The State Budget Process: Law vs. Reality

On November 1, state law requires that the annual budget process begins. Every step is spelled out, but for decades South Carolina lawmakers have simply ignored the laws that don’t suit them in favor of a non-transparent, illegal process that keeps the power firmly in the hands of the legislature.

What the budget process is supposed to look like

According to the law, the process is streamlined, transparent and allows for maximum citizen involvement. It also begins with the governor, who is meant to be an effective check on legislative spending. Here’s a rundown:

November 1: Governor collects agency budget requests.

The governor is required to start the process with a survey of the state agencies that receive state funding. On forms supplied by the governor’s office, agencies are required to justify every dollar they are requesting, including old and new expenses, with details for every program and service they provide.

Each agency is also required to disclose the sources of all federal funds in the agency budget and the strings or conditions attached, as well as the available federal funds not being requested at that time.

Finally, the agency must disclose any “Other Funds” it receives and their source. “Other Funds” are the categorical term for the fines and fees already appropriated in state law. Lawmakers do not discuss “Other Funds” or federal funding in the budget process, although together they comprise roughly two-thirds of the entire state budget (the remaining third is the general fund, the only budgetary category that is discussed).

Also by November 1, the comptroller general must submit to the governor a complete spending and financial report, which includes each agency’s leftover funding from the previous year’s budget.

January 16:* Governor submits first draft of the state budget to the General Assembly.

Within five days of the start of session (which, in 2018, starts on January 9), the governor must provide to the House speaker and Senate president pro tem a detailed budget draft.

*This is an approximate date, as the law does not specify whether the five days are calendar, business or legislative days.

January 23 (approximately): Joint (House AND Senate) budget hearings begin.

Within five days of the governor’s budget submission, the House and Senate appropriations committees must begin holding joint, open hearings on the governor’s budget.

March 31: House passes the budget and sends it to the Senate.

If the budget does not receive third (final) reading in the House by March 31, session is extended by one day for every day the budget is not passed. Once it has passed the House, the budget goes to the Senate, and finally to the governor for his signature or line-item vetoes.

This process is designed to be as transparent as possible and if it were followed, citizens and their elected officials would be able to track every dollar and follow the entire debate over spending decisions, instead of relying on the brief explanations of the Ways and Means Committee members. In addition, the budget process would be much quicker: If the law were followed, legislators would be openly debating a full and coherent budget at the beginning of session. A quick budget process would also limit lobbyists’ and special interests’ window of opportunity to influence state spending.

Finally, the governor – the only elected official with a statewide perspective on spending and governance – could help guide spending priorities and serve as a check to the legislature, preserving the balance of power.

Unfortunately, lawmakers simply ignore most of these laws, effectively excluding citizens as well as the governor from spending discussions.

What the budget process actually looks like

November 1: Governor collects incomplete agency budget requests.

The governor collects and posts online what each state agency is asking for in the upcoming fiscal year. However, those requests are not what state law requires and typically include only the requested changes to last year’s funding. They do not include funding sources, federal funding details, or justification for every dollar the agency seeks to spend. However, state law places the responsibility for state agency budget requests squarely within the governor’s office, as the governor is directed to collect this information on budgetary request forms that he supplies.

January 16:* Governor submits first draft of the state budget to the General Assembly.

South Carolina’s governors have not always complied with this law. Governor Mark Sanford (2003-2011) was the first governor, at least in recent history, to submit full executive budgets to the legislature at the outset of the legislative session. Unfortunately, the legislature invariably ignores the executive budget. During Governor Sanford’s administration, those phonebook-sized budgets were often referred to in and around the Statehouse as “door stoppers.”

*This is an approximate date, as the law does not specify whether the five days are calendar, business or legislative days.

Sometime after the beginning of session: House Ways and Means subcommittees begin drafting the budget.

Instead of starting with the governor’s spending plan, the House Ways and Means Committee begins crafting their own from scratch in an array of subcommittees. The subcommittee meetings are usually held simultaneously and are neither streamed nor recorded, making it impossible for both citizens and other lawmakers to track the budget’s development.

In general, lawmakers base their decisions on the previous year’s budget, shifting revenue around to fund the issue du jour. The budget doesn’t take any kind of overall shape as a spending plan until it’s passed by the House Ways and Means committee. Even then, it is more of an incoherent assortment of spending items than a logical, carefully measured spending plan from a statewide perspective.

This is not a quick or efficient process. Last year, lawmakers had to extend session as the budget conference committee worked to resolve differences in the House and Senate budgets.

By March 31: House passes the budget and sends it to the Senate.

When the budget finally reaches the floor, only the members of the Ways and Means Committee have any understanding of the state budget and the reasoning behind the various appropriation decisions. The real spending discussions happen in the subcommittee meetings, which for the most part are impossible to track. This forces lawmakers to accept House leaders’ assurance that these decisions are in the best interest of the state.

The House sets aside a legislative week to “debate” the budget, although very little actual debate takes place. The House votes through the budget, section by section, with only a brief overview of each. Two-thirds of the budget – federal funds or “Other Funds” – are not discussed, with the conversation primarily limited to the general fund. Lawmakers do comply with the state law requiring a roll call vote on each section, but recently there has been a push to eliminate even that modest transparency requirement.

Finally, the budget goes to the Senate and the process is repeated, except that the Senate starts with the House budget rather than creating their own, as the House did. Any differences in the House and Senate budgets are resolved in conference committee, after which the final budget lands on the governor’s desk. The governor can line-item veto any item in the budget, but these vetoes are typically overridden by the legislature. For instance, in 2016 Governor Haley vetoed $33.3 million of budgetary spending, and the legislature overrode all but $75,000.

Last year the General Assembly shortened session by three weeks, and one legislative leader blamed that minor reform for their failure to pass the budget on time. Of course, the budget would likely have been passed with time to spare if lawmakers had simply followed the law.

Conclusion

In South Carolina, localized legislative concerns dominate the process from beginning to end, with only the governor’s historically impotent budget vetoes standing in the way. The consequences have been predictable: notoriously wasteful spending as the budget grows from year to year; rampant duplication of services; budgets full of favors for well-connected companies; and a lack of both transparency and accountability throughout the entire process.

The General Assembly still possesses enormous power over the state budget – as it should –  but it does not have the authority to set the state’s spending priorities. The law gives the governor that authority. Nor does the law simply allow the governor to write a detailed spending plan – it is a requirement. And every year in early November, citizens should start seeing agency budget requests (that meet the requirements of the law) appear online as the governor begins the budget process spelled out in the code.

The law also requires the two chambers’ appropriations committees to hold joint and open hearings on the governor’s budget five days after that budget is submitted. These hearings are not suggested as “best practices.” They are required by law.

This process would keep the power over South Carolina’s spending accountable to the taxpayers. However, the budget process typically followed by the General Assembly squirrels that power away into the hands of a few lawmakers. Transparency and accountability in the state budget process will only occur when citizens demand that their governor and lawmakers follow the budget law.