The recession is over. Get ready to suffer. Declining revenues have forced the state to cut $2 billion from its budget over the last few years. This year, budget writers will have an additional $428 million to play with, but they’ll need all of that windfall and more to cover rising education and healthcare costs. It would appear that, much like the worst ultimate fighting beat-down, the real pain comes the morning after the fight.

Nearly half a billion dollars in new money is good news. But there’s approximately $829 million worth of unfunded liabilities, including expiring federal stimulus aid, rising Medicaid costs, and state agencies that can’t provide necessary services after years of crippling budget cuts.

It means the Statehouse will have to come up with another $400 million in cuts. Regardless, Senate Finance Committee Chairman Hugh Leatherman (R-Florence) is drawing a line in the sand. “There’s going to be a lot of pain before we get through this year,” he says. “Will there be tax increases? Absolutely not.”

Leatherman’s not the only one predicting bruising news for state agencies. “There will be pain to go around,” says House Majority Leader Kenny Bingham (R-Richland). Asked what agency will be the first cut in another year of tough cuts, Senate Majority Leader Harvey Peeler (R-Cherokee) said the question is what agency will be the last to be cut. “I’m afraid this year, all agencies will feel the pain.”

Two years ago, the legislature was pitching a systemic shift in the tax structure, specifically targeting a host of exemptions, including everything from packaging twine to newspapers to automobiles. The state launched a Tax Realignment Commission that gave its final assessment last month, including recommendations to put new taxes on groceries and utilities. But don’t worry. As with most any tough decision in Columbia, it’s going nowhere. “I haven’t seen anything in there that anyone is interested in introducing,” says House Ways and Means Committee Chairman Dan Cooper (R-Anderson).

Democrats have pounced. “There were those of us who said that report would end up on the shelf gathering dust,” says Rep. Gilda Cobb-Hunter. “It was a way to kick the can down the road.” A member of the Ways and Means, Cobb-Hunter will introduce a bill this year taking an arbitrary cap off the tax on car purchases. “The public is so far ahead of us on this issue of tax increases and revenues,” she says.

Legislators are talking a lot about reshuffling state agencies, but it will essentially involve throwing a few secretary desks and agency letterhead overboard this leaky ship. “You’re not going to see a lot of dollars savings, but it would give them more efficiency,” says Cooper.

As Charleston County students get an extended Martin Luther King Jr. holiday this weekend, courtesy of two furlough days for teachers this Thursday and Friday, Columbia appears ready for more breaks in 2011. Cooper is suggested a mandatory 10 furlough days for teachers next year. “I don’t want to cut education,” he says. “They used to ask Jesse James why he kept robbing banks — that’s where the money is.”

There certainly is more chatter in the Statehouse this year about funding reforms, but a majority of the state’s districts continue to benefit from a lopsided funding formula. For years, Charleston, Beaufort, and Horry counties have been sending tax dollars to Columbia to underfund less-affluent districts. The challenge has always been reforming the funding formula without cutting money to poorer districts.

The focus on funding problems and a lack of solutions may actually drive more support for alternative programs like virtual classrooms and charter schools.

“We’ve got to look at how we deliver the system, not just how we fund the system,” says Rep. Nikki Setzler (D-Lexington).

Legislators seem ready to hear what Gov.-elect Nikki Haley wants accomplished in her first year. “We need to listen to everything Nikki Haley says,” argues Peeler. “The people of South Carolina liked what she said.”

That said, Haley’s first proposal, eliminating the state’s already low corporate income tax rate, has received a chilly response.

“I think it’s time we talk about the individuals who need tax relief,” says House Minority Leader Harry Ott, calling for a cut in individual income taxes before cutting corporate taxes.

Cobb-Hunter aims her scorn at two GOP talking points in the run-up to November: an “Arizona-style” illegal immigration policy and a mandate that voters carry a state-issued picture ID to the polls. “I’m real tired of the rhetoric,” Cobb-Hunter says. “The time ought to be spent on economic development and job creation. That is the bottom line for most people.”

South Carolina is just beginning to implement immigration reforms made in 2008 that focused on employer verification. New “Arizona”-style ideas include the controversial proposal to require law enforcement to subjectively check the immigrant status of individuals during incidents like traffic stops. Democrats suggest the changes need to come from Washington. “When I talk to citizens in my area about the important issues, this isn’t one of them,” says Gerald Malloy (D-Darlington).

Sen. Vincent Sheheen (D-Kershaw), a former gubernatorial candidate, said the most important issue is the state’s high unemployment rate. “We need to remind the people of our state that this is not something that is common,” he says. Sheheen is calling for tax code reform that would lift some of the property tax burden off commercial business and address climbing state liabilities under 2008 homeowner tax credits. He’d also beef up small business and entrepreneurship efforts at the Department of Commerce.

Sheheen wasn’t the only one looking for a change in the Commerce Department. House Speaker Bobby Harrell took a final jab at Gov. Mark Sanford, arguing the executive office “had a lack of focus on economic development and job creation issues.”

Senate President Glenn McConnell (R-Charleston) seems more confident than ever he’ll be able to change the state’s antiquated gaming laws that bar raffles and other fundraisers. “It’s ridiculous the laws we have in this state,” he says.

Now with a seventh congressional district, the legislature will also have to struggle with reapportionment. “Ultimately, what you’re going to see is that all the districts in the state will have substantial changes,” says House Judiciary Committee Chairman Jim Harrison (R-Richland). “It may be that Mr. Clyburn’s district is the only one that looks largely similar to how it looks right now.”

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