South Carolina state budget (2008-2009)

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State Information


South Carolina, like most states throughout the U.S., was facing a budget deficit for fiscal year 2009 and fiscal year 2010. For FY 2009 South Carolina was facing a $871 million deficit. The Center on Budget and Policy Priorities projected the deficit would be $725 million for FY 2010.[1][2] Since July 2008, $1 billion had been cut from state spending and the budget had fallen to $6.1 billion. State revenue in January 2009 was estimated to be $80 million lower than 2008.[3] However, revenue reports forced officials to call for an additional $102 million in cuts to state agencies.[4] Despite the hopes of some lawmakers that federal stimulus dollars might bring relief to the state, Gov. Mark Sanford announced that he rejected $700 million in federal stimulus money because he believed that the stimulus money would destabilize South Carolina's economy. The governor suggested that the funds be used to pay down state debt, but the request was denied by White House officials.[5]

Impact of budget woes

See also: State budget crisis, 2009-2010
  • In early March 2009 education suffered another 2 percent cut, totaling $43 million cut from K-12, upping the total reduction for the year to $387 million.[6] The South Carolina schools budget was cut $365 million for FY 2009. The South Carolina Department of Education surveyed district superintendents and found that more than 300 local educators would be laid off this year, most of them administrators. More than 1,100 positions had been left unfilled when they were vacated.[7]
  • State agencies were trimming an additional $102 million from their budgets, bringing the amount cut from schools, colleges, health care and other services since July 2008 to more than $1.1 billion. Cuts included: $43 million from education; $16 million from the Department of Health and Human Services; $9 million from state colleges, whose budgets had been cut more than any other higher education system in the country; $3.6 million from the Department of Mental Health; and $3.2 million from the Department of Disabilities and Special Needs.[4]
  • State agencies had laid off 121 workers and eliminated 275 jobs since July.[4]
  • South Carolina's unemployment rate for January was its highest in nearly 26 years. A record 227,986 people were jobless and all but 11 of the state's 46 counties had double-digit unemployment, according to the state Employment Security Commission. South Carolina's unemployment rate rose to 10.4 percent in January. The employment commission reported South Carolina had 42,800 fewer jobs in January compared to December, when the rate was 8.8 percent - and 4,700 fewer people were in the work force. About 135,000 residents were collecting about $20 million weekly in unemployment benefits, officials said. The U.S. unemployment rate for February rose to 8.1 percent, the highest in more than 25 years.[8]
  • The South Carolina House of Representatives was poised to raise the state’s cigarette tax by 50 cents a pack. Expected revenue was estimated at $147 million.[9]

Budget background

See also: South Carolina state budget

South Carolina's fiscal year begins July 1 and ends June 30 of the following year. Agency budget requests are submitted to the governor by October, after which the governor compiles his recommendation for the new fiscal year. Every January the governor is required to submit an executive budget to the legislature containing an itemized plan of proposed expenditures, the amount appropriated for the last preceding appropriating year and for the current year. Following a series of meetings the House and the Senate pass a version of the budget. If both versions do not match a six member conference consisting of both House and Senate members is assembled to sort through the differences. The governor has final say on the budget and has the power to veto sections. In 1998 the state Supreme Court ruled that the governor could not strike individual sentences. A two-thirds majority is needed in both houses to override the governor's veto.[10]

  • From 2004 to 2008, the South Carolina legislature's spending increased by 40 percent.[11]
  • FY 2006-07 and FY 2007-08 combined, the General Assembly spent an additional $1.3 billion in surplus revenues.[12]

The South Carolina Policy Council hosted Governor Sanford and Sen. Tom Davis to reveal the Council's analysis of the fiscal year 2008-2009 budget.[13] The Council's analysis broke the budget into three categories:

General funds

(from tax revenues)

Other funds

(from agencies' fines and fees)

Federal funds
$6.7 billion[13] $7 billion[13] $7.1 billion[13]
According SC Policy Council President Ashley Landess, "Taxpayers think we spend about $6 billion a year on state government, but the budget is more than three times that."[13] The article reported that,
"'This report shows very concretely that our state spending picture goes far beyond the $6 billion that routinely gets reported,' Gov. Sanford said. 'This again highlights the need for more transparency in our budgeting process, so that citizens have a better handle on what is indeed being spent in our state, rather than keeping more than a third of our state budget on autopilot controlled by Washington.'"[13]
  • Total budget for FY 2008-2009 was $20,858,215,743 billion.[14]
  • Over $3.3 billion went to K-12 and higher education.[14]
  • The state had over 62,000 employee positions.[14]
  • The state had two rainy day funds.[14]

Budget figures

The following table provides a history of South Carolina's budgeted spending in recent years. Figures are based on the budgets as they were ratified by the legislature, and do not take budget cuts into account:

Fiscal year Total expenditures Change from previous year
2008 20,858,585,100[15] 2.9%
2007 20,266,849,917[16] 5.3%
2006 19,242,459,434[17] 6.7%
2005 18,033,783,808[17] 7.2%
2004 16,818,721,431[17] 9.0%
2003 15,424,866,119[17] 2.4%
2002 15,060,995,600[17] 2.2%
2001 14,730,477,146[17] 6.1%
2000 13,889,209,525[17] n/a

Ideas about why the crisis occurred

  • In 2007 lawmakers approved a state budget of $7.4 billion. In 2009 the state budget shrunk to $5.5 billion. Although most blamed the general economy for South Carolina's shrinking revenue, others argued that the state's unstable tax system was a large part of the state's revenue problem. Some had called for a spending limit to keep state spending from growing out of control during times of economic growth. Others noted that creating a more stable tax system would provide stable funding for education, local governments and state programs. South Carolina's tax codes have been described as "complex and unfair due to the decades of legislative manipulation."[18]
  • In February 2009 home sales continued to fall throughout South Carolina, falling a total of 35 percent. In South Carolina, home sales dropped to 2,448, and median price was down 8 percent to $146,000. The city of Columbia’s median price hit $128,000.[19][20]
  • The statewide property tax reforms of 2006, which exempted homeowners from most school taxes, were supposed to be paid for with a penny increase in the statewide sales tax. This resulted in a shortfall of more than $143 million over the past two years, which made the state's budget problems worse.[21]
  • South Carolina port exports in 2008 grew 19.65 percent over 2007 to $19.8 billion, according to the Department of Commerce and Ports Authority. The top exports were vehicles, machinery, rubber, plastics, electrical machinery, paper and paperboard, organic chemicals, optics and medical equipment, iron and steel and wood pulp. The sector with the most growth among the top 20 sectors was aircraft and spacecraft exports, which increased 153 percent to $143 million.[22]

Proposed actions

Governor Mark Sanford

Not only had the governor called for immediate budget cuts to government agencies in light of the state's widening budget gap but he had also called for a series of reforms for the FY 2009-2010 budget. In Gov. Sanford's budget recommendations, he suggested limiting annualizations to no more than one percent of the total budget, a reformed tax code in order to make the state more competitive with regard to economic development, a reformed education system that would provide more choices to parents and put more dollars into the classroom, a restructured state government that would be more efficient and accountable to the taxpayer and a reformed retirement system that would help repay $20 billion in outstanding liabilities.[12]

Gov. Mark Sanford said that in order to attract more jobs and investments he believed that the state needed to have a flatter, simpler and lower income tax rate. This, he said, could be done first, by using the economic development incentives that relate to corporate income tax to eliminate that tax on all businesses, and second, by giving South Carolina taxpayers the option of paying a 3.65 percent flat income tax. To balance the lost income tax revenue the governor suggested a cigarette tax increase to 37 cents, implementing a $3 per ton tipping fee and eliminating the state’s three sales tax holidays.[12]

In total the governor's recommended budget increased expenditures to $20.8 billion as compared to $19.9 billion for FY 2008-2009.[12]

Republicans

In an effort to raise revenue and reduce the state's budget deficit South Carolina Republicans suggested modeling an increase in cigarette tax after an Oklahoma program that used cigarette tax revenue to secure matching federal money. The federal money, Republicans said, would be used to provide a subsidy to buy health insurance for low-income residents or small businesses that could not afford insurance. “It looked like Oklahoma found a way to include the federal match,” said House Speaker Bobby Harrell. “That is critical to making sure there is enough money in the fund to cover a large number of uninsured people.” The increase would mean a 50 cent tax increase resulting in an estimated $147 million. Lawmakers said that part of the plan should lower insurance costs for non-smokers, who pay higher premiums to offset care provided to the uninsured. “This is a compromise between people who want something tax-neutral and those folks who want to expand Medicaid,” Harrell said. Some Democratic legislators had already announced their support for the tax proposal.[23]

Democrats


DNC ad regarding Sanford's rejection of stimulus funds

In early March 2009, following the governor's announcement that he would be rejecting some of the federal stimulus funds, the Democratic National Committee launched an ad critical of Gov. Sanford's plans. “His political posturing is hurting real people in South Carolina,” South Carolina Democratic Party Chairwoman Carol Fowler said. “We cannot wait for another failed economics lesson from Gov. Mark Sanford.” Senate Minority Leader John Land said the governor was trying to stake his turf as a far-right conservative with an eye toward a bid for the presidency. He called Sanford’s governorship “a total failure and a disaster.”[24] However, in response to the governor's call for reforms in education, Sen. Robert Ford was hawking a bill that would give students a publicly paid scholarship or tuition grant to go to a private school. Ford had been unable to gather additional support from the Democratic Party; however, Ford said that the state of public education was hurting the children. “All of us have been defending the system,” Ford said. “It’s time to stop. I’m not pussyfooting with this anymore.” Sen. John Scott said, "We already have school choice. Public school is free to all. If you want your children to go to a private school, you pay.”[25]

Economic stimulus package

South Carolina was expected to receive approximately $2.8 billion from the $787 billion economic stimulus package.[26] According to White House officials, the stimulus bill was estimated to create or save 50,000 jobs.[27]

However, believing the state's budget deficit resulted from irresponsible spending, not actual need, Governor Sanford vocally opposed the American Recovery and Reinvestment Act of 2009. In taking this stance, Sanford conflicted with members of the state legislature. Despite the opposition of Sanford and others to a federal stimulus, some asserted that opposition to stimulus funds would not be acted upon.[28] However, on March 11, 2009 Gov. Mark Sanford became the first governor to announce that he rejected $700 million in federal stimulus money. The governor said that he believed that the stimulus money would destabilize South Carolina's economy.[29] Sanford was quoted in The New York Times saying:

"We simply cannot afford to base 10 percent of our state budget on money that will disappear in two years’ time."[30]

Of the American Recovery and Reinvestment Act as a whole, Sanford said:

"What you're doing is buying into the notion that if we just print some more money that we don't have and send it to different states, we'll create jobs. If that's the case, why isn't Zimbabwe a rich place?"[31]

Gov. Mark Sanford speaks against the stimulus plan

According to preliminary reports, South Carolina was expected to receive:[26]

  • $445.5 million to offset its budget deficit and education shortfalls
  • $1 billion in tax relief for South Carolinians
  • $882 million in extra Medicaid payments
  • $566 million in increased unemployment benefits
  • $482 million to build and repair roads and bridges
  • $335 million for low-income health insurance
  • $260 million for food stamps
  • $59 million for weatherization[32]

Budget transparency

South Carolina Spending Transparency is the publicly available website created by the South Carolina government. It discloses information about South Carolina's spending, and is managed by the Comptroller General. Comptroller Richard Eckstrom has written extensively on the importance of state and local transparency.[33] He wrote in December 2008:

"Earlier this year, I worked with Gov. Mark Sanford to create an easy-to-use spending transparency webite. It contains detailed spending information for more than 80 state agencies, giving the public more access than ever to information about how state government spends its hard-earned tax dollars. This website, which is available through my office’s site (www.cg.sc.gov), is serving as a national model for other states attempting their own transparency initiatives. Several states have contacted me hoping to duplicate our open-government ideas."[34]

Legislation

Government tools

The South Carolina Spending Transparency database provides a searchable expenditures database.

The following table is helpful in evaluating the accessibility and scope of the information provided by the South Carolina Spending Transparency page.

Criteria for evaluating spending databases
State database Searchability Grants Contracts Line item expenditures Dept./agency budgets Public employee salary
South Carolina Spending Transparency Y
600px-Yes check.png
N
600px-Red x.png
Y
600px-Yes check.png
N
600px-Red x.png
N
600px-Red x.png
Y
600px-Yes check.png

Economic stimulus transparency

  • The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[35]
  • South Carolina was expected to receive an estimated $2,105,359,474.[36]
  • South Carolina Comptroller General Richard Eckstrom had been chosen by the governor to lead a stimulus transparency group. Eckstrom planned a unique coding system to match up and track the stimulus money to ensure it was used for its intended purpose. The oversight group was also developing a website to let citizens monitor these funds

Support for creation of the database

Governor Mark Sanford signed South Carolina Executive Order 2007-14 on August 30, 2007. The order required the comptroller to compile and disclose information concerning how the state agencies of South Carolina allocate revenues.[37]

Public employee salary information

See also: South Carolina state government salary

See also

External links

Additional reading

References

  1. Center on Budget and Policy Priorities, "State Budget Troubles Worsen," March 13,2009
  2. Business Week, "States in Worst Budget Trouble," accessed March 23,2009
  3. Associated Press, "SC Budget Problem Could Grow To $1.6 Billion," January 8, 2009
  4. 4.0 4.1 4.2 The State, "State revenue shortfall forces $102 million in last-minute cuts for agencies," March 19,2009
  5. Gov. Sanford, "Gov. Sanford Won’t Seek Stimulus Money," March 20,2009
  6. WSPA, "SC Education Budget Takes Another 2% Cut," March 18,2009
  7. Greenwood Today, "Federal stimulus funds critical to offset state K-12 budget cuts, Rex tells senators," March 18,2009
  8. Associated Press, "SC unemployment hits 10.4 percent in January," March 11,2009
  9. The State, "Cigarette tax gains momentum," March 23,2009
  10. Children's Trust of South Carolina, "Budget Process," accessed March 23,2009
  11. Wall Street Journal, "Two Governors and the GOP Future," February 20, 2009
  12. 12.0 12.1 12.2 12.3 State of South Carolina, "Executive Budget: fiscal years 2009-2010," January 9,2009
  13. 13.0 13.1 13.2 13.3 13.4 13.5 South Carolina Policy Council, "Governor Joins Policy Council to Unveil Budget Report," February 20, 2009
  14. 14.0 14.1 14.2 14.3 South Carolina Office of State Budget, "Frequently Asked Questions"
  15. [http://www.scstatehouse.gov/sess117_2007-2008/appropriations2008/tas87.htm South Carolina General Assembly, "H. 4800: General Appropriations Bill for fiscal year 2008-2009"]
  16. South Carolina General Assembly, "H. 3620: General Appropriations Bill for fiscal year 2007-2008"
  17. 17.0 17.1 17.2 17.3 17.4 17.5 17.6 Office of State Budget, "Historical budget information for each state agency?," September 13, 2006
  18. GoUpstate.com, "State budget woes," July 19, 2009
  19. Greenville Online, "S.C. home sales stumble, 26 percent for Columbia," March 21,2009
  20. Associated Press, "SC Realtors: Home sales fall 34 percent in 2009," March 29,2009
  21. The Post and Courier, "As sales tax income falls, property taxes rise," March 22,2009
  22. The Sun News, "Coastal business | S.C. exports rise, not in local port," March 19,2009
  23. The State, "Cigarette tax gains momentum," March 23,2009
  24. Charleston Regional Business Journal, "Democrats call Sanford’s stimulus actions ‘political posturing’," March 17,2009
  25. The State, "State Sen. Robert Ford backs choice on school vouchers," March 22,2009
  26. 26.0 26.1 The State, "Its senators voted no, but S.C. would get billions from stimulus," March 10,2009
  27. American Recovery and Reinvestment Act, "Estimated job effect," accessed March 23,2009
  28. Washington Post, "Keep Your Stinking Stimulus," February 20, 2009
  29. Miami Herald, "S.C.'s Sanford makes it official, rejects $700 million stimulus," March 11,2009
  30. The New York Times, "South Carolina Governor Rejects Stimulus Money," March 20,2009
  31. CNN, "S.C. governor evokes Zimbabwe in arguments against stimulus," March 11,2009
  32. The Post and Courier, "S.C. to weatherize, boost green energy," March 18,2009
  33. Herald-Journal, "Urge local governments to put spending information online," December 28, 2008
  34. Herald-Journal, "Urge local governments to put spending information online," December 28, 2008
  35. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  36. Wall Street Journal, "Stimulus Spending by State," March 12,2009
  37. South Carolina Executive Order 2007-14