The Palmetto Insider

The blog of the South Carolina Policy Council

Crying Wolf on Fines and Fees

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It came as a mild shock that the General Assembly did not pass any new fine and fee increases this session – at least as part of the provisos section of the budget (and at least as far as we could find).

Readers of our Best/Worst 2009 will recall that last year the General Assembly passed no fewer than 12 provisos that raised fines and fees, along with 11 fine/fee increases as standalone legislation.

Of course, the Senate tried. Provisos 37.14 and 37.15 would have raised watercraft fees and hunting/fishing license fees, respectively.

Likewise, the Senate attempted to increase drug court fees (proviso 89.141). This was in addition to legislation (H 3161) that would have increased a variety of court fees by $24 million. The proposal was vetoed by the governor.

Before taxpayers breathe a sigh of relief, though, we should point out that the current budget sets the stage for significant fine/fee increases in future years.

As explained in our recent report on the Other Funds part of the budget, lawmakers have habitually used earmarked fine/fee revenue to sustain high levels of General Fund spending.

The current budget, in fact, contains several flexibility provisos (cf. 39.14; 65.7; 80A.38) that enable state agencies to use earmarked and restricted revenue to supplement general agency funding. The worst of these, which we have repeatedly discussed, is proviso 89.87. As we wrote earlier this week:

This proviso authorizes agencies to use earmarked/restricted accounts (i.e., Other Funds) funded with fine and fee revenue to absorb General Fund cuts. This practice, in itself, is objectionable, but this proviso also allows agencies to increase spending to FY08-2009 levels (i.e., $6.736 billion). Thus, in theory, the proviso permits agencies to increase spending by $1.621 billion.

In other words, the proviso permits agencies to draw down Other Funds revenue by as much as $1.6 billion. That’s for one fiscal year alone.

So what happens when these earmarked/restricted accounts become exhausted? (Each fund, i.e., the Tire Fund, is supposed to contain dedicated revenue allocated toward special projects.) To begin with, the General Assembly will likely drain nonessential funds to replenish essential funds. (For more on that, see this Nerve story.) Second, they’ll cry wolf and raise fines and fees.

So in spite of not passing any fine/fee increases in the state budget, the legislature is still spending through existing fine/fee revenue. Only next year, taxpayers will be watching for such hidden tax increases.

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Written by Jameson Taylor

June 8, 2010 at 4:00 pm

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