MY LAST NERVE: Government Restructuring … or Just Rearranging?

January 24, 2014

Inside Insight

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Jamie Murguia

Almost instantly after unanimous passage in the House and a 39-4 favorable vote in the Senate, lawmakers and the governor began proclaiming a “historical” victory with the passage of the Department of Administration bill. The governor went so far as to say in her State of the State address on Wednesday night that “the Budget and Control Board – what I call the big, green, ugly monster – is dead, and with it the legacy of a backwards administrative government that was as wasteful as it was clumsy, as inefficient as it was embarrassing.” That isn’t quite the case though. The Budget and Control Board (BCB) lives on – just under a new name.

It’s worth considering, in detail, exactly what this “historic” bill does and doesn’t change.

What does the bill accomplish?

(1) More agencies will be managed by the executive branch. The executive branch, through the Department of Administration, will now oversee 17 additional state agencies that were previously under the Budget and Control Board. Essentially, the majority of the BCB is now the Department of Administration, an executive branch agency overseen by a director appointed by the governor with advice and consent of the Senate.

The DOA’s responsibilities will also include IT maintenance in state agencies, and administrative and financial services for the executive branch.

(2) Several new agencies and offices are created. In addition to creating the Department of Administration – the new Budget and Control Board agency – the bill also created the Revenue and Fiscal Affairs Office, the South Carolina Confederate Relic Room and Military Museum Commission, and the Executive Budget Office within the DOA.

  • The Revenue and Fiscal Affairs Office will now house the Board of Economic Advisors (BEA) and the Office of Research and Statistics, which were formerly under the BCB.
  • The South Carolina Confederate Relic Room and Military Museum is currently governed by the BCB. This bill would create an entirely new standalone commission composed of nine voting members.
  • The Executive Budget Office is established within the Governor’s Office. Its purpose is to “support the Office of the Governor by conducting analysis, implementing and monitoring the annual general appropriations act, and evaluating program performance.”

These managerial functions hardly amount to the massive power shift many legislators claimed they gave the Governor with this bill. Actually, if any branch of government made out with more power under this bill it was the legislative branch – go figure!

(3) Under the new authority the legislature granted itself, termed in the bill “Legislative Oversight of the Executive Branch,” there was also a new felony created. The General Assembly will now have the power to subpoena citizens to appear before either chamber of the legislature or any committee. Any person who either ignores the subpoena or gives false or incomplete testimony will be guilty of criminal contempt of the General Assembly. Anyone who refuses to be sworn in, refuses to answer any question, or refuses to produce requested documents will likewise be guilty of criminal contempt of the General Assembly. Any person convicted under this new law will be guilty of a felony and must either be fined or sentenced to up to five years in prison.

With this new oversight power, each standing committee will conduct “oversight studies and investigations” on all agencies within the standing committee’s topical jurisdiction at least once every seven years.

And (4) the Legislature took responsibility for deficit recognition. On the agency level, a deficit will only be recognized by passage of a joint resolution acknowledging the deficit by each chamber of the General Assembly. Previously, the BCB recognized these deficits – allowing legislators to shift blame to an unaccountable board for controversial decisions.

Additionally, if a statewide revenue shortfall is greater than 3 percent, the Senate President Pro Tem and the House Speaker may call their respective chambers into session to avoid a deficit. However, if the General Assembly does not meet within 20 days of being notified of the revenue shortfall, the Director of the Executive Budget Office will have the power to reduce General Fund appropriations. Essentially, the bill allows the legislature to address a statewide revenue shortfall, but leaves lawmakers a way to avoid responsibility if they don’t want to make politically difficult cuts.

More importantly, what doesn’t the bill accomplish?

(1) Lawmakers and the governor would have you believe that they got rid of the Budget and Control Board, but that’s not quite true. The five-member hybrid board exists under a new name – the State Fiscal Accountability Authority (SFAA). The SFAA is comprised of the same five members as the BCB (governor, treasurer, comptroller, House Ways and Means chairman, and Senate Finance chairman) and will maintain control over some of the BCB’s most important powers: procurement (purchasing of goods or services for the state), and bonding authority, as well as grants, loans and other forms of financial assistance to other entities

Because the SFAA is the same hybrid body as the BCB, just under a different name, accountability is still dispersed and eventually lost since the public has nobody to hold responsible for the decisions made.

(2) The General Assembly still won’t take responsibility for mid-year budget cuts. While the General Assembly is supposed to return to session to address deficits of 3 percent or greater, lawmakers will not be responsible for deficits below 3 percent. The Director of the Office of Executive Budget will reduce General Fund appropriations across the board – just as the BCB currently does – to eliminate the deficit. If the legislature chooses to appropriate every dollar the Board of Economic Advisors projects the state will receive, and that projection turns out to be too optimistic, lawmakers should be responsible for correcting their own mistake.

Under this legislation, they will not be.

(3) The Legislature still won’t take responsibility for approval of all bonds. Authority over bonding, grants, and loans will now be given to the State Fiscal Accountability Authority. Bonding is clearly a legislative function as it directly results in state debt, which must be paid back by state appropriations. Bond authority therefore rightly belongs to the legislature, not an unaccountable and anonymous board. The legislature should be held accountable when it issues debt foolishly.

And (4) the governor still won’t get responsibility for all procurement. The Procurement Services Division, formerly under the Budget and Control Board, will be transferred and incorporated into the State Fiscal Accountability Authority. The power to purchase goods and services for the state, in other words, remains in the same 5-member hybrid board. It is deeply irresponsible to allow lawmakers to both a) pass laws whose implementation will require government authorities to contract with private companies and b) decide which companies will get the benefit. Clearly, the temptation is for our part-time lawmakers to steer contracts to their own firms or the firms of their friends, allies, and contributors. Any restructuring reform worth the name would change that, and this bill leaves it largely unchanged.

Tell me, do you think the House and Senate have done a good job investigating and punishing their own members for violations of state law? Or do you believe all of our elected officials should be held to the same standard so that we can put an end to the corruption in our state?

Murguia is Director of Research for the South Carolina Policy Council, the parent organization of The Nerve. She can be reached at jamie@thenerve.org or (803)779-5022, ext. 105. Follow her on Twitter at @JamieMurguia.