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Budget Hike on Line for State Government’s Very Own Consulting Firm

The South Carolina Manufacturing Extension Partnership, a mostly government-funded nonprofit that acts like a private consulting firm, could get a nearly 30 percent state funding increase this fiscal year.

That’s if the General Assembly overrides Gov. Nikki Haley’s veto of the additional dollars for the group.

The increase would raise the Manufacturing Extension Partnership’s taxpayer support by $200,000 – from $682,000 to $882,000 – after its state funding, like that of most entities, had declined in recent years.

But with more than $1 billion extra to spend this budget year in an improving economy, the Legislature spread around lots of largesse.

Haley, in issuing 81 vetoes last week, trimmed at least $57.1 million from a $23.6 billion spending plan the Legislature approved for the fiscal year that began July 1.

Lawmakers plan to reconvene next week to take up the vetoes. Overriding each one takes a two-thirds vote by both the House and Senate.

When it comes to the Manufacturing Extension Partnership, or MEP, many South Carolina taxpayers might not know what it is and what it does.

From the partnership’s website: “In short, we exist to help small and mid-size (manufacturing) companies in South Carolina to compete, grow and win.”

Says MEP president and CEO John Irion, “We’re a consulting organization.”

The Manufacturing Extension Partnership, headquartered in an office building catty-corner from the State House in Columbia, is registered with the Internal Revenue Service as a private nonprofit 501C3.

But the MEP is not about charity.

It lobbies the Legislature; employs several executives with six-figure compensation, some of whom receive bonuses; and earns revenue providing consulting services to the non-Boeings of South Carolina’s manufacturing economy.

“I tell people that we are a not-for-profit business, but we’re also not for loss,” Irion says. “So we run our business like any business.”

Yes, the South Carolina Manufacturing Extension Partnership is a nonprofit, government-funded company.

Much of its work involves helping small and medium-sized manufacturing businesses.

“That’s really our target market,” Irion says. “We call on these companies with field agents across the state.”

The Manufacturing Extension Partnership offers such firms a free, one-day, on-site evaluation of their operations, with a view toward making them more efficient and competitive.

The MEP also avails itself to companies, for a fee, to craft strategies enabling them to “strengthen leadership, develop competencies, drive growth, and eliminate waste,” its website says.

For example, Irion says the partnership has helped 13 companies in the past 18 months become AS9100 certified, the internationally recognized quality management standard for the aerospace industry.

“You cannot be a supplier to Boeing unless you are AS9100 certified,” he says.

Irion describes most consultants as “a hammer looking for a nail,” and he says the MEP is able to offer the little guy a much lower rate. “The private consulting industry, the norm is somewhere around $3,000 a day.”

Whereas a private consulting outfit might charge a small manufacturer $50,000, the partnership can offer $12,000, Irion says. “We believe that the small company needs their skin in the game,” he says.

The MEP receives one-third of its revenue from the federal government, one-third from the state and one-third from its clients, according to Irion.

Last year, he says, 90 percent of the group's state funding went to the University of South Carolina and other public colleges through contracts the MEP has with them.

The group’s Form 990 for 2010, a filing that nonprofits must submit to the IRS annually, lists the partnership’s public support at 98 percent for that year and for 2009.

The Manufacturing Extension Partnership reported $2.9 million in net assets at the end of 2010, the most recent year for which the group’s 990 is available.

The form lists seven MEP employees whose compensation exceeded $100,000, including Irion. He earned $120,000 in base salary, a $56,500 bonus and $18,400 in benefits, for a total of nearly $195,000, according to the document.

Carl Spangler, listed as the partnership’s vice president of operations, was the MEP’s second-highest-paid employee. He brought home almost $185,000 in 2010, including a $51,000 bonus.

Irion says the organization sets goals for itself and its staff. “If they surpass those goals, there’s a progressive bonus.”

As a private nonprofit, the Manufacturing Extension Partnership is one of many quasi-governmental entities involved in running the state’s economy.

Each of the groups plays a different role.

New Carolina, for one, receives lots of public money and promotes economic “clustering” in South Carolina, or collaboration among companies in the same field.

Another example is the South Carolina Hydrogen and Fuel Cell Alliance, which receives government grants to, as its name implies, advocate for the development of hydrogen and fuel cells as energy sources.

In the case of the Manufacturing Extension Partnership, it is part of a nationwide network organized through the National Institute of Standards and Technology. The institute, which promotes industrial competitiveness, is an arm of the U.S. Department of Commerce.

This fiscal year, the Legislature allocated about $882,000 in state funding to the MEP.

Of that, $682,000 is annually recurring – the same amount the group got last fiscal year – and the other $200,000 would be one-time additional funding.

In her executive budget for this year, Haley included the $682,000 but not the $200,000. “I have vetoed this second line for SCMEP because it would increase the cost of the program by $200,000,” Haley wrote in explaining why she nixed it.

Asked for his reaction to the veto, Irion said, “It’s all politics, I guess.”

He says the Manufacturing Extension Partnership receives matching federal money for its state dollars, and that the group’s state funding had declined from about $2 million at the beginning of the Great Recession. “The Senate understood our plea and added $200,000 for one year.”

Last year, the MEP’s state funding flowed through the Commission on Higher Education. This year it is going through the Department of Commerce. “We’re going to be working closer with Commerce,” Irion says.

The MEP is hardly the only nonprofit the Legislature lined into the state budget this year.

Others include seven regional economic development groups (splitting nearly $5 million), the Greenwood Genetic Center ($2 million), and South Carolina SkillsUSA ($200,000). (Haley vetoed the latter two also.)

But compared to other public-private economic development outfits in South Carolina, the Manufacturing Extension Partnership plays a select – if not unique – role as state government’s very own consulting company.

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

Budget Economic Development General Assembly Lobbying State Agencies Corporate Welfare

South Carolina Manufacturing Extension Partnership Carl Spangler S.C. General Assembly National Institute of Standards and Technology John Irion Gov. Nikki Haley