Fantasy Land: When a Reduction isn’t a Reduction

March 31, 2011

Investigative Reports

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The NerveIf there were an Alice-in-Wonderland portrait of the state budget for next fiscal year, S.C. House Speaker Bobby Harrell would have painted it.

In a budget update posted last week on his website (www.bobbyharrell.com), the Charleston Republican said the House had adopted a $5.6 billion general fund budget for fiscal year 2011-12, a $236 million, or 4 percent, reduction from the current fiscal year’s budget. The fiscal year starts July 1.

“I’m pleased to report that House Conservatives towed the line of practicing true fiscal responsibility, and the result was the passage of a balanced budget focusing on growing jobs, our students in the classroom, and the core functions of government,” Harrell said.

Harrell’s numbers, however, don’t match budget figures published on the S.C. General Assembly’s website.

According to the site, the House on March 16 adopted a general fund budget of $5.35 billion, an increase of more than $275 million, or 5.4 percent, from this fiscal year’s adjusted budget of $5.08 billion; or a $240.5 million, or 4.7 percent, jump from the initial ratified budget of $5.11 billion.

In fact, although the total approximate $21.7 billion budget adopted by the full House is $119.7 million, or about 5.5 percent, less than the current fiscal year’s adjusted total budget, it is nearly $29 million bigger than the initial version passed by the House Ways and Means Committee.

Lawmakers in recent years have adopted total budgets that lowball the amount of expected federal and “other” funds, which include such things as college tuition and fees, lottery proceeds, a portion of the state sales tax earmarked for K-12 education, gasoline taxes, motor vehicle license fees and court filing fees.

This fiscal year’s adjusted total budget, for example, is $21.8 billion, nearly $671 million, or 3.2 percent, more than the initial ratified budget.

As has been his practice with The Nerve, Harrell did not respond last week to written and phone messages for this story.

In a related matter, Les Boles, director of the Office of State Budget, recently told The Nerve that a projected $700 million budget hole for next fiscal year was eliminated in the House version of the budget.

Boles did not respond to initial questions about the shortfall for The Nerve’s budget story posted on March 14, but did answer questions after a state Board of Economic Advisors meeting on March 17.

At the start of the legislative session in January, Boles’ office had projected an $829 million budget hole for fiscal year 2011-12, mainly because of a loss of federal stimulus dollars, though that figure was later reduced to $700 million amid more optimistic general fund revenue growth projections.

In response to The Nerve’s questions after the March 17 BEA meeting, Boles cited four factors in the elimination of the shortfall:

  • Unexpected additional revenues from November through the present;
  • Proposed cuts in the Department of Health and Human Services’ Medicaid budget;
  • Not replacing federal stimulus dollars for higher education and most of the state’s K-12 system; and
  • Budget cuts at other state agencies.

“You add all that up, and your budget gap has gone away,” Boles said. “The gap is your starting point, and the question is, how do you get rid of that gap? You either find additional revenues, or you cut your budget.”At the March 17 meeting, BEA staff reported that total general fund revenues from July through February were more than $94 million ahead of projections.

House Democrats have been skeptical of Republican claims of reducing the size of next year’s budget.

During the budget debate on the House floor on March 14, House Minority Leader Harry Ott, D-Calhoun and a member of the budget-writing Ways and Means Committee, said he wanted to make sure that everyone understood “that we are not in the budget-cutting business that I’ve heard so many of my friends talk about. We are in the revenue-growing business.”

The House has proposed more than $134 million in general fund cuts to 63 state agencies, divisions or programs for next fiscal year, according to an analysis by The Nerve.

But that’s more than offset by a proposed approximate $222.5 million hike in Health and Human Services’ general fund budget, though the agency’s total budget, which includes federal matching dollars for Medicaid, would be reduced by about 2 percent compared to this fiscal year’s adjusted budget.

Boles told The Nerve that the proposed approximate $222.5 million increase for HHS, which has been allowed by the S.C. Budget and Control Board to run a $200 million deficit this fiscal year, would help offset the loss of enhanced Federal Medical Assistance Percentage (FMAP) stimulus dollars for Medicaid programs.

Under the House version, HHS would have a general fund budget for 2011-12 of nearly $950 million, and a total budget of $5.82 billion.

As for next fiscal year’s total state budget, the only difference between the full House and Ways and Means Committee versions is a proposed approximate $29 million increase in the full House budget for the Department of Education, a review by The Nerve found.

The proposed hike is concentrated in Education Improvement Act programs, which are supported with 1 cent of the 6-cent state sales tax. That money is designated as “other funds” in the budget.

The proposed $29 million increase, according to the full House budget, includes:

  • Unspent EIA money to school districts – $16.2 million increase;
  • School bus operating expenses – $4 million increase;
  • Palmetto Gold and Silver Awards program (awards program based on school report cards) – $2.2 million increase;
  • Arts curricula – $1.18 million increase; and
  • S.C. Youth Challenge Academy (education program for at-risk youth run by the S.C. National Guard) – $1 million increase.

In a written response last week to The Nerve’s questions about the proposed increases, Education Department spokesman J.W. “Jay” Ragley said his agency has requested increased funds for school bus operations. But other EIA funding increase requests were done through amendments offered on the House floor during the budget debate, he said.House Majority Leader Kenny Bingham, R-Lexington and a Ways and Means Committee member, offered several EIA spending increase amendments, records show. He did not respond to written message last week from The Nerve seeking comment.

Ragley noted that the Education Department in January asked to suspend EIA funding for arts curricula and the Palmetto Gold and Silver Awards program for next fiscal year to save tax dollars.

“Suggest calling Ways and Means to provide further clarification,” Ragley wrote under several budget categories in response to The Nerve’s questions. He declined further comment when contacted by phone.

The House budget now is in the hands of Senate Finance subcommittees. The full Senate Finance Committee is expected to take up the budget the week of April 11.

Investigative reporter Eric K. Ward contributed to this story. Reach Brundrett at (803) 254-4411 or rick@thenerve.org