wasn't some high-tech breach. This was a low-tech breach because we didn't have a security policy in place, and that clearly falls on the executive."

"We're dealing with a very confused public that has no idea what is going on" and most of the General Assembly has no idea either. Could have happened in any administration.

We don't know yet what it will cost to protect the entire state, but we'll have to pay it.

Other budget matters

"One of the most vexing issues" this session.
Opting in or out of Medicaid expansion under Affordable Care Act (Obamacare) will be one of the most lively debates this session. There are other health care issues we have to deal wit as well.
We must fund Medicaid with recurring revenue. Over half of the increase in revenue we have this year is going to be needed for ACA. Expects 160,000 people trying to enroll in Medicaid this current year. Expects many employers to pay the $2,000 fine because it will be cheaper than buying employee health insurance.
In addition, there will be added costs for state employee health insurance.

Even without Medicaid expansion, projected to need $166 million more this year, $256 million more next year and $471 million after that.

Health and Human Services Director Tony Keck said it will take $190 million to cover existing Medicaid enrollment, while Haley budgeted $150 million. Says Keck's figure is "wishful thinking" and Haley is  "not accepting reality."
Not accepting Medicaid expansion will kill many rural hospitals as they have to deal with people who dont. And we will put every hospital at some risk

It's an economic development issue. How long will companies look on SC favorably if there is a large portion of the population uninsured and unearthly?
Need to deal in reality, not rhetoric.

Responding to Ott: Abut 17% of SC residents now uninsured. Even if that increases under ACA, there will be health insurance exchanges that will help cover the uninsured.

There is no reduction through 2016 in what hospitals will be paid to treat uninsured. He expects stare's uninsured could drop to 5%, so he says that will mean more money for hospitals treating uninsured, at least through 2016.

We are not meeting the health care needs of this state and are unlikely to. Hospitals writing him saying the impact will be disastrous. If we don't opt in and the hospitals lose about $400 million in "disproportionate share" money for treating uninsured, many rural hospitals will close. Sate has three years to make a decision, but "to say absolutely no today is not making the right decision."

The federal government is broke. "I don't have a whole lot of confidence in the federal government" providing the payments. We are expanding Medicaid, but not willing to do the "cash grab" of the next three years under ACA. The problems of rural hospitals are not new; taken long time to develop. We need to figure out how we take care of our state without the extra federal money that the feds are going to have to borrow anyhow.

We have a lot of good programs already we need to look at and optimize.

Feels better after hearing the panel today. The concern is to make sure the figures being thrown out are accurate.

Education (and highways)
There are winners and losers in the funding plan put forth by education groups in the state. It would take $500 million to $600 million to meet education funding that would "hold harmless" ( This includes the plan put forth by the education groups that would set a uniform statewide property tax rate to support schools of 100 mills.

We would get the greatest benefit if we funded early childhood education, especially for 4-year-olds. There area always going to be winners and losers when distributing tax money. We have to give students in "pockets of poverty" the same opportunity as those in "pockets of wealth." We must have equalized state funding.

Stop diverting limited money to private schools.

"I think what I'm hearing from my socialist colleagues on this panel is that the Legislature knows the educational needs of the entire state" better than parents. Competition is essential for improvement in education throughout this state. …

"Who's a socialist?"

Infrastructure funding also has to be thrown into this mix.

About finding formulas: Formulas work in chemistry but seldom in government. I think the budget tug of war this year will be between Medicaid funding and road and infrastructure funding.

Continues the push to fund controversial Interstate 73. Says it will help much more than Horry County. Says other areas have had their share of major state funding, such as the Ravenel Bridge in Charleston.

864 and 803 (Upstate and Midlands area codes) make it, 843 (coastal areas) spends it. Says the Upstate has to get money to repair I-26 and I-85.

Agrees with Peeler, but says public does not trust us to spend the money properly. We have to take care of our existing needs.

House legislative agenda
Republicans: Speaker Bobby Harrell, Majority Leader Bruce Bannister, Reps Murrell Smith and Brian White.
Democrats: Minority Leder Harry Ott and Reps Joe Neal, Chandra Dillard and Mandy Powers Norrell.

Columbia is less partisan than you might think.
Takes a moment tot praise AP Statehouse reporter Jim Davenport, who died on New Year's Eve.

"So many major reforms pass the House and die a slow, painful death in the Senate."

GOP agenda:
- Election changes: Change the way candidates file and qualify for the ballot after many were knocked off last year.- State data security: Address what changes need to be made after the Revenue Department hack.
- Update ethics laws
- Oppose Obamacare: Oppose Medicaid expansion
- Tax changes: flatten person income tax rates, eliminate outdated sales tax exemptions, reduce tax assessments on manufacturers from 10% to 6%. Bannister says that will bring SC in line with rest of country
- Grow economy with various changes: Regulatory changes, more capital for small business, better skills training.
- Government restructuring: Make government operate more like a business.

Democratic agenda:
Ott also praises Davenport and thanks him for always getting the minority's view.

- Election changes, especially early voting.
- State data security:
- Education; Ott - "Amazingly I didn't hear anything on the Republican side about education" We continue to believe public schools and early childhood education are key.
- Health care/Medicaid expansion: Expand Medicaid to insure 300,000 more people and protect rural hospitals from what Democrats believe will be financial disaster if not done.
- State employees health insurance: If the state Supreme Court does not overrule the Budget and Control Board's decision to make state workers pay part of the premium, introduce legislation to overturn that and restore original legislative intent to have state pay all of the premium increase.

Neal says as many as 450,000 SC residents could qualify for Medicaid expansion under Affordable Care Act.. Says Legislature should stop wasting time fighting ACA.

- Dillard says want to focus on cleaning up the language so it is clear how you file as a candidate and so there is equity between incumbents and challengers.
- Bannister says early voting is not part of GOP agenda, but will look at it.
- Ott: "We do not understand the Republican resistance to early voting." What better way to get more participation?
- Bannister: It's not that we oppose people going to the polls early, but the proposals so far (such as a six-week window) overreach. "We believe Election Day is Election Day and you should go to the polls."
- Ott: Let's make a deal right now.How about two weeks?
- Bannister: That;'s what's effectively on the books now. We'll look at it.
On the paperwork debacle of last year - we want to clarify so it's clear how you file. And the plan is to make it consistent so that incumbents and challengers have same rules. Dillard agrees. (In 2012, incumbents did not have to file their statements of interest at the same time they filed their candidacy paperwork, while challengers did.)
- Ott: The focus should be on making it easier for people to stay on the ballot, not kick them off.

Tax changes:
- Smith: Some of ht seam proposals as last year, such as reducing the manufacturing assessment. Not sure whether it will cost the state money - haven't gotten to details.
- Ott: We've heard lots of talk about lots of revenue needs, so I hope that as these changes decrease the revenue coming in, the GOP will propose proportionate cuts "so everyone knows" the impact.

- Smith: Education always a GOP priority. You can find duplication in services in the state and like a business save money by eliminating those.

- Norrell: Government has a duty to make life easier for people. As a freshmen, spending $12 million for credit monitoring sounds like a lot of money. SC could have passed a law allowing residents to check their credit reports more than once a year. It did not. Federal law also limits people's liability to $50 for a fraudulent charge. She is a bankruptcy lawyer and says the state is wasting that money. "I think we are doing a citizens a disservice by telling them we are protecting them."  Could better spend the money giving people detailed help about what to do if their identity is compromised  (cites Illinois attorney general's program.)

Afternoon roundtable
Senators: (GOP) Larry Martin (chairman, Judiciary Committee), Wes Hayes (chairman, Banking and Insurance; member of Ethics),  Shane Massey. (Dem.) Vincent Sheheen.

Reps: (GOP)  Murrell Smith, Bill Taylor, Rita Allison, Dehram Cole. (Dem.) James Smith (chairing House ethics study committee), Chandra Dillard (Democratic caucus ethics study committee),

Just considered S2 today to make many of the election filing changes, but working on amendment to eliminate a "gotcha" moment where you are off the ballot for some technical error. There would be an opportunity to correct such errors.This will be the No. 1 bill on the Senate Judiciary Committee agenda this coming Tuesday.

Key to ethics changes will be having the investigation of legislators done by an outside body but leaving enforcement to the House and Senate so you don't have to change the state Constitution.

James Smith:
Agrees with Hayes on the ultimate jurisdiction issue. It's a two-year process if we are going to make changes to the State Ethics Commission, but the question is what to do in the interim. Answer may be in working with with the public integrity unit the attorney general has formed. We wanted to have a bill out by session start, but now want to wait to see what governor's ethics committee also recommends.

We need work on following the money as well, especially some of these now-secret groups funding ads for and against candidates. (Hayes later agrees that the Legislature needs to come up with a definition of "committee" that meets constitutional muster so the law can force disclosure.)

We need to distinguish between a technical violation and criminal violations. It's not fox guarding henhouse for Legislature's ethics committees to police their own because solicitors already are the ones that have to press criminal cases.The legislative committees need to pay attention to the small things, however, because those small things can turn into big things.

One-party rule is a major structural problem in the state - Republican or Democrat. That's when you see corruption. But it also start with ethical and honest people being elected - and SC voters often haven't done that. (Takes shots at Republican Gov. Nikki Haley, who beat him in 2010, for taking gifts, as well as former GOP Lt. Gov. Ken Ard who stepped down for campaign finance violations.)

We also need to take a look at full disclosure of income by elected officials.

Challenges Republicans to abolish political action committees run by legislative leaders (that support other legislators' campaigns).

Murrell Smith:
Has concerns about eliminating those. Not sure it can be done by ethics rule but might require a law change.

Money buys influence. So "leadership PACs" are an issue.

Freedom of Information Act
This year's version of the bill adds the ability to go to Magistrate's Court (don't even need lawyer) for some relief. The FOIA as it is now "is pretty unenforceable."

Expects the bill to pass the House again this year (it stalled in the Senate last year). But there needs to be a "happy medium" of openness versus need for some privacy. But there are cases where the general public also abuses the law.

There are pesky citizens, yes, and that's wrong, too. But if you listen to most government officials, most FOI requests are pretty reasonable. And not only can a reporter or citizen go to the magistrate, so can the school board, etc., and can ask that the request be thrown out.
Lat year's bill was amended to remove the legislative exemption (there was concern it would expose constituents' communications). That was introduced by Rep. (Rick) Quinn, and I have encouraged that if he wants to do it again to do it as a separate bill.

James Smith:
Haley has not lived up to her bumper sticker slogans for more open government - used private funds for government business, deleted private emails, etc. So the bill has to include provisions to keep officials from trying to get around public scrutiny by using private accounts and it must be clear that records must be kept. Would also like to see provisions to ensure open Cabinet meetings.

Thinks Legislature should play by the same rules as the rest of state government. (References the thousands of pages of emails he printed out as gubernatorial candidate.)

FOI bill originated in my subcommittee last year and we heard some "atrocious stories of stonewalling" for public records. In these days of electronic records, it should not be hard to get public records.

(Question about making clear autopsy reports are public after a court ruling they are not. No legislators said that as on the agenda.)

Government restructuring
Massey and I have co-sponsored a bill again this year to overhaul the State Budget and Control Board and government oversight. We also need to get rid of some state elected officials - he mentions secretary of state and comptroller general. But after years of fighting this battle, he concludes we need a state constitutional convention to do a complete overhaul and avoid the attempts at piecemeal change. State government is "at a low point."

Thinks there is a "very good shot" this year at getting some of these changes passed. But regular oversight by legislative committees also means legislators' workload will increase.

James Smith:
The problems at the Revenue Department show the problems. Tying to get information after the department's computers were hacked "was like pulling teeth." Nothing compels them to respond to us. We also need a biennial budget and one that focuses in programs, not agencies.

It will take a groundswell of voters to get it done.I was on restructuring committee two years ago and all that resulted in was "a shuffling of chairs." It was "the culture of the Legislature" that prevented progress.

State education superintendent should be appointed, not elected.

It's become a competitive issue when SC is compared with other states.

The most important part of this bill is establishing legislative oversight. Right now, SC is "government on autopilot" - governor does not have the authority and Legislature is not set up to do oversight.
Says Kentucky is a good example of a programmatic budget. And federal government is a good example of holding oversight hearings.

(Session ends 2:30 p.m.)

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