Cigarette tax battle looms

COLUMBIA -- T.J. Brennan is the kind of guy who could help get South Carolina through its budget crisis.

A 26-year-old Charleston transplant from New Jersey, Brennan shrugged off the possibility of paying more for a pack of cigarettes to help the state provide basic government services, such as public education, through the deep economic downturn.

"I don't have a problem with that," he said, between drags outside Tommy Condon's Irish Pub and Seafood Restaurant on Church Street. "Hopefully, it will make me quit."

But pushing smokers to quit is precisely the rub. State legislators are considering the first cigarette tax increase in more than 30 years as a way to help fund government health care and free up tax dollars to be used for other purposes. It's not been an easy sell in this old tobacco state, in part because many legislators see it as an unstable revenue source that will decline over time as more smokers quit and fewer people pick up the habit.

Still, the House delivered a $5 billion budget to the Senate last week that includes a 30-cent increase in the cigarette tax, which at 7 cents is the lowest in the nation. The new budget begins July 1.

The Senate is expected to battle out the cigarette tax in the next couple of weeks. Before the senators now is a proposed 50-cent increase that is projected to raise $166 million.

Many legislators want to put the money from a cigarette tax increase into a savings account for a year, when the budget situation is expected to become much worse. The state will run out of about $1 billion in stimulus cash that will be used in the upcoming fiscal year to plug budget holes, as the controversial federal money has been used to do this year.

State Superintendent of Education Jim Rex, a Democrat who is running for governor, is trying to sell another plan. He wants the legislature to raise the tax to the national average of $1.34 a pack and put half of the nearly $445 million that it is estimated to raise toward government-run health insurance and half into public schools.

As it is now in the House's version of the budget, public schools will lose $100 million, bringing education cuts in the last two years to $850 million, Rex said. Classrooms have 1,400 fewer teachers this year than last, and more layoffs and unpaid leave would be on the way if the House's version of the budget is adopted, he said.

Public schools aren't the only government services being cut.

Projections show as many as 3,000 state workers across South Carolina could be laid off and thousands more forced to take unpaid time off work, which will result in fewer highway troopers, less law enforcement to watch people on probation and parole, and decreased oversight on air and water pollutants.

State spending is down about $2 billion in the last two years. The decline is a combination of falling tax revenues due to the sour economy and the legislature's decision to cut taxes.

Democrats in the House fought hard, but unsuccessfully, during the chamber's recent overnight session to bring in more tax dollars to preserve government programs, including by reversing some of the tax cuts. Rules in the Senate will likely block such debate in that chamber. Because of those rules, the Senate would have to pass a cigarette tax separate from the budget. Other legislation to complement the budget is a proposal that Senate President Pro Tem Glenn McConnell, R-Charleston, has pushed since 2007.

McConnell wants the state to put permanent spending caps into the state constitution to stop the legislature from big spending sprees in good budget years that lead to severe budget cuts. Spending caps would tie budgets to a 10-year average.

"It would put us on an orderly path and get us off the roller coaster," McConnell said.

In addition to the need to fund core government services, Sen. Paul Campbell, R-Goose Creek, said the Senate must keep an eye to the future. One way to do that is to follow the House's lead and put $7 million in the budget to fund Clemson University Restoration Institute's wind turbine testing facility at the old Navy base in North Charleston, Campbell said.

The testing facility is expected to employ about 20 scientists, but it is projected to create between 10,000 and 20,000 spin-off jobs.