June 5, 2023

The Nerve

Where Government Gets Exposed

Haley Vetoes $3 Million for ‘Paper’ Economic Development Agency

CalculatorGov. Nikki Haley apparently doesn’t want an economic development agency that exists only on paper to receive an additional $3 million this fiscal year, while a lawmaker is questioning why it’s taking so long to launch the agency.

In vetoing the proposed $3 million for the Rural Infrastructure Fund, which eventually would be controlled by the still-dormant state agency known as the S.C. Rural Infrastructure Authority, Haley wrote that the fund has “$20 million unspent in the bank already,” and that it was “unnecessary and excessive to devote an additional $3 million to the Fund.”

Her July 5 veto message was included in a section titled, “Excessive Growth.”

As of Friday, there collectively was nearly $39 million in several funds, including a fund known as Rural Infrastructure Bank Trust Fund, that now are controlled by the S.C. Budget and Control Board but would be transferred to the Rural Infrastructure Authority when it is in operation, according to information from the Budget and Control Board. Those funds totaled more than $34 million as of late May, The Nerve reported then.

Under its enabling legislation, the Rural Infrastructure Authority can provide grants, loans and “other financial assistance” for qualified “rural infrastructure” projects in designated “distressed or least developed” counties. The projects would “aid the development of trade, commerce, industry, agriculture, aquaculture and employment opportunities,” according to the law.

The authority would expand – and, according to some critics, likely duplicate – state economic development efforts in rural areas, many of which have among the highest unemployment rates in the state, The Nerve reported in 2010. Marion County, for example, had the state’s highest unemployment rate in May at 17.1 percent, according to the S.C. Department of Employment and Workforce.

In unsuccessfully trying to block a 2010 law creating the Rural Infrastructure Authority, former Gov. Mark Sanford in his veto message wrote that it “creates a new state government entity to perform functions the (S.C.) Department of Commerce currently performs.”

Commerce, for example, already administers a Rural Infrastructure Fund through the S.C. Coordinating Council for Economic Development.

A state budget proviso for this fiscal year, which started July 1, directs that all funds under the control of the Budget and Control Board’s Office of Local Government, including the Rural Infrastructure Bank Trust Fund, be transferred to the Rural Infrastructure Authority.

Lawmakers are scheduled to return to Columbia this week to decide whether to override Haley’s veto of the proposed additional $3 million in rural infrastructure funds through the BCB, which would be authorized under another budget proviso; and 80 other vetoes related to the nearly $23.6 billion state budget for the 2013 fiscal year. A two-thirds vote of each chamber is required to override a veto.

The $3 million, if approved, would come out of a collective $555 million in actual and projected excess general fund revenues since fiscal 2011.

The Senate Finance Committee earlier this year initially proposed an additional $20 million in rural infrastructure funds under the BCB’s budget, and the full Senate approved it. But the House reduced the proposed amount to $3 million, which was later agreed to by a budget conference committee representing both chambers.

Contacted last week, Rep. Bill Clyburn, D-Aiken and author of the 2010 law creating the authority, toldThe Nerve that Haley’s veto of the $3 million wrongly implies that tax dollars have been wasted.

“The money that is in there (existing accounts) cannot be released,” he said. “Nobody has the authority to spend it.”

Although created more than two years ago, the authority cannot spend any money because it has no organization or personnel. Under the law, the authority is to be governed by a seven-member board that is chaired by the state secretary of commerce – currently Bobby Hitt.

Two board members are appointed by the governor; and one member each is appointed by the Senate president pro tempore, Senate Finance Committee chairman, House speaker and House Ways and Means Committee chairman.

Clyburn was appointed by Dan Cooper, the former Ways and Means chairman. Under a separate Clyburn bill that passed and took effect earlier this year, lawmakers are ensured seats on the authority’s board.

Sen. Billy O’Dell, R-Abbeville and an authority board member, told The Nerve in May that the board was planning its first meeting that month. But Clyburn last week said the meeting never happened.

“I’m just assuming we’re waiting on the board chairman to call the meeting,” Clyburn said, noting that Ways and Means Chairman Brian White, R-Anderson, informed him about three weeks ago that Hitt was “in the process of calling the first meeting.”

As has been their practice with The Nerve, neither Hitt nor Amy Love, Commerce’s chief spokeswoman, responded to a written message last week seeking comment.

Clyburn said although he doesn’t know why Hitt has not called a meeting, he suspects there might be some confusion over which agencies control what funds. Haley did not veto the state budget proviso directing all funds, which include the Rural Infrastructure Bank Trust Fund, under the control of the Budget and Control Board’s Office of Local Government to the Rural Infrastructure Authority.

BCB spokeswoman Lindsey Kremlick in a written response last week to The Nerve said until the authority is in operation, those funds, which currently total $38.8 million, would remain under the control of the Office of Local Government.

Those funds and cash balances as of Friday, according to the BCB, are as follows:

  • Rural infrastructure Bank Trust Fund: $20.56 million;
  • Tobacco settlement: $13.59 million; and
  • Local government grants: $4.65 million.

Rural infrastructure funds are derived from state job development credits that qualifying companies cannot claim because they are located in more affluent counties. Job development credits are refunds of a portion of employee state income tax withholdings.

Under state budget provisos since fiscal 2006, rural infrastructure fund revenues of more than $12 million up to $17 million are transferred to the Rural Infrastructure Bank Trust Fund, managed by the BCB’s Office of Local Government.

Those provisos have earmarked amounts of more than $17 million for the Coordinating Council for Economic Development, made up of the heads of 11 state agencies involved with economic development. The council is managed by the Department of Commerce and chaired by Hitt.

The Coordinating Council awards rural infrastructure funds under its control to qualifying counties for water, sewer, or road projects; land acquisition; site preparation; and building acquisition or improvements, according to information from Commerce.

The money in the Rural Infrastructure Bank Trust Fund managed by the Budget and Control Board sat untouched – and unnoticed – for several years until Sanford in 2010 vetoed the BCB’s entire general fund budget, contending that the agency had other funds it could tap to survive.

The BCB’s five-member governing board, which includes the governor, voted to authorize Sanford and former BCB Director Frank Fusco to find an alternative funding source, which resulted in an agreement to withdraw the Rural Infrastructure Bank Trust Fund’s entire balance then of $13.3 million.

But the S.C. Supreme Court later ruled that Sanford’s veto of the BCB’s general fund budget was unconstitutional, which resulted in the $13.3 million being restored to the trust fund.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.

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The Nerve