Three Things to Know: June 23

This week's information compiled by your SC Chamber team includes: 
Deep Dive - FY2023-24 State Budget, U.S. House Republicans Propose American Families and Jobs Act, Palmetto Business Barometer Check-In

 1. Deep Dive - FY2023-24 State Budget

South Carolina’s $13.8 billion FY2023-24 budget will go into effect on July 1^st following Governor Henry McMaster’s announcement this week that he was only vetoing 11 items totaling $1.5 million from the package approved by the General Assembly last week. The 11 vetoes are likely the lowest in over two decades, which Governor McMaster attributed to strong “communication, collaboration and cooperation” between his office and legislative leadership throughout the budget writing process. For perspective, the Governor vetoed 73 items totaling $52.6 million in 2022 and 226 items totaling $152 million in 2021.

Shortly after the Governor’s veto announcement, House and Senate leadership announced that they would not return to Columbia to handle the vetoes issued by the Governor until they return to statewide session in January, and that they are now adjourned sine die.

The FY2023-24 budget includes significant investments in the state’s economy, workforce development programs, higher education, teacher pay increases, resiliency efforts, state employee salaries, and state-owned infrastructure. A breakdown of significant items included in the final budget is below.

Economy:

• $180 million for the state’s Capital Reserve Fund
• $139 million for the state’s General Reserve Fund
• $96.2 million to fund the first phased-in reduction of the individual income tax rate from 6.5% to 6.4%

Economic Development

• $1.29 billion for infrastructure improvements related to the Scout Motors project per H.3604
• $55 million to the Dept. of Commerce to upgrade infrastructure at the South Carolina Technology and Aviation Center (SCTAC) leased by Lockheed Martin
• $40 million to the Dept. of Agriculture for a Growing Agribusiness Fund
• $3.7 million to the Dept. of Commerce for its Deal Closing Fund

Environment

• $200 million to the Office of Resilience for a Disaster Relief and Resilience Reserve Fund
• $6 million to the Dept. of Health and Environmental Control (DHEC) for permitting efforts
• $1 million to DHEC for the state’s air quality program

Higher Education

• $540 million in one-time funds to the state’s four and two-year institutions of higher learning for construction and maintenance projects, and $172 million for recurring expenses and to freeze tuition
• $103 million to Clemson University for the construction of a veterinary school
• $7 million to the University of South Carolina for STEM related programs

K-12 Education

• $323 million to increase starting teacher pay by $2,500 to $42,500 and to increase the salary schedule by $2,500 per step
• $120 million to the Dept. of Education for capital improvements in schools of need

State Government

• $155 million for a $2,500 pay raise for state employees making under $50,000, and a 5% pay raise for employees making over $50,000

Workforce Development

• $93.7 million in technical college scholarships for critical-needs jobs through the SC Workforce Industry Needs Scholarship Program (SCWINS)
• $8 million for internship programs at USC and Clemson to connect students and employers
• $7.4 million to the Dept. of Employment and Workforce (DEW) to implement the Statewide Education and Workforce Development Act (H.3726)
• $3.5 million to the South Carolina Technical College System to establish a grant program to incentivize small businesses in South Carolina to hire youth apprentices
• $500,000 in recurring operational funds to DEW for the Be Pro Be Proud program

2. U.S. House Republicans Propose American Families and Jobs Act

The American Families and Jobs Act was recently proposed by House Republicans, which consists of a package of three tax bills that would temporarily extend certain business provisions from the Trump-era Tax Cuts and Jobs Act and incentivize greater investment in small businesses. The proposal aims to extend provisions like interest deductibility, the immediate deduction for R&D, and 100 percent expensing of equipment, machinery, and vehicles through 2025. Due to the temporary nature of the policies, they would likely not result in long-run growth. However, the Tax Foundation predicts the policies would promote growth and lift economic output by roughly 0.15 percent in 2024 and 2025.

House Ways and Means Committee Chair Jason Smith (R-MO) claims the package will “…provide relief for working families, strengthen small businesses, grow jobs, and protect American innovation and competitiveness.” One of the bills, the Tax Cuts for Working Families Act which would provide a new $4,000 Guaranteed Deduction Bonus for the next two years, recently advanced out of the Ways and Means Committee.

When it comes to long-term tax policy, many lawmakers have their eyes set on the outcomes of the 2024 election. Many of the policies in the Tax Cuts and Jobs Act are set to expire in 2025, after which Congress will most likely be forced to act on the future of those tax breaks. If either party can gain unilateral control of the White House and both chambers of Congress, they will have an unchecked ability to reshape tax policy for years to come. As for any tax proposals being discussed before the elections, Senator Rand Paul (R-KY) said, “Anything at this point would be a wish list. Because it depends on what happens in 2024.” Congress can pass tax policy with only a simple majority, which raises the stakes of every upcoming congressional campaign by acknowledging that one or two seats could make a huge difference. “It will be a campaign issue,” stated Senator Mike Crapo (R-ID). He elaborated by adding, “Democrats will claim that [TCJA] just help rich tax cheats[,] and the Republicans will say that bill gave us the strongest economy.

Even with the 2024 election well over a year away, members on both sides of the aisle are already thinking about broad goals for tax policy reform when Congress does decide to act.

3. Palmetto Business Barometer Check-In

In January, the SC Chamber and the S.C. Department of Employment and Workforce teamed up to launch the Palmetto Business Barometer, a voluntary monthly survey to better understand the conditions that South Carolina employers are facing and inform the public about the state’s economy and workforce. The survey measures conditions and attitudes over time with an emphasis on workforce behaviors. Each month, a survey is released for two weeks for business leaders and owners to complete anonymously. After two weeks, the survey closes, and experts convert the data into graphs and charts. Six months of surveys are now complete, and the seventh survey will open on July 3^rd.

With increased survey participation, patterns, and trends are beginning to be formed and identified. For example, in January 2023, 45 percent of businesses said that none of their workforce was engaging in remote work remotely; however, in May 2023, 66 percent of businesses said that none of their workforce is engaging in remote work. Over time, more businesses also self-disclosed they anticipate it will be more difficult to find qualified workers in six months – in January 35 percent said it would be, and in May 42 percent it would be. View the data from the past six months and track the trends on our result dashboard here.

As we continue through the 12-month survey process, South Carolina businesses of all sizes and industries are encouraged to participate in the survey. The survey is anonymous and takes an average of three minutes to complete. Access the Palmetto Business Barometer survey here. For more information, please reach out to communications@dew.sc.gov and info@scchamber.net.