Fast Facts About the Budget & Control Board
South Carolina’s Budget & Control Board (BCB) is a unique state agency, the only one of its kind in the country. While the Board itself is technically made up of five elected officials, the BCB is also a state agency that exercises centralized control over many of the administrative and personnel functions of separate state agencies. The Board also provides budgetary analysis through its Board of Economic Advisors division.
How was the Budget & Control Board created?
The BCB grew out of the South Carolina Preparedness for Peace Commissions’ 1945 recommendations to merge existing state government functions under a new Finance Committee consisting of the governor and the chairmen of the two budget-writing committees. This original plan was realized in 1950 when Governor Strom Thurmond submitted Reorganization Plan 2 to the General Assembly. The reorganization consolidated 10 existing boards and commissions into the BCB. Since that time, the Board’s power has waxed and waned, reaching a peak in the 1970s when the Boards de facto head, the state auditor, essentially wrote the state budget.
Who sits on the Budget and Control Board?
The five-member board comprises the following elected officials:
- Governor (Mark Sanford)
- Treasurer (Converse Chellis)
- Comptroller General (Richard Eckstrom)
- Chairman of the Senate Finance Committee (Hugh Leatherman)
- Chairman of the House Ways & Means Committee (Dan Cooper)
What is the structure of the Budget and Control Board?
The BCB is responsible for setting broad policy for and through its seven divisions, each of which has additional subdivisions. The implementation of these policies is managed by an executive director, who is appointed by and serves at the Boards will and pleasure. The chairman of the Board of Economic Advisors (BEA) also reports directly to the BCB on economic trends and general fund revenue projections.
The main divisions of the BCB include:
- Budget and Analyses (including Office of State Budget and Board of Economic Advisors)
- General Services (Agency, Business, Real Property)
- Retirement Systems
- Insurance & Grants Services (Insurance Reserve Fund, State Energy Office)
- Procurement Services (Materials Management Office)
- State Information Technology
- Office of the Executive Director (Office of General Counsel, Internal Audit Services)
Until 1993, the BCB was responsible for drafting a state budget and presenting it to the General Assembly. The BCB no longer serves this function as it was taken over by the governors office. The BCB, though, is still responsible for preparing the data the governor uses to create his budget.
How do other states do it?
Every other state houses the majority of functions conducted by the BCB under a Department of Administration often a cabinet-level agency. Some of these functions include:
- General Services
- Human Resources
- Employee Insurance Services
- Procurement Services
An exception to this trend is the Retirement Division, with fewer than 20 states placing this function under the control of an executive administrative department or cabinet agency.
Whats wrong with the current system?
Throughout its history, the constitutionality of the BCB has been called into question. This is because the Board, an executive agency, includes two legislators, thus violating a basic principle of limited government regarding the division of powers. In August 2007, ChangeSCNow, with the support of Governor Mark Sanford, again challenged the constitutionality of the BCB. The states high court dismissed the suit in November 2007.
In addition to infringing upon executive authority, the Board has also been criticized for being wasteful and nontransparent.
The Government Efficiency and Accountability Review (GEAR) report identified $500 million in cuts that could be made at the agency. In response, the Board claims to have streamlined its operations, but many of the cuts recommended by GEAR await legislative action.
The GEAR report also highlighted the Board’s past mismanagement of the State Health Plan and the state employee retirement system. Likewise, a recent Policy Council study brought into question the Board’s actuarial assumptions regarding annual investment returns arising from the state pension plan. As the GEAR report emphasized, however, the most pressing issue here regards the state’s ability to pay down its unfunded liability, which currently stands at $18.6 billion for state retiree benefits. It remains to be seen whether this liability will ever be paid by the state, with there being a possibility that health care benefits, in particular, would be reduced and/or shifted to the federal government. As the GEAR report also noted, the General Assembly bears ultimate responsibility for addressing this problem.
The decision making process carried out under the auspices of the BCB enables legislators to evade responsibility for making tough budgetary decisions. For example, the FY08-2009 budget (proviso 80A.11) required that any mid-year budget cuts made by the Budget & Control Board while the General Assembly is not in session be applied as uniformly as may be practicable. This language indicates a preference not to single out any one agency or program for cuts or elimination. A far better policy would be for legislators to debate and agree upon targeted cuts for non-essential government services, rather than leaving it to the BCB to make across-the-board cuts.