Government Spending

 

 

Proposed in 2014 Legislative Session

Study Committee to Research Impact of Dependence on Federal Funds (Filed 4/10/2014)

H.5119 would create the South Carolina Federal Funds Study Committee which would assess the financial stability of the federal government, the level of dependency the State and local governments have on federal funds, and how a reduction of federal funds would affect the State and local governments. The committee is also to make recommendations to reduce the state’s dependency on the receipt of federal funds to the legislature and Governor by October 31, 2015.

Federal funds come with strings attached that coerce states into enacting polices the federal government prefers. For South Carolina to be the freest state in the nation, it needs to regain our fiscal sovereignty over policy areas like healthcare and education, and transportation (just to name a few). Unfortunately, the findings of study committees are rarely taken action upon by the legislature. We already know our state is too dependent on federal funds, and it will take more than just the findings of a study committee to cut off our state’s dependence.

Doubling Down on Bad Transportation Policy (Filed 2/05/14)

S.994 would enact two large infrastructure funding changes. First it would change recently enacted law that stipulates $50 million be transferred to infrastructure bank each year to be bonded into $500 million for projects that bank deems worthy. This bill would increase this annual transfer amount to $100 million which could be bonded into a $1 billion of new debt each year. Second, the bill would mandate the full transference of a revenue source, half of which currently dedicated to education to the State Non-Federal Aid Highway Fund. This revenue source used to be dedicated entirely to education, but half of the proceeds were redirected to infrastructure last year and only one year later the legislature is back for the other half of the revenues. This idea as we have said before represents that old saying robbing Peter to pay Paul.

These policies were bad ideas when they were introduced and first passed, and they’re still bad ideas when legislators are trying to double down on them now. Passing this bill would mean more debt, and it would do little to guarantee better roads. Until lawmakers address our state’s prioritizing of construction over maintenance, any other road fix bills will simply be throwing good money after bad.

Zero Based Budgeting (Filed 1/23/14)

H.4549 would mandate that both agency budgets and the executive budget be submitted using a zero based budgeting process. Unlike traditional state budgeting, in zero based budgeting no expenditures are assumed. The fact that an agency or program received funds the previous fiscal year is no guarantee they will receive these funds again. Every appropriation must be justified under zero based budgeting. While such an approach would not drastically reduce government by itself, it would at least force agencies to justify more of their expenditures.

Transferring Excess Revenue to Highway Fund

H.4380 would limit annual state budgetary appropriations to the amount of state revenue forecasted by the Board of Economic Advisors (BEA) in the their February 15th forecast beginning in FY 2016. Typically revenues exceed this forecast, and this bill would require that all revenues in excess of the February 15 forecast be credited to the state highway fund.  We have documented similar attempts before to divert revenue directly to highway funds. What makes this attempt even more questionable than others that preceded it is that it comes after a year when the legislature transferred $50 million to a state transportation agency so that it could bond into $500 million. Ultimately, all fund transfers are merely a band aid for our state’s crumbling infrastructure. The problem of infrastructure maintenance won’t be solved until the legislature addresses the incentives created by the federal government and state agencies that lead to prioritizing new construction over maintenance.

Creating a “Division of Small Business and Entrepreneurial Development” (Pre-filed 12/10/13)

S.806 would create this said division under the Department of Commerce which would “develop and implement an economic development strategy for promoting small businesses in South Carolina,” and “provide community-based economic development assistance to local economic development organizations and community leaders in small business.” Small businesses aren’t hurting because of the lack of government intrusion in the economy; they’re hurting because they’re over-regulated and over-taxed, while the state government hands out tax favors to big businesses—putting the brunt of the tax burden on the smaller businesses. If policy-makers are serious about wanting small businesses to thrive, they shouldn’t double down on their already-failed corporate welfare policies. Instead, they should lower taxes, cut regulations, and leave businesses alone so they can create value and create jobs on their own.

More Spending Power and Less Accountability for the Rural Infrastructure Authority (Pre-filed 12/10/13)

By removing two key provisions in the state code, S.812 would give more spending and regulatory lee-way to the South Carolina Rural Infrastructure Authority (RIA)—a relatively new government spending program that provides financial assistance for infrastructure in certain rural counties in the state. Under this bill, the RIA would no longer be subject to the Administrative Procedures Act, which provides that all regulations promulgated by state agencies must be filed with the Legislative Council and published in the State Register. Moreover, S.812 removes the provision that any loan or financial assistance to a qualified borrower given by the RIA must first be reviewed and approved that the Joint Bond Review Committee. The RIA is already an unnecessary spending mechanism of the state, and making it even less accountable to taxpayers would only allow it to spend and regulate more than it already does.

Proposed in 2013 Legislative Session

Spending $24 Billion to Fund the South Carolina State Government

H.3710, perhaps more commonly known as the General Appropriations Bill, would appropriate roughly $24 billion to fund the state government for the 2014 fiscal year. If it’s anything like last year’s appropriation bill, taxpayers should be worried. As usual, the House Ways and Means Committee violated state law by not holding joint, public hearings over the governor’s budget, so as a practical matter taxpayers are highly unlikely to have any idea what’s actually in the budget.

Part 1A of this proposed budget gives an agency by agency breakdown of their respective budgets. The Recapitulation section of 1A gives a brief breakdown of the total budgets of each agency, including the total General, Other, and Federal funds spent altogether. Keep in mind that roughly $1.5 billion is omitted from the Federal funds section, since, for whatever reason, this money (which the state receives from the federal government for the Food Stamp program) is now “transferred” to an “unbudgeted account.”

Finally, Part 1B contains countless “provisos” that allocate even more tax dollars to agencies—allocations that aren’t included in Part 1A. (This section is almost impossible for an average person to read and understand, but it does have the virtue of being published on one web page, so you can do text searches on it.)

Prohibiting Taxpayer-Funded Lobbying

H.3152 would make it unlawful for a state entity to spend public money on a lobbyist. Taxpayer-funded lobbying is one of the key drivers of budget increases as it essentially gives money to people who in turn use that money to try to influence an increase in a section of the budget. If passed, taxpayer money could no longer be used to fund consulting firms like, for example, this one. As the bill stands now, “public funds” means all public funds, not just General Fund dollars (as distinct from fine and fee revenue).

Shifting Revenue Sources to the Highway Fund

S.3412 would require that funds collected from sales, use and excise taxes required from sale or titling of a vehicle would go into the State Non-Federal Aid Highway Fund (SNFAHF). In the fiscal years 2013-2014 and 2014-2015, 50% of all revenues collected from these taxes would go into the SNFAHF, and following these years 100% of these revenues would go to the SNFAHF.  Previously, these funds were divided between the General Fund (GF), and the Education Improvement Act Fund (EIF). An amendment further requires that the EIF must be kept whole and not deprived of revenue by this bill. Preliminary financial analysis has indicated that in fiscal years 2013-2014 and 2014-2015 this bill will cost the GF $41.4 million in revenue and the EIF $10.35 million in revenue each year. For years thereafter it will cost the GF $82.8 million annually and the EIF $20.7 million annually.

Since the state spends, or at minimum keeps, every dollar of revenue it brings in each year, and any reduction in state spending is highly unlikely politically, the state will soon be looking to make up over $100 million in revenue annually. In the event of this bill’s passage, taxpayers will be able to expect and look forward to either tax increases or an increased level of state borrowing and debt taken on to finance the transfer of this revenue.

Allocating All Extra Revenues to the Highway Fund

H.3017 will ensure that if state revenue projections were revised upward after the third reading of the budget, all the additional revenue would go towards the state highway fund. Instead of quickly throwing any additional revenue towards one or multiple agencies, the state should return them to the overcharged taxpayers.

Perpetuating Irresponsible Highway Funding

S.14 would create a new funding mechanism, the Palmetto Highway Improvement Fund, for the Department of Transportation (DOT) and the State Transportation Infrastructure Bank (STIB) independent of the funds they already receive from the budget. This new fund would start as 1% of all general fund revenues and would have the potential to grow up to 5% of all general fund revenues. The STIB is a largely unaccountable agency that has a history of serving only a select few counties. Rather than expanding its funding, the agency’s responsibilities should be given to the DOT where the decisions made can be held more accountable. This is not to say the DOT should be receiving these new funds either. The DOT, like every other agency, should receive its funding from the general budget in the appropriations process. For a more detailed analysis on this bill see our piece “Road Funding: Another Bad Idea”.

Implementing Zero Based Budgeting

H.3303 would implement a zero based budget process in South Carolina. Zero based budgeting is vastly superior to the current budget structure which is set up in such a way to ensure constant growth of government and green lighting of superfluous projects. Under zero based budgeting, agencies must justify their entire budget each year, no appropriation or expenditure is assumed. In contrast, in the current budget process, once a General Funds line item is approved for an agency in one fiscal year, that line item and its level of funding automatically becomes part of the agency’s base budget, and its expenditure is simply assumed in the starting discussion for the next year’s budget. Programs, even when proven less than beneficial, can become extremely hard to eliminate under this system. Implementing zero based budgeting would help to put reins on the growth of government and give proper scrutiny to programs that deserve it.

Borrowing Half a Billion Dollars for County Transportation

S.411 would authorize the issue of $500 million in general obligation bonds to finance country transportation infrastructure. While our state’s transportation system has its array of problems, the problems are more due to the corrupted priorities of the powerful State Transportation Infrastructure Bank rather than a lack of funding. Spending $500 million that we don’t have is not the solution. However, if transportation is supposed to be a key state priority, there is plenty of money being spent elsewhere (hundreds of millions of dollars spent on “economic development” each year) that could be spent on fixing roads instead of borrowing such a large amount of money that incurs interest down the road.

Automatic Pay Raises for State Employees

S.302 would establish a longevity pay plan for state employees, meaning employees would receive automatic pay raises based on their length of employment. Establishing these kind of automatic raises disincentives employee performance and is a perfect example of what makes government less efficient than the private sector. Employee pay should be based on performance, not seniority.

Limiting the Capital Reserve Fund to Capital Projects

S.111 will remove the ability to pay for projects other than capital improvements or construction through the Capital Reserve Fund. This should help to cut down on unnecessary spending as without this restriction the Capital Reserve Fund has become something of a pork projects fund for lawmakers who couldn’t get their particular spending item into general funds or provisos.

Limiting the Growth of General Funds

S.39 will limit the growth in the size of the General Fund each year to a percentage no greater than the average percentage change in the size of the General Fund over the last ten fiscal years. In addition, excess General Fund revenues greater than need for the maximum allowable general fund increase would go into a budget stabilization fund in the treasury to be drawn from in emergencies. While not as strong of a check on budget growth as might be desired, this bill will at least limit to a degree our ever rapidly expanding budget.

Holding the General Assembly Accountable for Fines and Fees

S.90 would prohibit the General Assembly from authorizing state agencies to increase or implement new fees, penalties, or fines in the annual appropriations bill. Instead, any increase or new fine or fee would have to be authorized in a separate bill. The “Other Funds” section of our budget, which includes these fines and fees, accounts for over one third of the state’s entire budget and has grown at a much higher rate than the General Fund in the past decade. If this bill were enacted, lawmakers would have to own up to these tax increases instead of letting bureaucrats do so behind the scenes.

Alternative Fuels in School Buses

H. 3432 would require the Superintendent of Education to create a pilot project to study the use of biofuel and other alternative fuels to power South Carolina’s school buses, and then report on the feasibility of switching all South Carolina school buses to alternative fuels.  South Carolina already spends an enormous chunk of educational funds on bus fuel and maintenance, and experimenting with more expensive alternatives is a waste of time and money.  The bill aims to improve air quality, but the EPA reports that air quality is already improving, even with traditional diesel buses on the roads.  Moreover, the proposed feasibility study is duplicitous of other studies, which indicate that bus fuel and maintenance costs would be much higher if alternative fuels were used.

A New Committee to Promote Cronyism

H.3437 would create a new “Joint Committee on Economic Development” that would consist of members appointed by the Chairmen of the Senate Finance and House Ways and Means Committees, Senate President Pro Tempore, House Speaker, and the Governor. What would the committee do? “The committee shall make a continuous study and investigation of all facets of the laws, policies, and procedures relating to economic development, including, but not limited to, the imposition of unreasonable penalties and interest charges, and any legal requirements that make it difficult to do business in this State, so as to recommend appropriate modifications.”

Nearly everyone agrees that “unreasonable penalties and interest charges” and “legal requirements that make it difficult to do business in this State” are bad things and should be done away with. But the reason they are there in the first place is because powerful elected officials in the State House benefit from them and want to keep them as they are – in fact, one might be tempted to say that these powerful elected officials are the very same people who would appoint this joint committee. It’s safe to assume, therefore, that this committee would only be proposing new ways to use taxpayer dollars in the name of “economic development.” Such policies are bad enough already. Do we really pay the members of another committee – according to the bill, members would “receive the usual mileage, per diem, and subsistence” – to come up with yet more ways to spend taxpayer dollars on “economic development”?

Giving Legislators more Leeway to Issue Bonds

S.491 would add large “port projects” to the criteria of what can be considered an “economic development project” for the purposes of general obligation bonds. Currently, annual general obligation debt service—interest and capital owed on bonds—is limited to six percent of the general fund revenue in a given year, and half of one percent can be devoted to these “economic development projects.” Our state currently collects more tax revenue than it needs, so it should at least live within its means with the money it has instead of borrowing more. Broadening the definition of an “economic development project”, as this bill does, would just give legislators more leeway in issuing bonds that taxpayers must pay back with interest years later.

Creating “Community Land Banks”

H.3922 would allow nonprofit corporations to be formed to acquire, manage, and provide a new purpose and use for vacant, foreclosed, or abandoned properties. While (obviously) there is no problem with nonprofit organizations themselves, these new community land banks would seem to be primarily funded through tax dollars.

Any unit of local government would be able to authorize the creation of a community land bank and create provisions governing its operation and its acquisition, use and disposition of real property. These banks would receive funding through grants and loans from the governmental unit(s) that created them, from other municipalities, the state, federal government, and other public and private resources—and would be given the capacity to issue their own bonds. As mentioned, we have no problems with nonprofits in general, but it appears these banks would be just another entity for lawmakers on all levels of government to funnel tax payer dollars to.

Selling the State Planes

Joint Resolution S.608 would direct the Budget and Control Board to sell the two airplanes owned by the state. As reported by The Nerve last year, the governor, state lawmakers, and Clemson University officials took at least 118 mostly round trips on these planes in a year, costing over $215,000. Not to mention, there is hardly any oversight to speak of regarding these trips, as these state leaders can be nonspecific in their reporting regarding the reason for their trips, giving reasons like “official university business”, “speech”, or “economic development”. Selling the planes would at least cut some of this waste from our already bloated budget, and give state leaders less ability to fly out to hand out taxpayer dollars to selected businesses in corporate welfare deals.

More Specifications and Leniencies for Economic Development Bonds

S.610 would clarify that national and international convention and trade show centers eligible for economic development bonds must include an adjacent facility allowing specific events, and also extends the time the project must be completed within from ten to fifteen years. While the former amendment seems to narrow the requirements for these bonds, it is suspiciously specific, opening the door to questions as to if there is a specific trade show center this bill is written for. The time extension also seems suspicious, giving the idea that perhaps a center receiving these bonds is running late on its completion.

Depositing State Agency Collected Funds in the General Fund

H.3299 would require that all funds collected by state agencies with a few exceptions (tuition, funds dedicated to debt service, funds for e-filing of court documents, and funds dedicated to a specific purpose), be deposited in the state’s general fund. This reform would allow for increased transparency and heightened scrutiny of the budget for two reasons. One, the general fund is the portion of the budget most commonly reported on by the media and are often erroneously labeled as the entire budget; transferring more spending to this fund would allow the public a better idea of the size of the budget. And two, other funds (where state agency collected funds go now) are currently grouped together with federal funds in section 1A of the budget, making it difficult to determine exactly how many state agency and federal dollars are going to different programs. While this bill stops far from fixing all our budget reporting concerns, any amount of increased transparency for the budget is a good thing.

More Generous Awarding of Rural Infrastructure Fund Grants

H.3906 stipulates that Rural Infrastructure Fund Grants may also be awarded to counties and municipalities in counties in areas with a population less than 40,000. As it currently stands, the Department of Commerce, which oversees the awarding of these grants, only selects those areas with a greater population than that stated above. These counties are classified as Tier I and Tier II. This bill adds a Tier III and Tier IV, representative of more sparsely populated areas, in order to be more inclusive. Such inclusivity further loosens the reins on potential government spending, and seeing as this bill is ambiguous about the increased funding, there is some cause for concern in what appears to be another attempt to expand the state’s role in economic development.

Repaying Unemployment Insurance Fund Debts

S.619 seeks to eliminate South Carolina’s Unemployment Insurance Trust Fund debt to the federal government no sooner than June 1, 2018. With the objective to make the fund solvent, the bill sets in place general rules by which the Department of Employment and Workforce must appropriate annual revenue towards this end while also stipulating that the fund remain this way in perpetuity. Oversight function is provided for by the Comptroller General and the mandate that the Department release an annual report to the public.

Higher taxes for more transportation spending, sans reform

Late Thursday night, the Senate Finance Committee approved an amended House bill that would provide for several tax hikes and opportunities to borrow up to $1.3 billion to spend on road and bridge repairs across the state. According to a story by The State (as the amended bill is not yet online), the bill would send $80 million in sales taxes on cars to the highly unaccountable State Infrastructure Board (STIB), and would allow the STIB to borrow up to $800 million.

The proposal also would use $70 million per year in general fund money to borrow up to $500 million to repair and replace interstates and bridges, increase the gas tax and tie it to inflation, increase vehicle registration fees by 50%, impose higher fees on electric and hybrid cars, increase drivers’ license fees, give each county $500,000 for road repairs, and give each county the opportunity to receive another $500,000 if their voters approve a 1 percent sales tax increase.

There should be no confusion that raising fees is not the same as raising taxes because it is.

This bill would put a heavier tax burden on nearly all South Carolinians and would give the legislature and state agencies more leeway to spend money as they see fit. South Carolina’s transportation system has a priority problem, not necessarily a funding problem. And if roads and bridges legitimately do need more funding, there is no reason to increase taxes when there are plenty of other areas of the state budget that could be cut to spend on transportation needs – including over half a billion dollars which would be available if the state and local governments didn’t hand out taxpayer dollars to companies like Boeing.

Funneling Road Repair Dollars through Unaccountable STIB

In the recently approved Senate budget, Senator Leatherman proposed a proviso, which was approved, that would transfer $50 million from the Department of Transportation to the highly unaccountable State Transportation Infrastructure Bank (STIB)—referenced here—for bridge replacement, rehabilitation projects, and expansion and improvements to existing mainline interstates. This $50 million could be used to borrow up to $500 million, which would only add to our worsening debt problem.

S.731, as proposed and then amended by Senator Leatherman in his Senate Finance Committee, would mandate that this money transfer happen annually. If the state does need money for road and bridge repair, there is no reason to give the STIB, of which 33 percent has gone to one county (Charleston), the responsibility to do so. Furthermore, there are responsible, cheaper solutions to fix our roads without hiking taxes and borrowing money (which is a tax on generations down the line).

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