Listen to your accountant

August 18, 2017

Inside Insight, Uncategorized

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On spending, how about self-discipline?

By BRYCE FIEDLER

The state Comptroller General’s office released its annual budget report this week, giving citizens insight into the sources of state revenue and how that money was spent as well as suggestions for future spending. Here’s the bottom line: The government needs to spend less.

According to the report, the General Fund this year accumulated $7.582 billion in revenue, slightly more than the $7.271 billion collected during fiscal year 2016. However, it states, “the revenue growth rate has been slowing during the past two fiscal years.”

This trend was also highlighted in last year’s report, where the office warned the legislature to “use surpluses to increase reserves for harder times ahead.”

If your accountant tells you to start saving because the economy may go south, and tells you again, you’d be wise to listen.

In terms of how the state’s tax dollars were used, “spending on education and health services consumed almost three-fourths of all spending in the General Fund,” amounting to $3.717 billion and $1.867 billion respectively, for a total of over $5.5 billion. Education, health, and higher education have remained the top three budget expenditures since 2014.

Individual income tax continued to be the largest source of revenue for the state, accounting for over $3.5 billion in funds. Sales tax revenue for the year only increased by 2.8 percent, a possible reason why the state’s anticipated surplus was short $11.8 million.

And then there’s the broken pension system. Here, the report is sobering.

Despite what the state claims it has done to remedy its employee pension plans, “the steps that it has taken are inadequate to correct the pension dilemma it faces,” it states.

One reason the state’s unfunded pension liabilities are so high is the unrealistic expected rate of return it relies upon. The pension reform law passed earlier this year by the General Assembly only slightly modified that rate, and its other provisions completely missed the fundamental issue at hand: The system is unsustainable.

The necessary move, then, and what the Comptroller General’s report echoes, is a restructuring of the system. Specifically, “state leaders must adopt a more disciplined, comprehensive, and long-term approach” to mitigate the liability.

Short-term fixes and colorful rhetoric will not pay off the estimated $20 billion to $74 billion in debt.

The most disconcerting, but not surprising, discovery is that the General Assembly continues to make poor fiscal decisions unnecessarily. The Comptroller General’s office states clearly that the state could tighten spending, and has done so under economic pressure, saying, “the economic downturn we survived within our recent past revealed our ability to operate government and provide necessary services on much less.”

There is a culture of excessive and irresponsible spending in the General Assembly. It stems from lawmakers’ inability to plan for the future and their refusal to learn from the past. A decade has not passed since the recession, yet legislators are spending as if the state will continue to enjoy infinite economic growth.

When the government was forced to get serious about spending after the financial crisis, it wasn’t just one or two areas that lost funding. The budget was slashed across the board.

Legislators have the opportunity now to prune strategically. It’s because they’re not under the gun that they ought to take it. Otherwise, as night follows day, the time is bound to come when everyone will have to pay the price. Again.

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  • Anon

    “our ability to operate government and provide necessary services on much less”

    I think there were some kids within the DSS system that might dispute the claim that necessary services were provided.

  • c

    Ever notice what animals do when hard times are coming?

  • dm10ae

    The pension will never be fully funded with investments going south faster than money can be made. The investing person loses money but yet can get more to invest, there is no bottom, until zero. The pension should not be political and run by legislators with more power in political arena than in fiscal processes.

  • Lyn Wilson

    First, call it what it is. “Revenue” = taxes on the citizens. Second, a $300 million increase in ‘revenue’ over 2016 is not “slightly” more – 4% of $7.2 billion is a lot of money. Third – Suppose the State doesn’t bail out the pension fund? Let SC retirees face the same sad state of affairs that other corporate retirees face when pension funds are raided or ‘disappear’. Then maybe, just maybe, there would be some incentive for a change in legislators and a change in the legislature to make such theft illegal and to provide consequences (legal and civil) against those who are responsible for the theft.