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August 12, 2010

Investigative Reports

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The NerveThe S.C. Legislature certainly knows how to protect its special interests.

While Gov. Mark Sanford and other state leaders face a possible legal battle over whether the S.C. Budget and Control Board can raid a special fund to keep the agency operating temporarily, a little-known state budget proviso at the heart of that case bans other agencies from eliminating or reducing certain programs or funds.

That includes such things as:

  • The State House Gift Shop and Santee Welcome Center, operated by the S.C. Department of Parks, Recreation and Tourism;
  • At least six regional economic development agencies that receive funds from the S.C. Department of Commerce; and
  • Teen abstinence and pregnancy prevention programs operated by the S.C. Department of Health and Human Services.

The state budget proviso (89.87) also prevents Health and Human Services, which administers the state’s Medicaid program for the poor, from reducing Medicaid provider rates.  That will seriously affect how the agency deals with fast-growing Medicaid enrollments because of the lingering recession, said agency spokesman Jeff Stensland.

“We’ve always argued that the agency should have the flexibility to adapt to unexpected enrollment increases,” Stensland told The Nerve last week. “We’re quickly reaching a point where we won’t be able to pay for basic Medicaid services because we’re locked down.”

President Barack Obama on Tuesday signed a $26.1 billion appropriations bill that supporters say will bring $282 million in Medicaid and education funding to South Carolina.  Stensland on Wednesday toldThe Nerve that his agency could get an estimated $127 million for Medicaid programs.

“It definitely will help, but it doesn’t come close to closing the budget gap,” Stensland said, noting his agency is projecting an approximate $200 million shortfall even with the additional $127 million.

The state budget proviso allows agencies to dip into earmarked and restricted accounts designated as “special revenue funds” to “provide maximum flexibility in absorbing the general fund reductions” that have occurred since the 2008-09 fiscal year.

The ratified general fund budget for this fiscal year is $5.1 billion, a $1.6 billion or 24 percent drop from the ratified 2008-09 budget.

Sanford and the five-member Budget and Control Board, of which Sanford is chairman, cited the proviso last month in approving the transfer of $13.3 million from a special BCB account, known as the “Rural Infrastructure Bank Trust Fund,” to help offset the loss of the agency’s entire $25.2 million general fund budget, which Sanford vetoed and was sustained by the S.C. House of Representatives.

In vetoing the BCB’s general fund budget, Sanford said the agency could live this fiscal year, which started July 1, off about $60 million in “unrestricted” accounts.

In a July 28 story in The Nerve, S.C.  Rep. Bill Clyburn, D-Aiken, claimed that the approved transfer was illegal and warned of a possible lawsuit against Sanford and others. Two days later, attorney and state Rep. James Smith, D-Richland, filed a petition on behalf of the mayor of Timmonsville in Florence County asking the S.C. Supreme Court to stop the transfer of the $13.3 million.

The lawsuit contends that the flexibility spending proviso, Sanford’s veto of the BCB’s general fund budget, and the approved transfer of the $13.3 million violate the S.C. Constitution.  The Legislature, not the executive branch, has the sole authority to appropriate tax dollars, according to the suit, which names Sanford; other BCB members; House Speaker Bobby Harrell, R-Charleston; and Senate President Pro Tempore Glenn McConnell, R-Charleston, as defendants.

The Supreme Court has not yet decided whether to hear the suit. The issue could come up for discussion at this morning’s Budget and Control Board meeting.

Last year, Sanford vetoed the flexibility spending proviso (89.96), saying in his written veto message that while “we support giving agencies flexibility, we are vetoing this proviso because its application is anything but uniform, and it actually hamstrings a number of agencies by making exceptions for certain programs and local interests at the expense of other worthwhile programs.”

He took particular aim at part of the proviso protecting the State House Gift Shop and Santee Welcome Center.

“This prohibition represents the worst example of legislative micro-management of an executive agency in this budget,” Sanford wrote in his veto message. “Even more egregious is the fact that Proviso 39.12 requires PRT to close the Governor’s Mansion Gift Shop even though it has lost less revenue than the State House Gift Shop.”

“While we are not opposed to PRT closing the Mansion Gift Shop to manage its budget reductions, we find it unbelievable that the General Assembly would give special protection to two other less productive shops (State House Gift Shop and Santee Welcome Center) in an effort to reward political patronage rather than make responsible budget cuts.”

Sanford pointed out that the State House Gift Shop, which he noted had two full-time employees and spent about $40,000 annually on temporary employees, lost about $125,000 in fiscal year 2007-08, compared to the Mansion Gift Shop, which had one full-time employee and lost about $35,000 in 2008. He said the Santee Welcome Center was the “least productive welcome center on I-95,” drawing 126,494 visitors and making 832 accommodations during 2007-08, compared to the Hardeeville Welcome Center, which had 265,065 visitors and made 7,402 accommodations for the same period.

The Legislature last year overrode Sanford’s veto. Sanford this year vetoed parts of the proviso, including the sections protecting the State House Gift Shop and Santee Welcome Center, but lawmakers overrode him again.

Contacted last week by The Nerve, Sanford spokesman Ben Fox said he didn’t know which lawmaker pushed to protect the State House Gift Shop and Santee Welcome Center.

“We opposed the sections of the proviso this time around that actually limited flexibility,” Fox said.

The state’s two top budget writers – Senate Finance Committee Chairman Hugh Leatherman, R-Florence, and Dan Cooper, R-Anderson and the House Ways and Means Committee chairman – did not respond to written questions from The Nerve about the proviso.

Asked last week about the proviso, PRT spokesman Marion Edmonds told The Nerve in a written response:  “Of course, we adhere to such provisos, but like other agencies operating under spending provisos, PRT has stated its desire to have greater flexibility to manage its budget as effectively as possible. The need to have all options available is even more critical during this current budget crisis.”

In his veto message last year, Sanford also blasted the Legislature for preventing Health and Human Services from making any cuts to a teenage pregnancy prevention program known as the Medicaid Adolescent Pregnancy Prevention Services (MAPP).

“While MAPP’s intent to prevent teen pregnancy is important, holding this program, as well as (Medicaid) provider rates harmless, will not give HHS the flexibility it needs to absorb future cuts – that will inevitably come once FMAP (Federal Medical Assistance Percentage) money dries up in two years – without resorting to cutting people from the rolls or cutting services,”  Sanford wrote.

“We find it disturbing that, once again,” he continued, “a political agreement would force the protection of a counseling program and potentially cause the reduction in medical services to our state’s most needy citizens.”

Sanford this year vetoed $213.5 million in FMAP funds, which the House sustained. Sanford and a number of lawmakers expressed concerns at the time about Congress not passing an extension of the enhanced Medicaid funding program.

Stensland, the HHS spokesman, said last week that based on information from the National Conference of State Legislatures and research by his agency, South Carolina is the only state that cannot under state law reduce Medicaid provider rates.

Asked who was behind the section of the proviso prohibiting that, Stensland declined to discuss specifics, saying only, “It does speak to the power and influence of certain sectors of the health care industry in South Carolina.”

Besides Medicaid provider rates, the proviso also bans HHS from making any cuts to a senior care management program known as PACE (Program for All-Inclusive Care for the Elderly) and to any “federally qualified health centers.”

The proviso also prohibits reductions to the Meals on Wheels program for seniors operated by the Lt. Governor’s Office, and “regional promotions” and the Palmetto Pride anti-litter program operated by PRT.

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