Boeing Seeks Early Christmas Gift From S.C.

November 22, 2010

Investigative Reports

Print Friendly, PDF & Email

The NerveAs the S.C. Legislature prepares to face what has been described as the state’s worst budget crisis ever, taxpayers once again are being asked to fork out millions of dollars in advance to aerospace giant Boeing.

And, under a little-known state budget proviso, the sky apparently is the limit when it comes to spending tax dollars on training workers for Boeing’s $750 million 787 Dreamliner assembly plant under construction in North Charleston.

The S.C. Budget and Control Board at its Dec. 14 meeting will be asked to approve a $2.9 million advance to the S.C. Technical College System to train Boeing workers through the readySC program, according to college system spokeswoman Kelly Steinhilper.

“This request is standard operating procedure for the open-ended account for readySC training and recruitment,” Steinhilper said in a written response to The Nerve.

Where exactly the $2.9 million will come from is unknown. Neither the offices of the state treasurer nor comptroller general could provide specifics when contacted recently by The Nerve.

Meanwhile, the Chicago-based Boeing Co. reported third quarter revenues for this year of nearly $17 billion and net income of $837 million.

Steinhilper said the “open-ended account” for training is authorized under state budget proviso 18.1, which allows the technical college system to “expend whatever funds as are necessary to provide direct training for new and expanding business or industry.”

Under the proviso, any funds for the readySC program, also known as the Center for Accelerated Technology Training, “shall be appropriately adjusted, if and only if, the Budget and Control Board approves the adjustment.”

The five-member BCB, chaired by Gov. Mark Sanford, unanimously did just that in February, approving without discussion a separate $3.1 million request to train Boeing workers.

Steinhilper said then that it had been about 15 years since the proviso had been used.

And it wasn’t the first time that the BCB had offered advance money to Boeing. In January, the board signed off on a $102.5 million taxpayer-funded “bridge” loan to the company. Deputy State Treasurer Scott Malyerck told The Nerve in September that only $4.75 million of the $100 million was actually loaned out.

That amount was reimbursed with the later sale of $270 million in economic development bonds for Boeing, Malyerck said.

With interest, those bonds will cost S.C. taxpayers at least $360 million over 15 years, The Nerve reported earlier. The Nerve estimated the total incentives package for Boeing to be at least a half-billion dollars when a host of other state and local taxpayer-funded goodies are thrown in.

The total training cost at the new assembly plant is estimated at $34 million over 15 years, according to an S.C. Department of Commerce cost-benefit analysis. Boeing plans to employ about 1,000 workers at the site with the scheduled production start-up in July, company spokeswoman Candy Eslinger earlier told The Nerve.

The company initially announced it will eventually employ 3,800 workers at the plant. It already has about 2,200 employees at two other assembly plants at the site, according to a Commerce estimate.

Eslinger declined to comment for this story when contacted last week by The Nerve.

A state budget proviso (90.16) for this fiscal year, which started July 1, earmarks $7 million for the readySC program using “increased enforcement collections” by the S.C. Department of Revenue. Of that amount, $3.5 million is set aside to train Boeing workers, Steinhilper said.

Under the proviso, the funds are to be dispersed in quarterly payments, which Steinhilper said creates a “cash flow issue.”

“This request is a bridge until the total increased enforcement funds are received,” she said about the proposed $2.9 million advance.

But contacted recently by The Nerve, state finance officials couldn’t say what other state funds would be used to cover the advance.

“The answer at this point is that we don’t know where the money would come from, so we can’t say that we’re for or against it until we know more information,” said Malyerck, whose boss, S.C. Treasurer Converse Chellis, is a BCB member, in a written response.

S.C. Comptroller General Richard Eckstrom, another BCB member, said in a written reply: “The (S.C. Technical College System) will be asking the BCB for authority to spend now against revenues it anticipates receiving over the remainder of the (fiscal year). I’m currently working to identify all options available to the system to meet its need in this area.”

Sanford spokesman Ben Fox in a written response to The Nerve said the $2.9 million request “should be a simple matter of a transfer” at the December BCB meeting, and that “it’s not the end-of-days crisis that some in the media intimated it was.”’

The BCB’s two other members – Senate Finance Committee Chairman Hugh Leatherman, R-Florence, and House Ways and Means Committee Chairman Dan Cooper, R-Anderson – did not respond to written questions from The Nerve.

Lawmakers have slashed about $1.6 billion from the state’s general fund budget over the past two fiscal years. They face a budget hole next fiscal year that is projected to be up to $1 billion, mainly resulting from a loss of federal stimulus dollars.

Still, the state ended last fiscal year with a net surplus of $71 million, according to a year-end report by Eckstrom. That was after more than $40 million in “open-ended” appropriations – including $2.5 million for the readySC program – were paid for, records show.

“Open-ended appropriations result from legislative commitments to fully fund certain budgetary items without providing sufficient appropriations to fully fund them, or from any agency operating deficit approved by the Budget and Control Board,” Eckstrom wrote in his report. “In these instances, the state uses budgetary surplus at year end to fund appropriation shortfalls.”

In a written response last week to The Nerve, BCB spokesman Mike Sponhour said the $3.1 million in training funds approved in February for Boeing are considered an “open-ended” account.

“When the BCB takes an action like this, it becomes a general obligation of the state that must be settled when the books are closed at the end of the fiscal year,” Sponhour said. “Closing the books and settling these obligations is a duty of the comptroller.”

Translation: State taxpayers are on the hook for training Boeing workers.

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