The Governor’s Spending Plan (Part 3)

[Note: Parts one and two of this series were published earlier this week and last week.]

If the governor’s executive budget suggests anything, it’s that state agencies are still very much in the traditional pattern of incremental growth – expanding little by little (and sometimes by more than a little) with no regard to the taxpayer.

Department of Commerce and the Infamous Deal Closing Fund

The governor’s budget allocates roughly $82 million for the Department of Commerce – an increase of 583 percent over its budget in 1995. And while we have seen significant inflation since then, that alone is not nearly enough to account for this enormous increase. The necessity of having this department in the first place is questionable in that its name itself implies unnecessary interaction between government and the economy. Unfortunately, the executive budget continues perhaps the most unnecessary part of this agency – and the one most prone to the most egregious forms of cronyism: the Deal Closing Fund.

This fund – used to lure business to the state with handouts of taxpayer dollars – is set at a total of $15 million in the governor’s budget. Much like last year, $8 million is recurring funding. The remaining $7 million will come from the Capital Reserve Fund – supposedly used for capital projects but too frequently the legislature’s slush fund – and non-recurring funds certified by the Board of Economic Advisors.

As if allocating $15 million to the fund this year isn’t bad enough, there is reason to believe that this will be bumped up to $25 million in the House or Senate budget since the Department of Commerce, at a recent Ways and Means subcommittee meeting, asked for a total of $17 million in nonrecurring funding. This is the perfect example of how nonrecurring funding seems to always eventually become recurring funding. It the principle of the children’s book If You Give a Mouse a Cookie: when you give a state agency an additional load of money during one year, that agency will ask for, and usually get, the same amount, or more, the following year.

Taxpayers Footing the Bill for Department of Revenue Hacking

Budgets are written, not based on actual “money in the bank,” but on revenue projections. Based on the Bureau of Economic Advisors’ projected revenue increases, the governor suggests a number of eye-catching appropriations.

  • $20.1 million dollars is appropriated for the Department of Revenue (DOR) to help deal with the aftermath of the spectacular security failure that led to the hacking and exposure of roughly 3.8 million South Carolina taxpayers’ tax and personal information.
  • $3 million is appropriated to the Budget and Control Board for IT security consulting to deal with the same issue.
  • $12.3 million more is requested for the DOR to help implement the long-planned South Carolina Integrated Tax System, a technology upgrade which will supposedly increase the efficiency of the DOR.

Funds for Questionable New Agency

The governor’s budget appropriates $18.6 million in other funds for the Rural Infrastructure Fund. The Infrastructure Fund appropriation would go to a new agency, the Rural Infrastructure Authority (RFA), which until late last year existed only on paper. What is this new authority’s mission? Essentially it’s to be a vehicle for special infrastructure spending in select counties that won’t have to go through the Department of Transportation

Policy Proposals

Just as last year’s executive budget did, this year’s is being used to introduce the governor’s legislative agenda. One policy change the governor is advocating for is a reduction veto. With this veto tool the governor could reduce the level of spending on a budget line item without completely eliminating it – as is the case now. While this veto could empower the governor to make more targeted cuts, there is already a codified process allowing for far greater input from the executive branch into the budget process. Following that law would go a long way towards prioritizing spending and ultimately saving our state money. The executive budget also proposes that the state government divest itself of all school buses by 2017; a prudent suggestion as school bus procurement and maintenance would seem best left to the governments of the localities the buses will serve.

Perhaps most interesting, the governor proposed that the BEA and DOR issue biennial reports on the number of beneficiaries of each tax credit, deduction, and exemption along with their impact on the state treasury. A biennial report cataloging these tax favors could serve to properly highlight the problem of South Carolina’s convoluted tax structure – a structure that leads that state to exempt more sales and corporate tax than it collects.

The House Ways and Means Committee is currently taking budget requests from state agencies. Once it passes its version of the budget, the spending plan will go to the full House of Representatives.

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