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How Horry County Schools lost $73 million in eight years

The Horry County School District has lost over $73 million in property taxes between 2008 and 2015, even as population growth and unfunded state mandates increase operating costs.

Act 388, passed by the state legislature in 2006, grants owner-occupied homes an exemption from paying property taxes used for the school district’s operations budget, which is funded separately from the capital projects budget used for new schools and construction.

The act increased the state sales tax from 5 percent to 6 percent in an effort to provide funds to school districts to make up for lost revenue, but the funds haven’t kept up with fast-growing school districts such as Horry County

If your county is growing, you will be negatively impacted.

John Gardner, Horry County Schools chief financial officer

District-levied property taxes for homeowners, also known as millage, can be used for capital projects such as new schools and construction, but not for the district’s operations budget, which includes the cost of utilities, teachers, benefits, insurance, special education and unfunded state mandates such as pay increases and funding for English for Speakers of Other Languages classes, known as ESOL.

The operations budget increases as more people move to Horry County, bringing school-age children, said Horry County Schools Chief Financial Officer John Gardner. According to U.S. Census data, the Myrtle Beach metro area was the second-fastest growing metro area in the U.S. in 2014 and 2015, and the district is predicting more than 700 additional students in the 2017-2018 school year.

We don’t need state governments being our big daddy.

Joe DeFeo, Horry County School Board chairman

Operating costs will increase next year as a result of those new students and the cost of staffing and maintaining three new schools, said Gardner.

But growing school districts such as Horry County aren’t receiving their share of revenue to keep up with growth, and the new residents who contribute to the increasing operating costs are not paying for the growth that they’re causing.

I see it as the state deciding what’s beset for the locals.

Joe DeFeo, Horry County School Board chairman

“Act 388 added a one cent sales tax to grant an exemption to owner-occupied residential homes,” said Gardner in an email. “The reimbursement was locked at the 2008 collections. For any subsequent year, districts will receive the ‘base’ established in 2007-08 plus a portion of the total additional funding available that will grow by the statewide inflation rate and population growth. So if your county is growing, you will be negatively impacted.”

In 2015, the district could have collected over $60 million in property taxes for its operations budget as a result of growth but because of Act 388 it received less than $48 million from the state, according to a spreadsheet from Gardner.

I don’t see any advantage of Act 388 other than trying to fix too-high taxes in some parts of our state.

Joe DeFeo, Horry County School Board chairman

As a result of the lost revenue, operations millage for businesses and second property owners has increased from 115.3 mils to 123.1 mils, said Gardner. One mil is equal to about $1.5 million. The district levies only 10 mils on homeowners for capital projects.

Gardner said the district has become less competitive in hiring teachers and class sizes have grown as a result of the act and since 2008, the average class size in the district has increased from 21.8 to 24.4.

At St. James High School, the students-to-teacher ratio was 18-1 in core subjects in 2008. In 2015, the ratio was 32.6-1. Other schools such as Myrtle Beach High School, North Myrtle Beach High School and Socastee High School have seen bigger classes, although Conway High School has seen smaller class sizes since 2008.

Horry County School Board Chairman Joe DeFeo said he thought Act 388 was “overreach” by the state government in an effort to control how counties taxed their residents.

“The problem is that’s what we have elections for,” said DeFeo. “I see it as the state deciding what’s best for the locals.”

DeFeo said the district would be in “good shape” financially without the act, but that it would be almost impossible to get rid of it.

“When you took operations away from private homeowners, they’re still paying that tax when they go to a business and buy something,” said DeFeo. “I don’t see any advantage of Act 388 other than trying to fix too-high taxes in some parts of our state. We don’t need state governments being our big daddy.”

Christian Boschult, 843-626-0218, @TSN_Christian

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