Major Takeaways from the Governor’s Vetoes

On July 5, the Governor vetoed 42 items and roughly $40 million from the state budget passed by lawmakers in the June special session. Most significantly, the governor vetoed the statewide data warehouse and a proviso that would have moved billions in higher education funds off-budget. Here are the major takeaways from the Governor’s vetoes.

Data Warehouse

Proviso 117.156 created a statewide personal information data warehouse for the purpose of tracking children and funneling them into the workforce.  It centralized data from six state agencies – including the Department of Education and Department of Commerce – in addition to state’s colleges and universities. This personal data would have been directly available to lawmakers and their staff, and would ostensibly have been used to “shape policy and funding decisions” on everything from preschool to the workforce.

The proviso’s language defined a broad and sweeping scope of possible data collection with a focus on personal, individual data. While the information to be tracked primarily consisted of education (preschool to college) and workforce/employment, the bodies charged with oversight of the warehouse could have compelled any other state agency to submit information to the warehouse.

Most significantly, the warehouse was void of any true accountability or privacy protections. A plethora of agency heads and education officials would have comprised the board primarily responsible for overseeing the warehouse, making it practically impossible for any single government body to be held accountable. Moreover, the only privacy protection built into the system was that it must comply with state and federal privacy laws – which are full of loopholes.

While the proviso has been vetoed, it is important to note that an enabling law passed last year mandating the creation of this data warehouse is still effective, and the Governor did not veto the related funding in this year’s budget. Repealing that law would require additional legislation by lawmakers.

Moving higher education spending offline

In this budget, lawmakers moved nearly $4 billion in higher education spending off-budget. These dollars (accounted for as “Other Funds”) consist of tuition fees, athletic program revenues, etc. for all of the state’s public colleges and universities, accounting for roughly 13% of the entire budget. Instead of listing the individual projected amounts (as every other state agency does), lawmakers simply inserted a budget proviso giving blanket authorization for higher education institutions to spend these funds as they come in. The Governor vetoed this proviso.

Public colleges and universities are state agencies, and are governed, funded and overseen by state government. Lawmakers elect the boards of trustees, and spending and programmatic decisions are overseen by governmental boards and commissions. As is the case with every other state agency, public colleges and universities need legislative authorization to spend every dollar they receive.

Higher education is a service the state has assumed the responsibility to provide, and as such, it forms a major portion of state spending every year. This vetoed proviso would have allowed public colleges and universities to spend funds that have not been reported to the public in the state budget – a nontransparent, unaccountable practice.

Hazardous Waste Fund Account

Proviso 34.56 would have loosened spending requirements on Hazardous Waste Fund County Accounts. These accounts are essentially infrastructure slush funds with no oversight other than local lawmakers. This proviso would have added “ancillary services” to the list of approved project types, essentially allowing the funds to be used for practically any projects that impact economic development.

Each fund is already controlled by an inherently unaccountable legislative delegation. Giving the controlling body more discretionary spending would have only further increased the possibility for abuse.

Locate SC Funding

A section of proviso 118.15(B) directed $4.5 million in non-recurring revenue to the Locate SC program. This line item was struck by the governor.

Locate SC is an online property listing service created and managed by the Department of Commerce that connects companies seeking to locate in the state with available industrial sites, buildings and office space.  Despite the $4 million veto, the program is still receiving an additional $7 million in new revenue this year.

Operating a property listing service for the benefit of specific companies and individuals is clearly not the role of government, and the lack of accountability in place creates the potential for favoritism and abuse. The effectiveness of this program is also unclear.

Improper use of Provisos

The final version of this year’s budget – like every previous version – included a number of provisos that changed or created an agency policy instead of directing the use of funds. Not only does this violate the proper legislative process, it often violates the constitutional ban (upheld by multiple Supreme Court rulings) on multiple-subject bills – a provision intended to ensure that lawmakers debate each bill on its own merits in a public, transparent process.

Below are several examples, all of which were struck by the governor:

• Proviso 38.30 modified existing Department of Social Services laws by giving foster parents preference with an adoption if they have cared for a child for a period of nine months. This proviso dealt strictly with agency policy, not the raising or spending of funds.
• Proviso 65.29 mandated the Department of Corrections to initiate a study with the Medical University of South Carolina, Department of Health and Human Services and the Department of Mental Health to explore the effects of cannabidiol oil (CBD oil) on prisoners. Aside from the issue of initiating a research program via budget proviso, the biggest concern is that the Department of Corrections would have been responsible for paying for the study. Corrections is severely underfunded and suffers from staff shortages and threats to inmate safety. The legislature should focus on properly funding essential functions of government before anything else.
• Proviso 93.24 directed the Department of Administration to establish a program to identify and develop “the next generation of South Carolina state government’s leaders”. Employee recruitment is already one of the department’s functions, and it should be free to execute that mission without legislative micromanagement. The agency itself even requested that the program be vetoed. Finally, this proviso largely represents a change in department policy rather than a change in spending.

Earmarks

Lawmakers often use budget provisos to insert preferential spending items for specific state agencies and projects, commonly referred to as “earmarks”. Many of these appropriations were added with no accompanying justification. Here are several of those items vetoed by the governor:

• $7.1 million to Francis Marion University for new facilities
• $4.5 million to the Department of Parks, Recreation and Tourism for a sports marketing grant program.
• $1.3 million to the Department of Commerce for Economic Development Hubs
• $500,000 to the Children’s theater
• $700,000 to the Department of Social Services for a strengthening families program.
• $500,000 to be given to non-profits to renovate homes damaged by flooding

***

The vetoed budget sections are currently on hold until the legislature returns. The rest of the budget has gone into effect. Lawmakers have not officially scheduled a vote on the governor’s vetoes, but they will have to reconvene before session officially ends on November 11. We will continue to post updates as changes occur.