State Budget Sets Records, Vetoes Make Zero Difference
THE STATE BUDGET IS A TRANSACTION BETWEEN TAXPAYERS AND GOVERNMENT. HERE’S WHAT YOU’RE BUYING.
After being rushed through a secretive committee process, the fiscal year (FY) 2016 conference budget – which reconciles the budgets passed by the full House and Senate – was voted on and passed by both chambers before the public ever saw it. Budget documents that have since been released give this budget’s total spending as $24.92 billion, or $26.42 billion if an unbudgeted $1.5 billion appropriation for food stamps is included.
This is, unsurprisingly, far and away the largest budget in state history. All told this conference budget is $878 million, or 3.65 percent, larger than the FY 2015 budget. Gov. Haley has issued her budget vetoes, which all told amount to a mere $30.2 million, or about 0.01 percent of the total budget. The governor, in other words, vetoed a tiny fraction of the increase from last year. (The governor has veto power over roughly two thirds of the total budget – that is, all except federal funds.)
Federal funds increased from the full House budget (the most recent budget passed by a full chamber for which an accurate document was available) by a relatively minor $4.26 million. When compared to the 2014-15 budget, however (the budget passed last year for the budget year that just concluded), federal funds are up by $168 million, or just over 2 percent.
The fact that such a large dollar amount constitutes such a small percentage increase is a telling indication of just how dependent on federal money South Carolina’s state government has become.
The drawbacks of taking these federal dollars was recently highlighted by the King V. Burwell Obamacare decision, which allows the IRS to continue issuing insurance premium subsidies that trigger Obamacare’s individual and employer mandates.
This connection is further reinforced through South Carolina’s ever growing medicaid expenditures which are driven by federal funds. Although state officials have not officially expanded medicaid under Obamacare they have continued in recent years to expand the amount spent on medicaid in the state budget. The Department of Health and Human Services (DHHS) which administers the medicaid program in South Carolina and whose budget is largely comprised of medicaid spending, is set to increase by $116.7 million from FY 15 to FY 16. Total health services provided by the department are set to increase by $140 million.
The only sure method states have of rejecting harmful federal policies, like the Affordable Care Act, is by turning down federal dollars.
County Transportation Committee funding increased
In an effort to address some of South Carolina’s road funding problems, the conference budget appropriates an additional $216 million to the Department of Transportation to be transferred to Country Transportation Committees (CTCs). This $216 million is in addition to the annual recurring appropriation to CTCs, which this year totaled $106 million. The additional $216 million, appropriated in the supplemental appropriations bill, comes with the stipulation that counties may only use the funds “on the state-owned secondary road system for paving, rehabilitation, resurfacing, and/or reconstruction, and bridge repair, replacement, or reconstruction.”
The funding increase is not insignificant, but beware: CTCs, like every other aspect of South Carolina’s transportation system, are ultimately accountable to a handful of state legislators. Increasing funding for CTSs, in other words, may be contributing to the problem, or merely making it more expensive.
It’s also worth noting that the conference budget increases the funding of the State Transportation Infrastructure Bank (STIB) by $105 million over the FY 2015 budget. This continues a trend in recent years in which the STIB budget has skyrocketed. As The Nerve has observed, the STIB’s proposed $255 million budget represents a nearly 400 percent increase in funding since FY 2012. More funding for the Infrastructure Bank will mean more debt issued for unnecessary road expansions and will require further stretching of what dollars are available for road maintenance and repair.
Putting more money into the same unaccountable and wasteful transportation governance system without reform is unlikely to yield any significant or lasting improvements to South Carolina roads.
University budgets continue to increase
As with earlier iterations of this year’s budget, higher education institutions continue to be one of this budget’s big winners. Many colleges and universities already received notable budget appropriations in earlier versions of the budget, and the conference budget compounds some of these gains with even further funding increases. Funding increases from the House to conference version of the budget, as well as other notable higher education spending in the conference budget include:
- Shifting $77.5 million from the Treasurer back to the Commission on Higher Education.
- Increasing Clemson’s budget by $45.75 million or 5.48 percent.
- Increasing Coastal Carolina’s budget by $9.34 million or 4.88 percent.
- Increasing USC Columbia’s budget by $15.2 million, or 1.41 percent.
- Increasing funding for South Carolina State’s public service activities by $740,000 or 9.77 percent, despite these funds being inappropriately diverted by the university in recent years.
- Appropriating $25 million to the Medical University of South Carolina (MUSC) for a children’s hospital, despite the university receiving a donation for the hospital in the same amount from Shawn Jenkins, founder of BenefitFocus.
Most of these funding increases and big ticket line items, are benefiting already wealthy institutions. Factoring this year’s proposed funding, the USC system will have received a 13 percent funding increase (after adjusting for inflation) since FY 2012. The Nerve has also reported that in recent years the USC system has maintained an annual average of nearly $350 million in “unrestricted net assets” that can be used for any lawful purpose of the institution.
When all institutions and higher education programs are taken together the FY 16 conference budget spends nearly $150 million more on South Carolina’s public system of higher education when compared to the FY 15 budget.
Other noteworthy items
CTCs and universities weren’t the only winners in this conference budget. Many other agencies, and in some cases private entities, received significant increases in funding in the conference budget, when compared to their appropriations in this year’s House budget. Some of these increases include:
- Increasing the Department of Disability and Special Needs budget by $22 million or 3.39 percent.
- Increasing the Department of Agriculture budget by $3 million or 18.86 percent.
- Increasing the Department of Parks Recreation and Tourism budget by $11.31 million or 12 percent.
- A $70 million appropriation to the Department of Commerce for economic development infrastructure, (money to build an interchange for Volvo as part of an incentive package for the company).
- $16.5 million for debt service on economic development bonds (paying down some bond debt in order to free up more bonding capacity, all in order to finance the Volvo incentives package).
- Increasing the South Carolina Conservation Bank budget by $5.13 million or 52.13 percent.
- Increasing the Retirement System Investment commission budget by 2.48 million or 16.24 percent, despite the questionable management of the commission. (Investment in high risk and/or questionable investments, has led to the commission having an annual return on investment of 3 percent, one of the lowest rates for state retirement portfolios in the nation.)
- Appropriating $23.5 million for a one-time $800 bonus for every state employee employed for more than 6 months and earning less than $100,000
Despite holding a legislative session that will expire at least three weeks after its scheduled end date, and hosting lengthy debate on budget bills, the General Assembly has produced yet another spending plan that provides typically massive spending hikes. Increasing spending is not a one size fits all solution for South Carolina’s problems. Yet without reform it’s the only solution South Carolina’s legislature is likely to produce.