Investing in the Future: Gov. Robert McNair, the Moody Report, and Funding Change

A guest post by Elizabeth Pearson

The decades between the end of World War II and the early 1970s comprised a period of incredible change for state governments all over the country, including South Carolina. My doctoral research focuses on one aspect of that change: how states generated new revenue to support public investment programs and meet the costs associated with growing populations.

McNair

Governor Robert McNair in his office

I came to the South Carolina Political Collections in early December to go through Governor Robert McNair’s gubernatorial papers and research McNair’s pursuit of higher taxes to fund the ambitious policies outlined in the “Moody Report.” This report, a 400-plus-page analysis prepared for the state by Moody’s Investor Services and a consulting group named Campus Facilities Associates, outlined a suite of programs that the consultants argued would help the state make a “quantum leap” forward in a range of areas. The report particularly focused on public education, including the need for a statewide public kindergarten program and higher teacher salaries.

Much of my analysis will continue over the coming months as I re-read, organize, and annotate the 2,000-plus photos that I took at SCPC and the South Carolina Archives and History Center during my visit! However, I wanted to share some preliminary insights from my research that give a sense of the rich material available at SCPC to investigate these topics.

Blatt

House Speaker Sol Blatt presiding

First, one of the things I was most curious about when I came to South Carolina was how policymakers had weighed increases in the sales tax against other methods of generating new revenue. In a memo to the governor around the same time the Moody Report was released, the consultants who prepared the report stressed that tax changes should improve tax equity, or “taxation according to the ability to pay” (1). Comparing this August memo to the final version of the Moody Report and McNair’s state of the state message to the legislature in January 1969 suggests that the governor’s office debated how to balance the sales tax increase — generally regarded as a “regressive” mode of financing since it costs people at all income levels the same — with more progressive sources of revenue.

The consultants suggested raising a portion of the new revenue through increases in both corporate and individual income taxes, but the final Moody Report did not mention corporate income taxes. Instead, it advised changes to the individual income tax that would raise more revenue (2). Then, in his state-of-the-state address to the legislature in early 1969, McNair announced that he would not ask for any changes to the individual income tax — but would recommend increases in the corporate income tax, the sales tax, and taxes on alcohol and cigarettes. As I continue my research, I’ll be looking for more evidence of how policymakers thought about the pros and cons of these various taxes, as well as how those views may have shifted during the debate over improving public education in South Carolina.

Moody Report

The Moody Report debate in an editorial cartoon by Walt Lardner

Second, some of the more colorful material that I came across in the collections is an exchange of letters between Governor McNair and longtime House Speaker Sol Blatt (whose papers are available at the SCPC). Blatt wrote McNair just before the Moody Report was released, noting that he had “never had much faith in reports by outside firms coming into this State to make recommendations to tell us how our State should be operated” (3). McNair sent his personal copy of the Moody Report to Blatt and urged him to read it carefully (4), but Blatt promptly wrote back to say that the length of the report, at almost 450 pages, would prove an obstacle to reading it. “I am tied up practically all day at the office and must read it at night and to be perfectly frank, when I get home at night, I am a little tired and I do not feel like doing much serious reading and studying” (5).

When the report was released, Blatt was quoted extensively in the press criticizing the report’s overall cost and the kindergarten program in particular. An internal memo between McNair and one of his advisers about a month later reveals that the governor’s office debated how to respond to Blatt’s attacks and decided to do nothing for the time being. At the bottom of the memo, McNair scrawled, “I agree also — always good to sleep on something over night. Maybe I am letting the Speaker get to me unduly of late.” Although Blatt eventually came around to a compromise proposal authorizing a limited kindergarten program, he still delivered a “passionate, hour-long speech” on the House floor (against his doctor’s orders) outlining his concerns about other elements of the Moody Report (Page 1969a; 1969b).

As I continue to analyze the material I collected in South Carolina, I’ll be comparing my findings to research I’ve conducted in other states (New York and Texas) to better understand how states across the country responded to the financing challenges of the postwar period.

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Materials from Robert E. McNair Papers:

(1) Memo from Benjamin Galos to Governor McNair, August 9, 1968, Box 52, “Moody Report, General, 1968, August” folder.

(2) “Opportunity and Growth in South Carolina: 1968-1985 [the Moody Report], Box 52.

(3) Letter from Sol Blatt to Robert McNair, July 27, 1968, Box 52, “Moody Report, General, 1968, June, cont-July” folder.

(4) Letter from Robert McNair to Sol Blatt, August 2, 1968, Box 52, “Moody Report, General, 1968, August” folder.

(5) Letter from Sol Blatt to Robert McNair, August 5, 1968, Box 52, “Moody Report, General, 1968, August” folder.

Newspaper articles:

Page, Levona.  1969a.  “Blatt Drops Kindergarten Plan Opposition.”  The State.  April 9, p. 1A. ———  1969b.  “Blatt Tells Why He Compromised.”  The State.  April 10, p. 1B.

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