The State Budget: What You’re Spending in 2017

GOVERNMENT OUTPACING THE ECONOMY – BY A LOT

The General Assembly just passed a $27.42 billion budget – by far the largest in state history and a $1.1 billion increase from last year. As in past years, lawmakers ignored state laws requiring a transparent and coherent budget process and instead cobbled together the state spending plan in a vast array of subcommittees that no ordinary person could follow or understand.

The first point to make is that the state budget is far more than the roughly $8 billion general fund. The state budget includes all public money spent by the state, including fine and fee revenue as well as federal funds. The full budget is over $1 billion larger than last year’s budget. The breakdown is only available in the summary control document published by the Revenue and Fiscal Affairs office – it’s not even in the bill itself.

This year’s budget growth continues the trend whereby government spending outpaces per capita income growth. Last year, for instance, the state budget grew by 8 percent over the previous year’s budget, yet per capita personal income grew by only 3 percent. This year’s budget is a 4 percent increase over last year’s, but South Carolinians’ income growth will almost certainly fall below 4 percent.

Worse, this year’s budget reveals a massive increase in other funds spending, from $8.35 billion in 2016 to $10.85 billion. With this year’s increase in taxes and fees, that number is sure to increase dramatically over the next decade – and increase at a far faster rate than South Carolinians’ earning capacity.

These trends should have given state budget-writers cause for deep concern, but there is no evidence of it.

Federal funding

Roughly one-third of our state budget comes from the federal government, which accordingly influences – in some cases dictates – state policy on education, transportation, second amendment rights, entitlements, and many other areas of policy. Unfortunately, none of those federal dictates are disclosed or debated in the budget process – this despite a law requiring agencies to disclose every federal dollar they want to spend and the strings attached (Section 2-65-20) during the budget process.

Note: not all of the federal dollars South Carolina uses make it into the budget. In 2013 the federal food stamp program (SNAP) was moved “offline” into an unbudgeted account and has been unaccounted for since then. The explanation from DSS in past years is that the agency doesn’t get any of the money; it goes from the federal government straight to beneficiaries. Maybe, but if that’s true, why account for it at all?

In any case, the state law code states that “no agency may receive or spend federal funds” that are “not included in the appropriation act.” The SNAP funding total for fiscal year 2015-16 was $1 billion, and last year’s total to date is over $900 million with the reports for May and June still outstanding.

Waste, bad policy, etc.

In addition to the major funding allocations in the budget, lawmakers often slip in directives funding lines in the form of budget provisos. These one-year laws are designed to elaborate on how agencies should spend the money being allocated. But many provisos contain what could fairly be called “pork”: special interest funding, pet projects, and special favors for friends and allies of legislative leaders.

Gov. McMaster line-item vetoed several of these items this year. A few examples:

Stripping power from the Commission on Higher Education – Lawmakers used a proviso to strip an oversight agency of a major component of its authority to govern state colleges and universities. Using the state budget to change permanent law is flatly illegal, as the Supreme Court has affirmed on numerous occasions, but lawmakers tried it anyway.

Suspending the law regarding the safety code for go-karts – Leave aside the question of why lawmakers would want to deregulate go-karts (a cynical observer could be forgiven for wondering what owner of a go-kart park has a friend in the legislature). Lawmakers should pass this bill, if they pass it at all, in a separate bill, not in a hidden budget proviso.

School bus funding through lottery revenue – Lottery funds are collected and intended for higher education scholarships. If lawmakers want to update the state’s bus fleet, they should find non-earmarked general fund dollars for it. (Or, better yet, privatize the bus system, as is done in most other states.)

Allowing counties to spend road money on lighting, sidewalks, etc.  – The gas tax bill that lawmakers passed this year increases local road funding through the county transportation committees, or CTCs. This budget proviso would allow 20 percent of the total CTC revenue to go to lighting, sidewalks, “and other safety or economic-development related projects” instead of potholes (emphasis added). A general rule of South Carolina state budgeting: If money can be directed away from road repair and maintenance, it will be.

The governor vetoed nearly $60 million of certified and non-certified funding this year. It is unclear when the General Assembly will vote to sustain or override these vetoes. The legislative session has long since ended, so lawmakers may decide to wait until January when the second half of the two-year session begins. If that is the case, the remainder of the budget will take effect at the beginning of the fiscal year on July 1 and the vetoed portions will be suspended until the General Assembly takes action.

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