Counties and cities funding alternatives

How much might they get from the state's Local Government Fund?

Full House *Senate funding budget Finance

budget

Berkeley County $9.1 m $6.7 m $6.2 m

Charleston County $18 m $13.2 m $12.2 m

Dorchester County $7 m $5.2 m $4.8 m

Charleston $3.4 m $2.7 m $2.5 m

Mount Pleasant $1.9 m $1.5 m $1.4 m

North Charleston $2.8 m $2.2 m $2 m

*If there is a surplus in state funds, the Senate Finance Committee has proposed matching the House budget.

Sources: Municipal Association of South Carolina and South Carolina Association of Counties

Dorchester County hasn't been able to hire more public safety employees to serve its growing population because it has suffered cuts in state funding, along with other counties, cities and towns statewide.

"We are only able to keep up with health insurance and retirement type increases. We have cut positions such as the code enforcement manager in last year's budget," said County Council Chairman Bill Hearn.

Local governments in the region are bracing themselves for possible cuts in state funding for basic services for the next fiscal year, which begins July 1.

State law requires that the General Assembly allocate an amount equal to 4.5 percent of the previous year's budget to the state's counties, cities and towns for expenses such as police, fire and trash collection services. But each year since 2008, the Legislature has suspended that requirement, and eaten into the fund.

That money is essential to local governments, said Scott Slatton, legislative advocate for the Municipal Association of South Carolina. "It's how they pay the bills,"

The Local Government Fund used to be a reliable source of funding, Slatton said. But legislators began cutting in 2008 when the economy soured. And they still haven't returned to using the 4.5 percent formula.

This year, if the General Assembly followed the formula, $287.5 million would be distributed to local governments through the fund. But the House budget included only $212.6 million, which represents a 26 percent shortfall.

The story is even worse in the Senate Finance Committee's version of the budget, where only $196.6 million would be guaranteed. That represents a 32 percent shortfall.

In that version, another $16 million could be added to the fund down the road if there was a state budget surplus.

The Senate has yet to approve its version of the budget and will take up the matter again this week.

Keith Bustraan, Charleston County's chief financial officer, said the cutbacks have meant that on average the county has been shorted between $2.5 million and $3 million annually. During that time, the county has responded by freezing positions and reducing capital expenditures, he said. "They made reductions at the expense of local government," he said. "We have unfortunately adjusted to the 'new normal.'"

The General Assembly enacted the 4.5 percent formula for local government funding in 1991, which took a lot of the guesswork out of budgeting.

"There was no dispute. You knew what the amount would be, and you could plan on it," Bustraan said.

Now, that is not the case. Local government funding has dropped from 11 percent of the Charleston County general fund to 7 percent in the current budget, he said.

Rural governments often have to enact tax hikes or cuts in services to balance the budget when local government funding is lost. Charleston County is not hit as hard because of its diversified economy, Bustraan said.

Nonetheless, managing the budget is a challenge when the local government fund, which is the third largest revenue source for the county's general fund, is still an unknown as the budget is presented to County Council.

Local government funding is allocated for a long list of mandated services such as the assessor, building code enforcement, voter registration, the jail, the public defender and storm water management, Bustraan said.

"It has never covered all the state-mandated expenses," he said.

There are currently two local government funding scenarios for Charleston County, which will receive either $13.2 million or $12.2 million depending on which version of a Senate Finance Committee budget is adopted. The lesser amount would mean a half-percent reduction in revenue for the general fund budget, he said.

"As we always do, as the year progresses we closely monitor the budget on both the revenue and expenditure side and make appropriate adjustments," said county spokesman Sean Smetana.

Berkeley County Councilman Timothy Callanan said the uncertainty of allocations from the Local Government Fund is a problem.

"Right now we have got to pass a budget in the next month. And we have no clue what we are getting from the Local Government Fund," he said.

In Dorchester County, Hearn said the loss of local government funding for the upcoming budget will be more than $2.2 million. In the past seven years, the funding deficit has totaled more than $8 million.

The situation has made funding the increasing costs of services, personnel and benefits "quite difficult," he said in an email.

"We have had to absorb cost increases imposed by the state in terms of required pension system increases and annual increases in the State Health Plan," he said.

"As a result, we cannot make a final decision on our budgets until the state makes a decision on its budget, which is typically not until the end of June," he said.

Steve Bedard, chief financial officer for the city of Charleston, said city officials have adjusted to recent cuts. "We're used to it not being fully funded," he said.

But Slatton said cuts to many local governments are harsh, because they have no way to completely make up for the drop in income.

State law limits how much they can raise property taxes, he said. So they can't totally make up for the cuts by increasing those taxes.

North Charleston Councilman Bob King said the city has been able to weather the state cuts to municipalities because of its steady growth.

"We think we are all right on our budget. We have not had to lay anybody off," King said.

Tim Winslow, a lawyer for the South Carolina Association of Counties, said that fully funding the Local Government Fund would provide some property tax relief to county property owners. And he thinks property tax relief is one of the Legislature's lowest priorities.

Counties already contribute to state services, Winslow said. For instance, county health departments are state agencies, but the counties cover the cost of housing them. "When they are not fully funding this, they are forcing county property taxpayers to cover the cost of state services," he said.

Winslow also said that the Senate Finance Committee's version of the budget, which includes possible surplus money, makes it extremely difficult for counties to create their budgets.

Most counties, he said, are working on their budgets now. "They are holding us hostage over the surplus money," he said.

Reach Diane Knich at 843-937-5491 or on Twitter at @dianeknich.