Takeaways from the Senate Budget

Earlier this month the Senate amended and passed the House budget, and the House is currently debating further amendments prior to sending the bill to conference committee. While the Senate did not add much to the bottom line – the increase is around $15 million, making the total budget $28.5 billion– senators did slip in a few provisos, which ostensibly either appropriate additional funding or stipulate how agencies must spend funds.

The budget is divided into two main parts: Part 1A, which appropriates state revenue to the various agencies line-by-line, and Part 1B, a long conglomeration of provisos.

Over the years part 1B has become a catch-all for a wide assortment of legislative purposes. Lawmakers routinely include earmarks, create entirely new programs, and insert previously failed bills into provisos.

Hijacking the budget provisos for these purposes does not only make the already-secretive budget process even murkier, it also violates the state’s constitutional prohibition of “multiple subject” bills.

While the ban on “multiple subject” bills might seem arcane, it has a very practical and relevant purpose: to ensure that lawmakers debate each bill on its own merits. Clearly, stuffing the state budget with previously failed legislation, new programs and special projects is exactly the kind of behavior that constitutional provision was intended to prevent.

The South Carolina Supreme Court’s various rulings on this issue underscore that budget provisos must “reasonably and inherently relate[s] to the raising and spending of tax monies.” Legislators routinely ignore these rulings, and this year is no exception.

In addition, legislators continue to ignore the state law that specifically outlines the budget process, requiring a detailed executive budget to be submitted to the legislature, and debated in an open, joint hearing of the Senate Finance Committee and the House Ways and Means Committee. That law, dating back to 1930, has not been followed at any point in recent history, not even since SCPC researchers discovered and revealed the law in 2011.

Here is a brief overview of some of the most debatable provisos in the Senate’s version of the budget.

1. Suspending the local government fund (proviso 113.5)

This proviso is passed every year. It suspends the state law requiring the General Assembly to appropriate 4.5% of the previous fiscal year’s general fund revenue to the Local Government Fund (LGF). This fund’s purpose is to cover the cost of state mandates on counties and municipalities. Rather than appropriating the correct amount in the budget, lawmakers routinely suspend the law requiring them to do so via budget proviso.

While the policy contained in this proviso may be suspect, it does appear to meet the constitutional standard for budget provisos as it directly affects the appropriation of state dollars.

2. ORS to inform lawmakers how much cost recovery utilities have received (73.6)

This proviso instructs the Office of Regulatory Staff (ORS) to provide a report to the General Assembly that identifies: all of the electric generation facilities owned by each investor-owned utility; the length of time that utility has received cost recovery from ratepayers; the itemized cost incurred for each electric generation facility; and the profit earned by the utility from the operation of the electric generation facility.

This proviso has nothing to do with state appropriations to the ORS. It merely requires the agency to generate a report. Lawmakers argue that provisos such as this are permissible because the agency itself is funded through the budget. The SC Supreme Court disagreed in a ruling that differentiated between the “operation of state government” and fiscal issues, noting that if the budget included both appropriations and operations it would inherently violate the “one subject” provision of the constitution.

As this proviso does not appropriate money to ORS, but rather directs it to perform a specific duty, such a mandate should be a separate bill or an amendment to existing law.

3. PSC to force utilities to pass tax savings along to customers (proviso 72.2)

This proviso directs the Public Service Commission (PSC) to order investor-owned utilities to pass their tax savings from the federal Tax Cuts and Jobs Act on to ratepayers.

This proviso is not related to the spending or raising of public dollars, but rather indirectly orders a state regulatory board to order a private utility to relinquish dollars that are not yet public. If lawmakers want to try to pass a law, they must do so in separate legislation with full debate.

4. Study committee to evaluate Santee Cooper (proviso 117.162)

This proviso creates a study committee to evaluate Santee Cooper’s assets and to consider the possibility of selling the utility. Of the committee’s thirteen members, twelve would be legislators or their designees.

This proviso is another example of trying to pass a stand-alone bill (H.4376) via proviso. This bill is still alive and the Senate has every opportunity to pass it.

5. Requiring counties to prove they aren’t sanctuary cities (proviso 117.168)

Proviso 117.168 requires local governments to prove to the State Law Enforcement Division (SLED) that they are not sanctuary cities. SLED would have the power to investigate local governments’ compliance with federal immigration law, and would issue an “Immigration Compliance Report” to the General Assembly, the governor and the state treasurer. If any local government is found to be in violation of this proviso, the state treasurer is instructed to withhold any remaining funding from the Local Government if any county or municipality is found to be in violation.

This is a particularly egregious example of circumventing the proper legislative process via budget proviso. It forces counties and municipalities to prove a negative, and is designed to prevent a problem that even the bill’s sponsor admits does not exist in South Carolina. The original bill containing this language H.4496 did not make the required crossover deadline (the date by which bills must have passed one body and submitted to the other in order to be voted on this session) – which means is unlikely to pass as stand-alone legislation.

6. Treasurer must remit investment interest to general fund (98.13)

This proviso in its present form does appear to meet the constitutional standard of a legitimate use of provisos. It would direct the state treasurer to transfer all earnings and interest earned from the investment of public dollars into the state’s general fund — a requirement already spelled out in current law.

The treasurer has the statutory power to “invest and reinvest all funds of the state”, an authority which he exercises regularly. However, the law also states that all money earned from such investments must be returned to the general fund. Proviso 98.13 simply reiterates that requirement with more specific language. The appropriation of public money to a specific fund/purpose is the sole purview of the General Assembly, and this proviso appears to do only that.

7. Read-only review of state accounting and financial management systems (117.157)

Proviso 117.157 directs the State Treasurer’s Office to provide five separate state entities, including the Senate Finance Committee and House Ways and Means Committee, with “read-only” access to the state’s accounting and financial management system.

This proviso is aimed at operation of government, and does not address the appropriation of state dollars.  It is administrative rather than monetary, and therefore in direct conflict with the Court’s constitutionality test.

8. Excess debt service funds appropriation (112.1)

This proviso redirects some of the excess debt service funds set aside in the current budget, and allows any additional excess funds in fiscal year 2018-2019 to go to pay down bond debt. If that were the full scope of the proviso it would appear to belong in the budget. But the proviso does not stop with the revenue directive – it goes on to require the state treasurer to submit any proposal to spend these funds to the Joint Bond Review Committee (JBRC) for review and comment.

The provision does not mandate the approval of the JBRC to release the funds, thus making it an administrative requirement rather than a fiscal directive. It would also expand the scope of the JBRC from bond review to investment review, as well as adding a new operational duty to the treasurer – both of which are not germane to the state budget and should be implemented in stand-alone legislation.

9. Constitutional officers appearing in advertisements (117.161)

Proviso 117.161 prohibits any statewide elected public official from appearing in any advertisements, through any means of identifying the public official, such as his/her likeness, voice or even a signature, purchased by that official (with the exception of campaign advertisements paid for with campaign funds). Such a prohibition might well be warranted, and is at least in part addressed in the State Ethics Act, which prohibits public officials from benefitting from office (as could be argued in this case). But it should not be addressed in the budget.

Furthermore, the proviso states that if an official violates the ban, the cost of the advertisement must come from that official’s salary. That requirement is unconstitutional:  The constitution states in Article VI, § 7 that “the duties and compensation of such offices shall be prescribed by law and their compensation shall be neither increased nor diminished during the period for which they shall have been elected.”

In addition to being unconstitutional, it poses a threat to the balance of power in a state where it has been almost entirely eroded.

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Unfortunately, these provisos are typical examples of lawmakers’ willingness to routinely violate the state Constitution and the rulings of the state Supreme Court when it comes to the state budget.

This is exacerbated by their habitual violation of the state law mandating an open budget process that would allow input from the public. Ignoring legislators’ practice of slipping major changes to state law into the budget – which is dense, long and deliberately vague – would further sanction the capricious application of the law.

The Senate adopted all of these provisos in the Senate’s version of the budget, and the House is currently debating whether to amend it back to the House budget along with additional tweaks – which include its own version of several of the provisos shown above. After the House votes, the budget will go to conference committee, and the committee will develop a compromise between the final House version and the version adopted by the Senate.