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Politics Threatens to Derail Restructuring

Politics threatens to overshadow policy in a debate about restructuring state government, a brand of kabuki theater that could derail the most far-reaching attempted overhaul in two decades.

Causal and keen observers alike might have heard rumblings about expanding government bureaucracy, along with concerns about protecting the state’s credit rating.

The facts, however, do not confirm alarms about those matters.

Many knowledgeable observers believe restructuring done right, or even reasonably well, would streamline state government and save taxpayers money. And the state’s credit rating depends more on good decisions than on who makes them, according to representatives of the three main national rating agencies.

Since mid-February – more than two months – the House has been sitting on a bill the Senate passed to eliminate the Budget and Control Board (BCB).

The bill transfers many BCB functions, such as human resources and most of the state budget office, to a Department of Administration that would be part of the governor’s cabinet.

Budget and Control Board duties not assigned to the new executive-branch agency would go elsewhere.

For instance, trusteeship of the state retirement systems would shift from the BCB board – made up of the governor, treasurer, comptroller general and the General Assembly’s two budget committee chairmen – to a new nine-member Public Employee Benefit Authority.

The bill originated in the House and the House passed it in March 2011, but in a form that kept both the BCB board and the Budget and Control Board agency intact.

Widely derided as unique to South Carolina, the BCB agency performs myriad day-to-day functions of state government, while the board oversees state finances.

Critics contend the BCB is unaccountable, inefficient and an unconstitutional mix of executive and legislative powers.

Early during this year’s legislative session, the Senate amended the House-passed bill, H. 3066, and sent it back to the House.

But the House has not acted on the Senate’s changes, which completely reworked the bill, abolishing the Budget and Control Board and dividing its activities among a Department of Administration, existing legislative and executive entities, or new ones.

That’s where things stand with a little more than one month left in the session. If the House and Senate fail to compromise on the bill this year, any legislative restructuring in 2013 would have to start from scratch.

“Well, it looks like things are not going anywhere at all,” says Talbert Black, a Lexington County grassroots activist who follows the restructuring issue closely.

Although the Senate amendments go much further than the House version of the bill, even the Senate’s changes fall short in some areas as far as Black and like-minded observers are concerned.

They object to the Senate maintaining mixed oversight in some areas, such as a Bond Review Authority that would feature both executive and legislative appointments.

Yet even the Senate’s more comprehensive reform could be in trouble in the House.

After the chamber continually postponed debate on the Senate amendments beginning on Feb. 23, some House leaders recently decided to sound off about the Senate markup – and in a decidedly public and political manner.

Last week, House Speaker Bobby Harrell, R-Charleston, criticized the Senate changes in a House Republican Caucus news release.

“Not only did the Senate leave unassigned authority decisions up to the old Budget & Control Board, they made a brand new Budget & Control Board in one of the 10 agencies they created,” Harrell said, adding:

“We believe that the House can truly eliminate the Budget & Control Board, and do so in a way that provides real accountability and doesn’t create 10 government agencies.”

The Senate bill would indeed form a few new entities, such as the Bond Review Authority, but it does not propose 10 new agencies. Rather, it mostly shuffles functions among existing departments.

And Harrell’s assertion that the House can nix the BCB notwithstanding, the chamber failed to do so in the bill it originally passed.

The news release also said national credit rating firms have expressed concern about the Senate changes as they relate to the state’s AAA grade, the top rating possible.

That release followed a statement the week before by Harrell and S.C. Treasurer Curtis Loftis sounding a similar note about the state’s credit rating.

Loftis says his motivations are substantive rather than political. He says he is only trying to protect the state’s interests by fighting to ensure that a small group of people with a long-term view, rather than one politician with a short-term view, makes far-reaching decisions about the state’s finances.

“I did my best to really try and be up front about the whole thing,” he says.

But be that as it may, the Harrell-Loftis statement started the political melee, to which Senate Republican leaders responded in kind.

However, in interviews with The Nerve, representatives of the three main national credit rating agencies – Fitch, Moody’s and Standard & Poor’s – said the firms evaluate financial decisions and actions by states, not policy issues related to who makes those calls.

Marcy Block, senior director of public finance for Fitch, said it is up to South Carolina to decide how its debt management is structured. “But we have given credit to what that entity (the BCB) has done,” Block said.

David Jacobson, a spokesman in the public finance division of Moody’s, provided examples of the firm citing the Budget and Control Board in its South Carolina outlooks.

The examples merely mention the BCB, though, not praise it as the ultimate protector of the Palmetto State’s stellar credit rating.

The same goes for Standard & Poor’s.

“We’re looking more at the result than the name of the organization,” S&P communications director Ed Sweeney told The Nerve regarding the state’s financial management decisions.

The House reportedly will unveil a counterproposal to the Senate’s restructuring plan any day now.

But regardless, only the small amount of time left in the legislative session will tell if a legitimate policy debate on this issue can triumph against the political pro wrestling surrounding it.

Black, the Lexington County activist, says politics seems to have the upper hand at the moment.

Says Black, who also serves as state coordinator of the national limited government group Campaign for Liberty:

“The real reform – the separation of powers, the accountability; you know, having the General Assembly take care of all the bonding and the executive branch taking care of procurement – those very clear lines of responsibility get lost in all the political wrangling.”

Reach Ward at (803) 254-4411 or eric@thenerve.org.

State Retirement System State Agencies Legislation General Assembly Budget and Control Board Investment Commission Accountability Transparency

restructuring S.C. House Speaker Bobby Harrell Department of Administration Talbert Black S.C. Treasurer Curtis Loftis