BCB Hard to Kill in Department of Administration Bill

June 9, 2011

Investigative Reports

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The NerveIf a Department of Administration is going to happen this year, the S.C. General Assembly in wrapping up its work from the 2011 legislative session will have to take decisive action on a very complex issue.

But even if it does, a bill lawmakers are working on to create the department would not fully undo an imbalance in state government that is the impetus behind the proposal in the first place.

The imbalance stems from the Budget and Control Board (BCB). It is both an agency and a five-member panel that mixes executive and legislative authority.

Critics of the Budget and Control Board describe it as a unique entity that violates the separation-of-powers principle and undercuts the governor’s authority, concentrating power in the Legislature’s hands.

In a historic move, the Senate last week unanimously amended the Department of Administration bill to eliminate the BCB, both the agency and the board. The amendment says it plain as day – twice, in fact: “Effective July 1, 2013, the State Budget and Control Board is abolished.”

As that happens, most of the executive functions of the BCB – from facilities and fleet management to the offices of human resources and the state engineer – would be transferred to a Department of Administration. A director who is a member of the governor’s cabinet would oversee the new department.

Along those lines, the amendment would help bring the scales of power between the executive and legislative branches of state government closer into balance.

Sen. Shane Massey, R-Edgefield and a co-sponsor of the amendment, says it would be a significant win for South Carolina if the amended bill to do away with the Budget and Control Board passes. “And we have that opportunity,” Massey says.

Rep. Garry Smith, R-Greenville, is lead sponsor of the bill, H. 3066. The House has passed it and it is one vote shy of clearing the Senate.

That could occur next week when the Legislature is scheduled to reconvene for its wrap-up work from the session. But for the Senate to act on the bill then, two-thirds of its members would have to vote to allow the chamber to take it up.

And even if that happens and the Senate passes the bill, it probably would have to go to a House-Senate conference committee to work out a compromise between the chambers’ different versions of the legislation.

(These are procedural details related to an adjournment resolution the House and Senate passed.)

In any case, even if the bill gets on the agenda for next week – a big if – advocates of deep-sixing the Budget and Control Board might find that the amendment does not go all the way toward that end.

That’s mainly because in place of the BCB board, the amendment would create something similar called the State Financial Affairs Authority. And that entity would exercise similar, though not quite as much, power.

For instance, the State Financial Affairs Authority would be responsible for budget cuts during a fiscal year as the BCB board is now.

It stands to reason then that the new authority would not put an end to the main criticism of the Budget and Control Board – that its five-member panel comingles the branches of government and allows the Legislature to overreach.

That’s one meaty part of the amendment.

Another is a second proposed new animal, this one dubbed the Public Employee Benefit Agency. It would take over the job of administering state employees’ health and retirement benefits. The Budget and Control Board currently handles that task.

Along with the new agency to process claims and so forth, a committee would be created to come up with a plan to transition management of the state retirement system’s assets to a “trustee-based system.”

The Retirement System Investment Commission presently oversees the assets, which total upward of $25 billion. The amendment is silent on the future of the commission.

“We are supportive of that,” Sam Griswold, president emeritus of the State Retirees Association, says of the amendment’s changes to health and retirement benefits management.

As it stands, the five members of the BCB board act as trustees of the retirement system’s investment portfolio. The board consists of the governor, the state comptroller general, the state treasurer and the chairmen of the budget-writing House Ways and Means and Senate Finance committees.

The State Financial Affairs Authority would have a similar makeup, with one main difference. Rather than the heads of Ways and Means and Senate Finance by virtue of chairing the committees, the two legislative members of the authority would be one from each chamber elected by their fellow lawmakers.

“The authority may organize its staff as it deems most appropriate to carry out the various duties, responsibilities, and authorities assigned to it … ” the amendment says.

It would vest in the State Financial Affairs Authority many of the same powers the BCB wields, whether the agency or its board.

Those include overseeing procurement of goods and services by state agencies; authorizing and executing bond sales; operating the Board of Economic Advisors, which forecasts state revenue collections; and approving changes to state human resources regulations.

Likewise, while the Budget and Control Board’s governing panel handles mid-year budget cuts now, that responsibility also would fall to the State Financial Affairs Authority.

The same goes for dealing with state agency deficits.

But, perhaps in response to a couple of departments that had been running deficits this year, and a third that still is – the Health and Human Services agency – the amendment would drop the proverbial hammer on those responsible for red ink in the future.

If the authority finds that a deficit is the result of agency management, the measure says, “then the state officials responsible for management of the agency, department, or institution involved must be held liable for it and the financial affairs authority shall notify the Agency Head Salary Commission of this finding.”

Another area where the amendment would give the governor more leeway is property transactions.

Right now, the BCB board must approve all of them except those made by a few agencies that are not under its purview, such as the S.C. Research Authority.

With the amendment, property transactions of less than $1 million could take place without approval of the Financial Affairs Authority.

Massey, a vocal proponent of nixing the Budget and Control Board, says the rationale behind the authority stems from gray areas of state government. Those, he says, are ambiguous functions that are part executive and part legislative “that we really don’t know what to do with.”

Other states have comparable entities that deal with such crossover issues, Massey says.

But no other state apparently has a Budget and Control Board. Indeed, The Nerve had to explain what it is when asking the National Conference of State Legislatures whether such a creature exists elsewhere in the country.

The organization, expert in all matters legislative among the states, provided a few tables that show a mixed bag in terms of how states divide executive and legislative authority.

In 28 states, for example, the executive branch proposes a budget that their lawmakers use as a starting point in crafting a spending plan. South Carolina is not among them, although former Gov. Mark Sanford prepared detailed executive budgets down to the dollar, even if the Legislature often ignored his proposals.

At the same time, legislative approval of mid-year budget cuts, as happens in South Carolina via the BCB board, is hardly uncommon. It is required in 20 states, according to the National Conference of State Legislatures.

In that sense, it seems the Budget and Control Board is a lot like a certain cheesy action movie – hard to kill.

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