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Delaware lawmakers are halting an expansion project at Legislative Hall in Dover after suffering millions of dollars in federal funding freezes from the Trump administration, including $38 million in health care dollars last week.

Delaware, New Jersey and Pennsylvania joined a coalition of states and Washington, D.C. in suing the Trump administration this week after they were notified about the cuts.

In a joint statement, the Democratic leaders of the House and Senate and the co-chairs of the Joint Finance Committee said they were dropping the project updating the state Capitol building for the time being.

“In the coming months, lawmakers will be faced with tough decisions about how to balance our annual budget. We are committed to funding critical programs that benefit our students, our seniors, our veterans, and every day families,” the statement said. “We hope to revisit the expansion project soon.”

The project’s total estimated cost in a 2023 feasibility study was $122 million, but current predictions are about 3% higher than that. The project got $10 million of funding in this fiscal year’s budget; and the Office of Management and Budget had requested $50 million for fiscal year 2026, which included part of the Legislative Hall expansion and part of constructing the adjacent parking garage and connecting tunnel. The parking garage, which lawmakers said has already been funded, is still expected to move forward. Construction is set to begin in July without the tunnel. The parking garage was estimated to have cost $33 million at the February meeting of the Legislative Building Committee.

Happy Thursday.

We’ve got plenty to report below.

But the Senate has wrapped up its work for the week after the Senate Finance Committee adopted its version of the state budget. And the House is back at 10 a.m. Thursday ahead of a weeklong break next week.

You’re reading The State House Gavel, a daily reporter notebook by reporters Gavin Jackson, Russ McKinney and Maayan Schechter that previews and captures what goes on at the South Carolina Statehouse this year while lawmakers are in session.

Notebook highlights:

In a rare joint move , the House and Senate budget chairmen said that the 2025-26 fiscal year budget will not include earmarks .

, the and said that the will . And speaking of the budget that passed the Senate Finance Committee , the latest on the income tax plan .

, the on the . No scrolling while rolling! The S.C. House passed legislation that would ban holding a phone while driving, an effort one of the bill’s most vocal advocates will help curb deadly car accidents.

MAAYAN SCHECHTER The S.C. Statehouse in Columbia, S.C.

Budget chairs axe earmarks in 2025

In a rare joint move, the two powerful chairs of their respective chamber’s budget committees agreed to forgo earmarks in the 2025-26 fiscal year general fund budget.

First, what are earmarks?

Some call them earmarks, others use the terms pet projects or pork.

Lawmakers call them “community investments.”

Every year, both chambers receive lawmaker requests for one-time money that goes to an organization, a nonprofit or back to their local governments for a requested expenditure.

In years past, it’s included money for local law enforcement, sidewalk repairs and lighting safety upgrades, infrastructure improvements, preservation initiatives, tourism efforts, nonprofits and, even, ornaments for the Statehouse Christmas tree.

The process — which has dolled out hundreds of millions of dollars in projects every year — has received its fair share of criticism over transparency, and, in some cases, earmarks going to groups connected to lawmakers personally, or going to organizations that had little showing of work.

Either way, over the past several years, the process has become more transparent but still has not avoided criticism.

So, what did the budget chairs do?

On Wednesday, Senate Finance Chairman Harvey Peeler, R-Cherokee, announced that the Senate’s version of the state spending plan would not include any earmarks.

Not long after, Peeler and House Ways and Means Chairman Bruce Bannister, R-Greenville, issued a joint statement.

“As the chairmen of the chambers’ budget writing committees, our top priority is to ensure the responsible expenditure of the taxpayers’ dollars. Over the last few years, we’ve been able to provide for a great deal of community investments and we’ve made significant strides in the transparency of those investments,” they said. “However, in this appropriations bill, we’ve agreed instead to focus on what should be every member’s top priority — tax reform.”

The letter makes pretty clear: no earmarks this year.

Peeler told reporters the Senate needed some of the money typically doled out for earmarks to spend on further shifting the income tax rate.

The increase in requests, Peeler said, “has gotten out of hand over the years.” And many of these earmarks should be handled locally rather than through the state budget, he said.

“I think the House Republican Caucus is behind that plan to move forward,” Bannister told The State. “So yes, it may make passing a budget more difficult, but I think right now, under the circumstance, we’ll have a balanced budget, it will pass in a timely fashion, and then we will kind of reassess (at) beginning of the year.”

So is this permanent?

For several years now, Gov. Henry McMaster has criticized the earmark process due in part to the lack of vetting and transparency.

Instead, he’s asked lawmakers to create a grant-like program that would let entities apply for money through the respective appropriate state agency.

Until now, lawmakers have largely ignored this effort, but Wednesday GOP leaders appeared open to the idea.

“I hope we don’t have earmarks moving on,” Peeler told reporters, but he said if not that there’s discussion of a grant-type program. “Not all earmarks are bad.”

Jeffrey Collins/AP / AP South Carolina House Ways and Means Chairman Bruce Bannister, R-Greenville, left, and Senate Finance Chairman Harvey Peeler, R-Gaffney, right, vote as the conference committee reached a budget deal, Friday, June 21, 2024, in Columbia, S.C. (AP Photo/Jeffrey Collins)

Income tax plan pushed to next year

Senators claimed saving money on earmarks allowed for an accelerated income tax rate cut.

In their budget version approved Wednesday, the Senate budget writers set aside some $290 million to further accelerate the drop of the top income tax rate from 6.2% down to 6%.

The House had already allocated $200 million.

That’s about as far as the rate is likely to go down in 2025.

Recall: Just last month, Republican House and Senate leaders and the governor lauded an income tax plan that would decouple the state from the feds and moving to a 3.99% flat rate for all taxpayers in 2026, down from the current structure with a top rate of 6.2%. It also would further lower the rate to 2.49% in future years if state revenue growth remained strong. House leaders delayed the bill after state estimates showed that a majority of filers would see their taxes increase in the first year of implementation.

That plan, GOP leaders said Wednesday, is no longer in play.

House GOP Leader Davey Hiott tells me the House is still working on their income tax plan. “I don’t know what that final plan will look like. But we’re still working on our version of it.”

“Plan A,” he says, “probably was not something that we could pass at this time.” https://t.co/lGDxjYQXhm — Maayan Schechter (@MaayanSchechter) April 9, 2025

So what happens now?

As Hiott and Peeler said, the issue is not dead.

And the House still might pass some version when it returns from its weeklong furlough break. Bannister told The State that hearings will continue after they return.

But Peeler flatly told reporters “no” when asked whether a tax bill would move through both chambers and to the governor’s desk this year.

“We’re going to work on it during the coming session,” he said.

Gavin Jackson / SCETV Republican leaders gather in the Statehouse lobby on March 25, 2025, to push legislation that would lower and flatten tax rates in the state.

SC could go ‘hands-free’

South Carolina could soon stop the phone scrolling altogether by motorists, joining more than 30 states that already do so.

The House on Wednesday passed H. 3276 — filed by York Republican Rep. Tommy Pope — that would make holding a cellphone to make calls, write texts (already prohibited), scroll through X or Instagram or videos illegal, with added penalties.

Drivers could still make calls using voice-to-text devices.

And there would be exceptions, including for first responders responding to a call, or a driver reporting an accident, emergency or safety hazards.

After pushing for a hands-free law for eight years, Aiken Republican Rep. Bill Taylor told reporters distracted drivers are six times more dangerous than an drunken driver.

“That has to stop,” he said.

The bill gets a third, perfunctory vote Thursday, before heading to the Senate.

Taylor told reporters he hopes the Senate strengthens the bill, given that, he said, the House “watered” it down a bit.

SCETV S.C. Rep. Bill Taylor, R-Aiken, talks about the hands-free driving bill on Wednesday, April 9, 2025, in Columbia, S.C.

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