$22M Budget Proposed for “Paper” Economic Development Agency

October 29, 2012

Investigative Reports

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Desk and ChairA state economic development agency created by lawmakers more than two years ago but not yet in operation would get its first budget next fiscal year – nearly $22 million – under a proposed spending plan released publicly last week.

The proposed fiscal 2014 budget for the S.C. Rural Infrastructure Authority was submitted by the state Department of Commerce Secretary Bobby Hitt, who serves by law as chairman of the authority’s seven-member board of directors, which includes three state lawmakers.

The Office of State Budget posted the appropriations request on its website last week. The 2013-14 fiscal year starts July 1.

The Nerve earlier reported that of the first publicly released 49 state agency budgets for fiscal 2014, 26, or 53 percent, listed appropriation increases, with 14 agencies seeking hikes of double digits or higher.

State law requires agencies to submit proposed spending plans for the upcoming fiscal year to the governor – in recent years by way of the Office of State Budget – by Nov. 1. Governors typically use proposed agency budgets to help prepare their proposed overall state spending plan for the next fiscal year, though, as The Nerve has previously pointed out, lawmakers routinely have ignored a state law requiring the Legislature’s two budget-writing committees to hold joint public hearings on the governor’s requests.

The Rural Infrastructure Authority is requesting $21,845,000 for next fiscal year, including $100,000 for the salary of an agency director who has not yet been hired, $180,000 for salaries of other employees who would be transferred from other unspecified state agencies, and $105,000 for other operating expenses, according to documents.

The bulk of the proposed budget – $20 million- would be earmarked for “loans and other financial assistance to municipalities, counties, special purpose and public service districts, and public works commissions for constructing and improving rural infrastructure facilities,” documents show.

As of Friday, the agency had $38.3 million under its control through the Rural Infrastructure Fund, Chris Huffman, Commerce’s chief financial officer, told The Nerve.

Under its enabling legislation, Rural Infrastructure Authority projects would “aid the development of trade, commerce, industry, agriculture, aquaculture and employment opportunities.” Critics say the agency would duplicate state economic development efforts in rural areas, many of which have among the highest unemployment rates in the state.

Then-Gov. Mark Sanford in 2010 unsuccessfully tried to block the law creating the agency, writing in his veto message that it “creates a new state government entity to perform functions the Department of Commerce currently performs.”

Current Gov. Nikki Haley in July vetoed an additional $3 million for the agency, writing in her veto message that the Rural Infrastructure 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.

Lawmakers overrode her veto, but the agency won’t be getting the money this fiscal year.

S.C. Comptroller General Richard Eckstrom in August announced that the state’s year-end general fund surplus – which was included in a larger pot of excess money earmarked by lawmakers to fund a variety of things, including $3 million for the Rural Infrastructure Fund – was about $15 million less than projected in the fiscal 2013 state budget. The proposed extra money for the RIF was at the bottom of a spending priority list for the surplus money.

Rural infrastructure funds are derived from a percentage of 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.

The S.C. Budget and Control Board’s Office of Local Government in recent years had controlled certain accounts that the Rural Infrastructure Authority is supposed to take over. Asked last week about the balances of those accounts, BCB spokeswoman Lindsey Kremlick in a written response directed The Nerve to contact Huffman, noting, “We’ve processed the transfer to move the funds to the Rural Infrastructure Authority.”

Little, if anything, however, apparently has been done with any funds earmarked for the authority.

Huffman told The Nerve that the agency’s board met for the first time on Aug. 29. He said the board, which includes state Sen. Billy O’Dell, R-Abbeville, and Reps. Bill Clyburn, D-Aiken, and Mike Pitts, R-Laurens, has not hired an executive director, adding, “They are in the process of discussing that.”

For now, the agency is located at and being administered by Commerce, Huffman said. The agency’s new director, when hired, could decide to locate the agency elsewhere though contract with Commerce for certain administrative functions, he said.

Contacted Friday, Pitts said he and O’Dell told other board members at their first meeting in August that “we would look to hire an executive director before we went back in session (in January) so that the agency would be ready to move forward.”

He also said the board reviewed a number of proposed infrastructure projects that were “already on the table,” though no final decisions were made, including whether “we want them (the applicants) to resubmit (their proposals).”

Efforts last week to contact Clyburn, the author of the law creating the Rural Infrastructure Authority, were unsuccessful.

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