Legislative Outlook RoundtableJan 09, 2024 12:36PM ● By David Dykes
Key industry leaders sat down recently to discuss issues they’ll be monitoring in this year’s South Carolina legislative session.
The state’s workforce shortage, child-care needs, income and job-opportunity disparities between urban and rural areas, and the growing use of artificial intelligence were all part of the conversation. But attention also focused on liability laws that many think threaten local businesses.
The panelists included Fred Green III, president and CEO of the South Carolina Bankers Association; Sara Hazzard, president and CEO of the South Carolina Manufacturers Alliance; and Bob Morgan, president and CEO of the state Chamber of Commerce. The discussion was moderated by David Dykes, editor of Greenville Business Magazine, Columbia Business Monthly, Charleston Business Magazine and B2B: The Grand Strand.
Here are excerpts from the conversation, edited for brevity and clarity.
What are your top issues and goals entering the 2024 legislative session?
Hazzard: We have a number of items. I’ll highlight a few of them, with the top issue being workforce development and education. We are looking at a number of different approaches to how we tackle our workforce challenges that we have in the manufacturing industry in the state. Kind of looking at three different approaches, first being exciting the people of South Carolina about the opportunities that are available in manufacturing. The second is preparing, making sure that we are doing things that prepare our future workforce, and then also retaining. What are we doing to make sure that the manufacturers are able to retain their workers. So, we’ve got a number of priority items under each one of those buckets that we will be pursuing this coming session. Another big focus area for us is going to be legal reform, in particular, improving South Carolina’s joint and several liability law. That’s an issue that has been pending for a number of years and something that the business community as a whole is working together to try to tackle.
We know that it’s an uphill battle, but we hope to see some movement this year on that legislation.
We also expect there to be a lot of conversations around energy and, in particular, energy capacity in South Carolina. We, as large consumers of electricity in the state and energy, in general, manufacturers, will want to have a seat at the table as the state is looking at taking on conversations around energy. We’ll also be interested in infrastructure funding, as usual, and environmental issues that come up. So those are kind of the big focus areas for us. And then, as always, looking at our tax and economic development policies in the state will also be another focus area for SCMA this coming session.
Morgan: Our agenda centers around five buckets, primarily the first. And it’s the issue we hear from our members more than any other: Workforce. Workforce. Workforce. 78,000 jobs going unfilled in South Carolina. More jobs coming with the good work of the governor and the Department of Commerce. We have a labor participation rate of 57 percent, which is below the national average of 63 percent. And so, any efforts and initiatives to address workforce we’ll be supportive of, including the continued funding of the South Carolina Workforce Industry Needs Scholarships and something that’s been in the budget for the last two years, providing, in effect, technical college tuition free to anybody who’s studying in the fields that are most in demand in our economy.
I believe we’re also going to talk further about child care in this conversation. That is one of the chief barriers to entry for many people as we look at that labor force participation rate. And there’s now been a joint committee appointed by the House and the Senate to take a look at child care. We’ll be very engaged in that. Tax reform and continuing to reduce the individual income tax rate - the Comprehensive Tax Cut Act of 2022 took us from 7 percent personal income tax rate to 6.5, with a phase down each of the next five years by an additional 1 percent.
Sara mentioned tort reform. We’re both a part of the coalition for lawsuit reform, joint and several. We have a bill that’s in the Senate that we’ll be working on from day one to try to get that out of committee on to the floor of the Senate, and then over to the House. As it relates to economic development, infrastructure funding, continue to fund the ability of the South Carolina Ports Authority to expand and to grow. The Department of Transportation will be requesting recurring funding for bridge replacement and repair around the state. Those are important priorities, again, as it relates to economic development. We’ll also be looking in the budget. With the recent split of DHEC, we’d like to ensure that the new Department of Environmental Services has the resources that it needs to stand alone as a separate entity.
Not directly related to the legislative session and particular legislation, but we also are paying close attention to recent activity by the United Auto Workers union, which has now targeted South Carolina and targeting our automotive manufacturers in particular to try to unionize those. We believe it’s very important and critical to South Carolina’s success that we are an employment-at-will state. We are a right-to-work state. We have the lowest rate of unionization in the country. That is a competitive advantage for us. And anything we can do to keep big labor and the union bosses out of South Carolina, we’ll be focused on.
Green: I agree with all of the comments from Sara and Bob. The banking industry is always pro-business. A healthy business environment makes for a healthy banking environment. I would just shift to our number one bank-related issue, and that is to oppose any legislation that would enhance the powers of the credit union industry.
What most people don’t realize is credit unions don’t pay a penny of tax, and they compete with tax-paying entities like banks for the same customer. I’m not talking about the credit unions across the board, but just those largest ones that are $1 billion and up in assets. They act like a bank, they look like a bank, but they don’t pay taxes like a bank. And some of the bills that were introduced last year and the year before, and we’ll be dealing with this year, would allow them to use that tax- paying exemption to, say, acquire banks. And so, from a public policy standpoint, it doesn’t make sense to allow a non-tax paying entity to use their subsidy to buy a tax-paying entity and forever take that tax-paying revenue off the books of the state of South Carolina.
Are new tactics needed to address the shortage of workers in the variety of industries that you’ve touched on?
Morgan: I’ve already mentioned that we need to continue to fund the workforce scholarships that help folks find their way to education in our technical schools. We don’t need new legislation. In the session earlier this year, the Legislature passed a consolidation of different workforce programs, created an umbrella under the Department of Employment and Workforce to bring together more than a dozen statewide programs in various agencies throughout state government in a coordinated way.
Now, we need to see the implementation and execution of that new program. There are regional workforce coordinators now who are starting to hit at the grassroots level, if you will. In our grassroots tour that we conducted in August, September, and October, there are a lot of businesses at the local level who don’t know the resources that are available to them. And so, we have good resources in state government and hopefully now with the greater coordination, the delivery of those services will be even stronger.
I mentioned earlier child care being a major barrier to workforce participation. We have a tax credit currently for companies who provide stipends to their employees for child care. Precisely, 19 companies across the state of South Carolina take advantage of that tax credit.
Clearly, it needs to be addressed, needs to be fixed in a way that it’s more attractive to more companies. And that’s one of the issues that the new committee, the ad hoc committee that’s been appointed with representatives from both the House and the Senate, will begin to address as soon as the session starts.
If I’m working at a company or a plant and I need child care, I can have something on site where I work that will take care of the child care needs. So, I know that my family is covered, but I also can do my job.
Hazzard: I think it depends on the different companies. Each company may have a different approach or a different thought on on-site child care. We do have companies in South Carolina that are putting child care on site at their businesses, and more and more are exploring those options. We’ve also heard of companies that are looking at working with outside contractors to identify the available child care that might be near their facility and working with existing child care facilities to see if they can maybe adjust their hours to work with the various work schedules that are inside a particular facility or an operation.
So, I think it just depends on the company. Some companies are willing to take on that. It’s a monumental task. Not only are you providing the child care, but you’ve got to provide the workers to be able to work in the child care facility. I think that that’s a challenge as well. So, it’s really not that easy to be able to do it, but some are taking it on, and some are looking for other alternatives that are out there. But child care certainly is a barrier for folks to be able to go to work in South Carolina, and it’s something that we’re excited to see the state of South Carolina trying to address.
Green: Our business model has, I guess the employee base is dispersed across the footprint as opposed to having everybody under one roof. So that’s the big problem with any on-site day care. The issues, again, whether it’s tax credit or the group headed by leadership in the state House (studying child care availability and affordability), are all important, certainly something we’re following and would hope that we can move the needle on that.
How does artificial intelligence play into the workforce issues? If there’s a shortage of workers, and you’re going to have artificial intelligence possibly taking more jobs, what are the do’s and don’ts of planning for that?
Hazzard: I think we see artificial intelligence as really kind of the wave of the future. Manufacturing is very high tech and very modern, advanced manufacturing that we have here in South Carolina. When we think about artificial intelligence and what does it mean for the workforce, one of the things that we’re really focused on is we know that that is going to require a more highly skilled workforce. So, it’s more important than ever that our education programs and systems in South Carolina are creating and producing the types of workers that are ready for that modern manufacturing and advanced technology.
Morgan: Artificial intelligence is going to radically transform the efficiency of communications in the workplace and elsewhere. And companies that figure out how to put it to use are going to be those who are going to survive in the future economies. Those who don’t, their competitors probably are. Yes, it’s going to be disruptive. There will be jobs lost where AI can more efficiently perform the work that humans currently do. At the same time, it’s going to create jobs and opportunities for those who know how to put it to use.
There has been now a standing committee appointed by Speaker (Murrell) Smith in the House to study AI to see what guardrails we might need to keep some of the negative consequences that we’ve all read about from happening, but it is quickly becoming a reality. And an example is a grant that Clemson University has gotten – a $22 million grant – to study how can AI be used to better deliver health care into the rural parts of the state - but one example of an opportunity that will be positive in putting AI to work to serve the citizens of our state.
Green: The banking industry is technology-focused, and we’ve had some variation of AI for a long time, although we didn’t call it AI. So that’ll continue to evolve. The other thing about the banking industry (it) is still a people person industry face to face. So, I don’t anticipate AI having a reduction in the workforce.
Let’s talk about the gap that exists in South Carolina and many states between urban and rural areas. As the major metropolitan areas in South Carolina grow, some people, many people are being left behind. What can be done?
Hazzard: Child care and transportation, housing, and access to broadband are all areas that should be focused on in lifting up those rural parts of South Carolina. I do think those challenges – we also do see in certain pockets of urban areas across the state as well. So, I think taking a statewide approach to trying to figure out some of those challenges would help lift up both rural and urban areas in the state.
Morgan: I think we need to acknowledge that urbanization is a global trend, and our major markets are going to continue to grow and attract the largest number of people. There is an opportunity that as our state has invested many of the relief dollars that came out of Covid and the infrastructure dollars, we are making major investments in broadband, in rural communities. I think the opportunity is for us to think about economic development a little differently. Those rural areas need people. They’re not going to see a bank come in unless there’s a critical mass of potential customers.
And so, in terms of economic development, there’s a large number of people who are not going to return to the office. Their jobs lend themselves to working from home. Small towns can market themselves to people elsewhere in the country who are coming out of those large, expensive urban markets. And you start talking about the lower cost of housing, you talk about a different lifestyle. South Carolina is chock full of great downtowns, small towns that are very attractive to live. The problem right now is there tend not to be jobs there. But again, for those who can work from home, who have good access to broadband, that opens up opportunities that haven’t existed previously.
Green: Part of the problem is the business model of the banking industry. You have to have critical mass of potential customers, and the population just doesn’t exist to warrant that type investment. So, the alternative is to look at alternative delivery sources like online banking, things like that, which then gets back into broadband. And not just the broadband accessibility, but the training on how to use it for banking services. So that’s kind of the focus that we have, is how can we, without a brick-and-mortar facility, deliver those banking services in the rural areas.
You talked about liability law. How optimistic are you that progress will be made on that front? And what are you urging lawmakers to do?
Hazzard: I would say we are fairly optimistic. We have been working on improving South Carolina’s joint and several liability law for at least three or four years now following a Supreme Court ruling that highlighted the flaw in the law that allows anyone who might be involved in a particular lawsuit to be held, even when they may only be 1 percent at fault, 100 percent financially liable in a situation which is really just frankly unfair and not a good way for South Carolina to present ourselves as being a pro-business state. We do have challenges. The legislation right now has over 23 or 24 co-sponsors in the Senate, with the lead sponsor being the president of the Senate, Thomas Alexander, to fix the law, and bipartisan co-sponsors as well.
The bill is pending in the Senate Judiciary Committee, where last year we did receive, I believe, two subcommittee hearings. There was testimony taken. We are asking the Judiciary Committee to move the legislation very early in January and are working with our supporters in the Senate to try to get the bill moving. So fairly optimistic, but we do know that there are headwinds in front of us, and it’s not going to be an easy task for sure.
When you read the newspapers right now, you’re hearing about restaurants and bars that are going out of business. If they sell alcohol in South Carolina, they are seeing significant increases in their liquor liability policies, and some of them are not able to afford the policy premiums. That seems to be the thing that’s getting the most attention. But I would tell you that this issue impacts every single business in the state of South Carolina, not just restaurants and bars. I think that this is a very important issue for the business community in the state.