Huge State Bond Package Passed – Minus Public Input

March 9, 2015

Investigative Reports

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Piggy Bank CoinsThe S.C. House meets today to begin debating a nearly $24.5 billion proposed state budget for next fiscal year – plus an attached $497 million bond proposal that House budget writers quickly approved without giving the public any chance to comment on the total debt package.

The bonds are essentially loans that S.C. taxpayers will have to pay back with interest – interest that likely will collectively total tens of millions of dollars over the repayment period. But the budget-writing Ways and Means Committee didn’t reveal those costs when it publicly discussed for the first time and passed the bond package on Feb. 19.

As a comparison, taxpayers will have repaid more than $116 million in interest on top of $355 million in principal by June 30, 2025, when the last payment is scheduled to be made on bonds state officials approved – beginning with a rare, special legislative session in October 2009 and without prior public discussion – for aerospace giant Boeing, according to a payment schedule provided to The Nerve by the S.C. Treasurer’s Office.

Asked by The Nerve if anyone from Ways and Means has contacted the Treasurer’s Office, which conducts the sale of state bonds, about doing a cost analysis of the $497 million bond proposal, Scott Lindenberg, spokesman for Treasurer Curtis Loftis, reiterated Friday in a written response, “We have not received a request to provide a formal fiscal impact analysis on the bond bill.”

Ways and Means Chairman Brian White, R-Anderson, did not respond last week to written and phone messages from The Nerve seeking comment on specifics of the bond proposal and why the public was not allowed to review it before his committee approved it.

The bond package, which is labeled as “Part III” of the proposed state budget for the fiscal year that starts July 1, would finance 44 projects ranging from $1 million for a pedestrian bridge at the University of South Carolina’s Aiken campus to $60 million to the S.C. Department of Commerce for unspecified “Regionalized Economic Development Infrastructure.”

Other big-ticket items in the bond package include $50 million to the S.C. Technical College System for “Pathways to Workplace Infrastructure Development” and $50 million for the Medical University of South Carolina Children’s Hospital. No funds for any of the proposed projects could be released until after next Jan. 1.

(The Nerve last month reported the bond proposal includes $35 million for a new aeronautical training center at Trident Technical College in North Charleston for workers at Boeing and its suppliers, and others. The Ways and Means Committee also approved spending another $5 million from one of the state’s “rainy-day” funds – the capital reserve fund – for the proposed center.)

Bigger Bond Package

The last time the 170-member General Assembly approved a multiple-agency, capital-improvement bond package was in 2000, authorized under an amendment to a 1968 law, according to Ways and Means documents. The latest Ways and Means proposal would raise the “aggregate principal indebtedness” for specified capital-improvement projects, under a new amendment to the 1968 law, to a maximum of $3 billion from about $2.6 billion, which was last set by lawmakers 15 years ago.

A review by The Nerve found that the current $497.1 million bond proposal is $358.7 million, or 259 percent, more than $138.4 million package approved in 2000; factoring for inflation, the hike works out to be 169 percent.

The single-largest bond project approved in 2000 was $9.3 million for a computer system for the S.C. Department of Public Safety. The biggest project in the current bond proposal – $60 million for unspecified “Regionalized Economic Development Infrastructure” – is more than six times – or 383% when factoring for inflation – greater than the amount approved 15 years ago.

Back in 2000, the bond package initially was proposed by the Senate Finance Committee, according to media reports.

“We were making government live within its means,” Bobby Harrell, then-chairman of the Ways and Means Committee, said at the time, according to an April 2000 Associated Press story. “The Senate apparently wants to gets its credit card out. We should live on the paycheck we have.”

The Charleston Republican, who became the House speaker in 2005, resigned from office in October after pleading guilty to six criminal ethics charges that stemmed from a 2013 public-corruption complaint filed by the South Carolina Policy Council – The Nerve’s parent organization – with S.C. Attorney General Alan Wilson.

‘Not Pre-Planned’

Besides White, The Nerve last week left phone or written messages seeking comment from the chairmen of the Ways and Means budget subcommittees: Reps. Kenny Bingham, R-Lexington; Bill Herbkersman, R-Beaufort; Chip Limehouse, R-Charleston; Jim Merrill, R-Berkeley; Mike Pitts, R-Laurens; Gary Simrill, R-York; Murrell Smith, R-Sumter; and Bill Whitmire, R-Oconee. Only Bingham and Simrill responded.

Bingham, chairman of the Public Education and Special Schools Subcommittee, said in a written response his budget panel “did openly discuss” a $50 million “set aside” in the proposed bond package to “deal with the equity funding lawsuit if needed,” referring to the S.C. Supreme Court ruling last year that the state had failed to provide a “minimally adequate” education to K-12 students in the plaintiff school districts, as required by a 1999 ruling.

Asked, though, if the full Ways and Means committee publicly discussed the total bond package for the first time at its Feb. 19 meeting – the last meeting by the entire committee before voting on the state budget, Bingham, who also is the House Ethics Committee chairman, replied:  “Yes, that’s how the process always works. Subcommittees adopt their sections individually, and then the whole committee adopts the individual parts.”

The full committee held two other meetings that week before the Feb. 19 vote, though the bond package was not addressed at the earlier meetings.

Simrill, chairman of Economic Development and Natural Resources Subcommittee, told The Nerve that “I did not specifically say, ‘We’re going to put this in a bond bill,’” during his budget subcommittee hearings prior to the full committee meetings. But he acknowledged discussing the bond proposal privately with White before the Feb. 19 vote, noting that “from the subcommittee process, it had been building to a crescendo.”

“The chairman said, ‘I’ve been hearing that from other committees,’” Simrill recalled. “The bond component was not pre-planned. It was born out of necessity on what the needs were.”

Despite not allowing citizens the opportunity to comment on the total bond package before the Feb. 19 vote, Simrill said, “I think the transparency shows itself to what is happening,” pointing out there was more than a two-week window for the public to review the bond proposal and entire state budget before the full House takes it up.

Simrill said he believes the timing is right for a multimillion-dollar bond package, noting the “current bond bill is coming off,” and that “we can take advantage of unprecedented low interest rates.”

A Ways and Means document says the state will “pay off a large portion of its debt portfolio in the next few years,” though it didn’t provide specific figures. The Treasurer’s Office on Friday could not provide a payment schedule for the bond package approved in 2000.

According to another document from the Treasurer’s Office, taxpayers will pay off a total of more than $1 billion in Boeing and other unrelated general-obligation bonds from June 30 of this year through June 30, 2031, including about $859.5 million in principal and $156.8 million in interest.

The latest bond proposal isn’t the first time that lawmakers have shut out the public from the budget process. In recent years, they routinely have ignored a state law (Section 11-11-90 of the S.C. Code of Laws) that requires the Ways and Means and Senate Finance committees to begin holding joint public hearings within five days of when the proposed executive state budget for the upcoming fiscal year, prepared by the governor, is submitted to the General Assembly. The regular legislative session begins the second Tuesday in January; by law, the governor must submit a proposed executive budget no later than within five days of when the session starts.

The South Carolina Policy Council in 2012 recommended the joint budget hearings as part of its eight-point reform agenda.

In a 2013 letter to White, then-House Speaker Pro Tempore Jay Lucas, R-Darlington, said that “(p)ersonally, I like the idea of starting the budget process in this manner – I think it could lead to a more efficient and transparent process,” as The Nerve reported. Lucas, however, has not pushed for it since becoming the House speaker.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.