What’s in the final House budget?

A few weeks ago, the House passed their first version of the state appropriations bill. After it was amended by the Senate, the budget returned to the House for another round of extensive revisions before going to conference committee. Budget conferees are tasked with developing a compromise between the final House and Senate versions to present to both chambers when they return on June 27.

The final House budget contains some noteworthy differences from both the original House budget and the version passed by the Senate, particularly in the matter of budget provisos, which should  merely direct agency spending, but have become a catch-all for everything from earmarks to previously failed bills. Not only does this violate the proper legislative process, it often violates the constitutional ban on multiple-subject bills – a provision intended to ensure that lawmakers debate each bill on its own merits in a public, transparent process.

Despite multiple Supreme Court rulings against unconstitutional budget provisos, lawmakers continue to insert them into the budget. Below are some of the most significant provisos included by the House in their final version of the appropriations bill.

 

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

Similar to a proviso in the Senate budget, this is a good example of appearing to meet the constitutional threshold for germaneness. It would direct the state treasurer to transfer all earnings and interest from the investment of public dollars into the state’s general fund – a requirement already spelled out in current law.

The House added clarifying language allowing the treasurer to pay fees, expenses, salaries and other investment costs out of the investment earnings. The appropriation of public money to a specific fund/purpose is the sole purview of the General Assembly, as well as the specific purpose of the appropriations bill, and this proviso appears to do only that.

 

2. Allowing formerly retired state employees to simultaneously draw salaries and pension benefits (117.154 and 108.16)

This pair of provisos would allow retired state employees to return to work while still drawing pension benefits. Proviso 117.154 would only apply to law enforcement officers who agree to work as school resource officers in “critical needs” areas, while Proviso 108.16 would apply to all state employees in the South Carolina Retirement System and the Police Officers Retirement System.

Lawmakers have already tried this approach with a teacher incentive program. It was largely responsible for running up the state’s massive pension deficit, and in 2012 lawmakers passed a law to phase out the program, completely ending it by June 30 of this year. It is unclear why lawmakers would return to a program proven to have such disastrous consequences rather than simply increasing pay for school resource officers.

 

3. Creating a “Workforce Pathways” grant program (117.156)

This proviso would create a $2.6 million grant program for technical colleges offering “Pathways programs.” These programs are a workforce development tool meant to facilitate the funneling of students into industry sectors selected by a state board. The grant fund was originally proposed in a separate bill passed last year by the House, but which stalled in Senate committee. While a case could be made for germaneness to the budget, as this deals with the appropriation of revenue, a major scholarship program should not be created via proviso, particularly when that program has failed to pass on its own merits through the proper legislative process.

Moreover, the program itself represents a highly questionable expenditure of funds. The biggest hindrance to employment is not the lack of government-subsidized programs. Licensing, regulatory, and tax reform would do much more to stimulate the economy and open new doors for opportunity without costing the taxpayer.

 

4. Energy-related provisos

Despite the fact that multiple energy-related bills have advanced through the legislative process and are eligible for consideration in special session this summer, lawmakers inserted several energy-related provisos into the state budget.

Proviso 72.1 would delay the Public Service Commission’s (PSC) final ruling on who pays for V.C. Summer and the proposed SCANA/Dominion merger until November 1, 2018. This language comes from S.954, which is currently in conference committee.

Proviso 73.5 would define terms in the Base Load Review Act (BLRA) in an attempt to retroactively place parameters on the law that forced ratepayers to back SCANA’s debt for the nuclear project. This language comes from H.4375, which is also in conference committee.

Proviso 72.2 would require the PSC to force utilities to consider a variety of potential power resources (including customer-based solar) when they are cost-effective, and to implement cost savings where possible.

Policy questions aside, all three of these provisos are regulatory rather than fiscal in nature, and are therefore in direct conflict with the Court’s constitutionality test.

 

5. Increasing the cap on customer-based solar generation (117.157)

This proviso would increase the cap regulating how many customers can install home-based solar panels. Current law limits customer-based solar generation (known as “net metering”) to 2% of a utility’s overall power generation, and this proviso would double that cap. It also creates a study committee tasked with developing permanent policy recommendations for net metering.

This proviso follows a bill that failed in the House, which would have completely removed the net metering cap. Much like the previous energy provisos, it does not directly relate to the appropriation of revenue and therefore fails the one-subject constitutionality test.

 

6. Reducing debt service payments in favor of other projects (112.1)

This proviso would reduce the state’s debt service payments to the minimum amount required, and spend the rest on a new State Law Enforcement Division (SLED) lab ($54 million), port permitting ($5 million), and correctional facility security upgrades ($8.3 million). Another budget proviso (112.2) would loan the Ports Authority up to $50 million from excess debt service funds.

While these provisos are proper for inclusion in the appropriations bill, the policy raises serious concerns. Lawmakers should be accelerating the process of paying down state debt, not slowing it down. The billions of dollars owed by various state agencies wield a disproportionate amount of influence over state policy, and practically guarantee that any form of tax reduction will be unachievable.

 

7. Allowing Superintendent of Education to close down charter schools (1A.91)

This proviso would allow the state Superintendent of Education to begin the process of revoking a charter school’s charter or related charter contract if the school is sponsored by a school district in a state of emergency, and if grounds exist to revoke the charter under current law.

This represents an expansion of power for the Superintendent, not a question of appropriations, and should not be included in the budget. In addition, it is unclear why charter schools are being held to a different standard than public schools – which the Superintendent cannot shut down even in a state of emergency. Shutting down a charter school should be done according to the process laid out in state code, not at the discretion of a public official.

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These provisos are simply the highlights in the House’s overall spending plan. Ostensibly, the budget conference committee is developing a compromise between the Senate and House budgets, although they cancelled the May special session claiming that more time is needed to reconcile differences between the two versions. This means the General Assembly will not vote on a final budget until the end of June – days before the next fiscal year begins on July 1. Should that deadline not be met, a continuing resolution will fund state government at the previous year’s spending level.

When the General Assembly finally passes the budget, it goes to the Governor, who can line-item veto any of its various appropriations or provisos at will. Lawmakers will then vote on each veto, and need a two-thirds vote in each chamber to override them.

We will continue to monitor the budget and keep readers informed as it makes its way through the final stages of the legislative process.

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