Mystery money: How to return the $1.8 billion to taxpayers

Update 4/19/24: The Senate Finance subcommittee investigating the $1.8 billion issued an interim report on Tuesday. It recommends a forensic audit of the bank account in question, legislation to make the State Auditor more independent, and a constitutional amendment to make the Treasurer an appointed position instead of being elected by voters, among other items. It also notes that the $1.8 billion has existed in a state treasury fund “without identification of agency claim and ownership since 2016.” We contend this finding strengthens the case for rebating the money to taxpayers, and that the subcommittee’s recommendations would not conflict with the proposal outlined here.  

If you have watched the news or read the local paper, you have probably heard about the recent discovery of $1.8 billion sitting in a South Carolina bank account where it shouldn’t be. And to cause more confusion, top financial officials can’t say where it came from or who has ownership.  

News broke of the mystery money in mid-February. Since then, state lawmakers have held multiple investigative hearings, including a recent six-hour meeting to question S.C. Treasurer Curtis Loftis, Comptroller General Brian Gaines, and State Auditor George Kennedy, in search of explanation.

We learned that the error began sometime during the 2010s when South Carolina transitioned to a new financial accounting system, and that the extra $1.8 billion is seemingly connected to a larger $3.5 billion accounting mistake discovered last year, which led to the resignation of then-comptroller Richard Eckstrom.

But the biggest question – who does the $1.8 billion belong to? – remains unanswered. In fact, no one, or no entity, has made a legitimate claim to it.

We propose a simple solution: unless evidence can be provided by June 30 that it has ownership elsewhere, that money belongs to taxpayers.

OUR RECOMMENDATION

After a slow investigative rollout, South Carolina needs a structured plan to address the $1.8 billion in a timely and efficient manner.

The General Assembly should direct state agencies that believe they have a claim to the money to submit evidence of their share by no later than June 30. This reasonable deadline, also the last day of the fiscal year for S.C. government, would give them more than two months to gather and present records to support their case.

If, for any reason, they miss the deadline or can’t produce evidence, they forfeit all claims going forward. The remaining money (which could reasonably be most, if not all, of the $1.8 billion since no agency to date has presented evidence or publicly notified legislators of a stake in these funds) should be rebated to taxpayers.

If the Legislature is proactive and authorizes rebates before the end of session, taxpayers could see checks starting in the fall, providing much-needed relief ahead of the holidays. This could make a significant difference in covering expenses such as gifts, travel and gatherings, or simply keep more money in people’s pockets.

The good news is that we already have one option on the table. A recently filed House proposal would move the $1.8 billion into a special fund to provide one-time tax rebates. Individuals who filed a return for tax year 2023 would be eligible, with amounts varying by tax liability. As of writing, the bill has an impressive 20 legislative sponsors.

As part of a tax cut package championed by SCPC, the General Assembly in 2022 returned $1 billion in budget surplus to state taxpayers via rebates. This amounted to serious money for hardworking South Carolinians and their families, up to $800 per person, based on tax liability. In other words, the move would not be without precedent.

We contend that a similar approach for the $1.8 billion makes clear sense, allowing for even bigger rebates. If distributed along a similar formula as those in 2022, this year’s rebates could reach up to $1,440 per taxpayer!

*** 

The discovery of $1.8 billion in unclaimed state funds presents a historic opportunity for taxpayer relief. Our proposed solution, which includes setting a deadline for agency claims to be submitted and using the remaining funds for one-time rebates, offers a fair and practical way forward that can significantly benefit hardworking South Carolinians and their families.