Important state budgetary law ignored once again

Important state budgetary law ignored once again

More than one hundred planning documents for next year’s state budget are missing important data required by South Carolina law.

The latest round of agency budget requests, published earlier this fall, were supposed to justify every dollar agencies are asking for in FY24-25, explaining why both new and current programs deserve taxpayers’ money. Despite this legal mandate, agencies only provided details for new spending requests. 

SCPC has brought attention to the law for years, which routinely goes unfollowed.

The law is based on a financial practice called zero-based budgeting. Under this approach, expenses should be justified annually based on their need and performance, without regard to previous budgets. It is commonly used in the private sector to keep budgets lean and eliminate unnecessary costs. For South Carolina, it can help identify redundant or wasteful government programs; and reduce spending

Here is a brief overview comparing what the law requires with how the budget process actually works.

 

What the budget law requires

By November 1, state agencies are supposed to submit their annual budget requests to the governor, which is done through the Executive Budget Office.  

According to state law, agencies should be justifying their entire proposed budgets – both current funding and new spending requests. The text is unambiguous, which reads:

“The Governor shall, prior to making annual recommendations to the General Assembly of the amounts to be appropriated to the various state agencies, departments and institutions, as required by Section 2-7-60 of the 1976 Code, require them to justify the entire amount of money they are requesting. It is the intent of this section that each state agency, department or institution shall be required to justify its recurring expenses, as well as any new or additional expenses.”

In accordance with the principles of zero-based budgeting, agencies are supposed to list the 1) purposes, 2) goals and 3) quantitative measurements for every program they administer:

“For the purpose of justification as set forth in this provision, the [governor] shall require each state agency, department and institution to submit for each program the purposes, objectives and such quantitative measurements regarding services provided ...”

 

What actually happens

In practice, S.C. agencies list and justify only new spending requests on their annual budget forms (or requested proviso changes). If, for example, an agency wants to start a new program or expand a current one, build a new facility, or raise employee pay, it will typically provide explanations for those requests. However, programs within an agency that aren't having their budgets changed (which is often the case for many programs), are not listed, leaving the dollars that currently fund them without explanation. 

Here is one example from a small state entity, the S.C. Workers’ Compensation Commission. Since it is not requesting a budget increase for FY2024-25, the spending sections on its budget form were skipped. The rest of the agency budget plans can be viewed here

 

How this affects the budget

Rather than building South Carolina's budgets from scratch, current spending levels are carried forward each year, serving as the basis for the next budget. Legislative discussions revolve entirely around the allocation of new funds, which make up only a fraction of overall spending. Most agencies, as a result, see continued budget increases. 

These issues were highlighted recently in a social media post by S.C. Sen Tom Davis, who supports zero-based budgeting and called it “the gold standard.” According to Davis, South Carolina hasn’t used it since 2009 after the Great Recession when the state faced a budget deficit.

In the years since, state spending has seen a concerning rise. Recurring general fund appropriations grew by nearly 70% between FY13 and FY23, a rate that far outpaces expected budget growth based on state population growth and inflation data.

There's no question – following the law and applying zero-based budgeting would go a long way to bring down spending.