The South Carolina legislature returns this week with many of its persistent problems only made worse by the national economic crisis. You know it’s bad when several legislators, unprompted, start prattling on about “the opportunities” within a tight budget year. But after more than $1 billion in lost state revenue and a 2009 that is, at best, not going to improve, the opportunities in the budget are hard to see beyond the contusions.

After wrangling with more cuts in the current budget, the legislature will have to resolve an estimated $81 million shortfall for the 2009 budget year that begins July 1. Then the state will have to work around $489 million in additional funding issues — things like school bus replacement and maintenance, a Department of Corrections deficit, and a growing demand for state-sponsored scholarships.

“This is where the doom really becomes gloomy,” says Les Bowles, the state’s budget director.

Though much of the budget problem stems from persistent tax reductions over the last few years, legislators seem focused on continued cuts in state departments to pay for the lost revenue, rather than reversing some of those tax cuts.

“We will see government downsize drastically,” says Sen. Hugh Leatherman, a Florence Republican and chair of the Finance Committee. Proposing new taxes “is absolutely the worst thing we could do in tough economic times.”

For the long term, Leatherman has proposed a commission to review the state’s tax structure, particularly looking at antiquated exemptions on things like packaging twine (but hopefully not newspapers). The process will take years to complete (revenues will probably be growing by the time they’re done) but Leatherman says it’s essential not to do this piecemeal where individual interest groups can sway votes.

“We talk about this exemption and that exemption, and they come out of the woodwork,” he says.

There’s also talk of banking extra money in the good years so that the cuts aren’t so severe in these bad years — though you have to get to the good years to really appreciate that proposal.

It seems that the only place legislators expect to find new money in the short term is through an increase in the state’s cigarette tax. The nation’s lowest at seven cents, the tax was targeted last year for anything from a 30-cent to 50-cent hike, but failed to make it out of the legislature. While there is a growing consensus that the tax needs to go up, there’s still a large debate over spending that extra money.

Legislative leaders want all of the money to go to health care, either to the broader Medicaid program or targeted funding for things like anti-smoking campaigns and health care for the uninsured. But Gov. Mark Sanford and his supporters want more tax cuts.

While education funding is still a concern in Charleston, with next year’s budget expected to be more than $30 million short, the Lowcountry better hope that there isn’t swift movement on reforming the education funding formula. Legislators from rural communities in the Upstate and Pee Dee regions, who currently far outnumber those from districts like Charleston, floated the idea that reforms would include increased funding to their districts on the backs of wealthier districts like Charleston and Beaufort.

“The haves need to be willing to give up something in their district,” says Sen. Larry Grooms (R-Dorchester).

Sen. Jake Knotts (R-Lexington) wasn’t on board with the idea of underfunding other districts — something Charleston has been doing for years.

“I’m not going to let my level of education go down to bring another one up,” he says. “We’ve paid for our schools and education. We shouldn’t have to pay for another part of the state.”

Senate leader Glenn McConnell says his top priority will be energy reforms. The Charleston Republican has reintroduced several energy bills targeted at conservation to avoid blackouts that he predicts could begin within the next decade without reductions in coal-generated power. Incentives would include a program to help low-income residents purchase energy efficient appliances and insulate mobile homes.

Rep. Bill Sandifer (R-Oconee), the chair of the Labor, Commerce, and Industry Committee, says the state is incapable of capitalizing on wind, solar, or wave power on any large scale. While he supports nuclear energy as a distant solution, the cost and years it takes to develop those plants makes growing the state’s coal-fired stock a necessary evil for the next few years, he says.

Finding a way to improve the state’s struggling Ports Authority will also be a priority for McConnell. The authority has watched as other Atlantic ports outpace it in shipping traffic and is set to lose 20 percent of its business if a workable labor agreement can’t be found for shipping giant Maersk. Legislation introduced this year would seek structural changes in the port’s leadership.

“I’ve been disappointed,” McConnell says. “I’d like to see the port focused on what’s good for the state and the economy instead of what’s good for their bottom line.”

After a nationally publicized spat over unemployment benefits, House Speaker Bobby Harrell (R-S.C.) says he will call for an audit of the Employee Security Commission to help the state target new jobs for the people looking for them.

“I want to make sure that we’re not just paying benefits,” he says. “That we’re helping people find work.”

With tough economic times, both McConnell and Harrell say public-private partnerships will be a necessity, with a focus on new technologies.

“We’re not going to get textile mills and other factories we’ve lost back,” says Harrell. As for the difficult relationship the legislature has with Gov. Mark Sanford, McConnell says that it’s a matter of talking to one another.

“As contentious as things can be (between) the House and the Senate … we keep communication open. It’s a good healthy dialogue,” McConnell says, noting things are quite different with Sanford. “We get more communication through press conferences. How’s the relationship? It’s cool. I’m going to keep my guard up.”