MY LAST NERVE: Bailouts Continue, Despite “Historic Reform”

May 2, 2014

Inside Insight

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By JAMIE MURGUIA

Sc state university

Unaccountable power isn’t going away

In a typical move by the Budget and Control Board (BCB) Wednesday, the board voted 3-1-1 to bail out yet another state agency. This time, it was South Carolina State University.

The governor, after admitting that “this should be the decision of the legislature,” detailed the agreement her office drafted that would allow the BCB to loan the university $6 million in order to assist with its $13 million deficit. The loan is to be used specifically for debt service and payroll and has to be repaid by the end of fiscal year 2014-2015.

Under the terms of the loan, the university is required to ask the legislature for the money to pay it back, increasing the university’s budget over the $146.2 million the House budget allocated this year. Comptroller General Richard Eckstrom criticized this provision, saying it’s not a guaranteed repayment source and the BCB would essentially be appropriating funds – something that, as he said they learned the hard way in a 2013 state Supreme Court ruling, the Board is not authorized to do.

What seemed to be a theme among the supporters of the loan was the need to get the university “out of the headlines” so that enrollment could begin to increase. The reference to headlines was an allusion several scandals covered by the media, including criminal charges brought against former members of the university’s Board of Trustee as well as ongoing financial troubles that have apparently led to a decrease in enrollment at the university. According to a report in The State, enrollment at the university has dropped 25 percent in recent years, but administrative costs have remained the same. Supporters were citing plans to recoup debt based on student fees and tuition as a way the university could close the deficit gap.

Under questioning by Eckstrom, a Haley staffer explained that the goal of the loan was to buy the university time to get through the current fiscal year and to allow the General Assembly to adopt the budget for next fiscal year that provides a longer term solution. However, Sen. Hugh Leatherman (R- Florence), whose Senate Finance Committee recently referred its budget to the full Senate, stated that the likelihood of allocating the money this year – that is, getting approval from both chambers to change the budget bill – is “slim to none.” Either way, taxpayers will be on the hook for the amount of the loan.

What’s the significance for the taxpayer in all this?

It’s this. Three Budget and Control Board members have taken it upon themselves to come to the aid of yet another agency that’s spent way beyond its means, rather than allow the body that allocated the university’s budget to deal with an admittedly tough situation.

Of course, the Budget and Control Board was “eliminated” earlier this year with the passage of a “historic” government restructuring bill. But the practice of loaning and/or appropriating funds unilaterally and expecting the legislature to cover the tab will no doubt continue under the Board’s new name: the State Fiscal Accountability Authority. This latter agency will retain much of the same authority the current Board has, including the power to issue loans to broken state agencies. As in so many other areas of the year’s “historic” reform, what was supposed to produce accountability will in fact produce more of the same.

So what’s your view: Should an unaccountable board have the power to bail out state agencies without legislative approval?