Next Year’s Budget: Still Growing and Growing

May 11, 2010

Investigative Reports

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The NerveAlthough most of state government likely will experience another round of general fund cuts next fiscal year, more than two dozen agencies would see their total funding increased under proposed Senate and House budgets.

Bucking the trend of general fund cuts, the S.C. Senate was particularly generous to itself with state taxpayer dollars.

An analysis by The Nerve found that of 106 budget categories, 43 – or 41 percent – in the House budget and 44 – or 42 percent – under the Senate version propose total fund increases for 2010-11 compared to the ratified budget for this fiscal year, which ends June 30.

And that number likely is higher, as the budget categories reviewed by The Nerve do not, according to the top state budget official, include hundreds of millions of federal stimulus dollars or funds generated by budget provisos.

Besides S.C. agencies, the House and Senate budget categories showing increases include various state funds and department divisions, boards, commissions and authorities. Seven colleges and universities, including Clemson and the University of South Carolina’s main campus and five of its seven branches, are among the group with projected larger total budgets.

Of the 40-plus categories showing total fund increases, 29 are state agencies, divisions, offices, boards or commissions under the House budget compared to 34 under the Senate version, The Nerve’s review found.

Total funds include general, federal and “other” funds, such as fines and fees. College tuition, for example, which has been skyrocketing statewide in recent years, is considered other funds.

Overall, total funds are projected to grow 2.25 percent and 1.96 percent under the Senate and House versions, respectively, to more than $21 billion for next fiscal year compared to the start of this fiscal year.  But those budget categories do not include certain revenue sources, such as the $346 million in appropriated “state stabilization funds” paid with federal stimulus money, said Les Boles, director of the Office of State Budget.

The Nerve reported last week that the Senate, which passed its budget on April 29, proposed giving itself an increase for next fiscal year of more than $3 million, or at least 36 percent, compared to the most recently amended budget for this fiscal year. When compared to the initial ratified budget, it works out to nearly a $4-million, or 46-percent, hike for the 46-member chamber.

The Nerve’s latest analysis found that the Senate’s proposed increase for itself – all with general fund dollars – would be the largest percentage general-fund hike of any state agency or board in its proposed 2010-11 budget, compared to this year’s ratified budget.

Senate President Pro Tempore Glenn McConnell, R-Charleston, defended the proposed increase for his chamber – the vast majority of which is designated for “unclassified positions” – during a recent budget debate on the Senate floor, contending that the legislative branch is a “core function of government.”

McConnell said the proposed increase is needed primarily to make up for depleted reserves used for basic services; and to set aside money for anticipated costs related to recommended repairs at the Gressette Building where senators’ offices are located, and the redrawing of legislative district lines as a result of the latest U.S. Census.

Coming in second (29.75 percent) in proposed general-fund hikes for state agencies in the Senate budget was the lieutenant governor’s office. The lieutenant governor presides over the Senate as president, though he doesn’t vote unless there is a tie. The proposed increase for that office is concentrated in the home and community-based meals program under the Office of Aging, records show.

Budget Winners

Following is a breakdown of the state agencies and boards that would receive the top-15 largest percentage increases in projected total funds, with their total proposed appropriations listed in parentheses, under the Senate’s 2010-11 budget compared to this year’s ratified budget:

  • Department of Employment and Workforce (formerly Employment Security Commission) – 103.5 percent ($207 million)
  • Transportation Infrastructure Bank Board – 59.5 percent ($80.3 million)
  • Senate – 46.1 percent ($12.3 million)
  • Department of Public Safety – 41.6 percent ($187.7 million)
  • State Housing Finance and Development Authority – 39.8 percent ($256.4 million)
  • Clemson University – 30.7 percent ($767.8 million)
  • Department of Transportation – 23.3 percent ($1.29 billion)
  • Retirement System Investment Commission – 21.69 percent ($5.8 million)
  • Department of Revenue – 20.3 percent ($62.8 million)
  • Administrative Law Court – 19.4 percent ($2.8 million)
  • Financial Institutions Board – 16.4 percent ($4.1 million)
  • Attorney General’s Office -15.9 percent ($15.9 million)
  • Public Service Commission – 14.24 percent ($4.8 million)
  • Lt. Governor’s Office – 13.86 percent ($36.3 million)
  • Department of Social Services – 13.39 percent ($1.7 billion)

In comparison, below are the top-15 percentage total-fund rankings under the proposed House budget, which passed March 18:

  • Transportation Infrastructure Bank Board – 59.6 percent ($80.3 million)
  • State Housing Finance and Development Authority – 39.8 percent ($256.4 million)
  • Clemson University – 30.7 percent ($767.8 million)
  • Department of Public Safety – 24.2 percent ($164.6 million)
  • Department of Transportation – 23.2 percent ($1.29 billion)
  • Retirement System Investment Commission – 21.69 percent ($5.8 million)
  • Higher Education Commission – 17.2 percent ($143.7 million)
  • Financial Institutions Board – 16.4 percent ($4.1 million)
  • Department of Revenue – 16.1 percent ($60.6 million)
  • Attorney General’s Office – 15.9 percent ($15.9 million)
  • Department of Employment and Workforce – 15.1 percent ($117.1 million)
  • Public Service Commission – 14.24 percent ($4.8 million)
  • Lt. Governor’s Office – 13.86 percent ($36.3 million)
  • Department of Social Services – 13.39 percent ($1.7 billion)
  • Department of Labor, Licensing and Regulation – 12.96 percent ($41.2 million)

In the Senate budget, the Department of Employment and Workforce would receive most of its proposed $105 million increase from money – not classified as general funds – allocated to other state agencies, counties, planning districts and school districts, budget documents show.The department was known as the Employment Security Commission before it was reorganized earlier this year into a Cabinet agency under the governor following controversy over its handling of unemployment funds and other issues.

Similarly, the Department of Public Safety’s budget would see an approximate $30 million increase in transfers from various state and local government accounts under both the House and Senate versions, according to documents.

The Infrastructure Bank Board, a division of the S.C. Department of Transportation that assists in financing public transportation projects of more than $100 million, would receive a projected $30 million boost in non-general fund revenue under both budgets, documents show.

Biggest Increases, Biggest Drops

Under both the proposed House and Senate budgets for next fiscal year, the health plan for state employees managed through the S.C. Budget and Control Board shows the largest projected percentage increase – more than 500 percent, from $9.2 million to more than $58 million – in total funds.

Boles, the state’s budget director, told The Nerve last week that the state health plan figures can easily be misinterpreted, noting that the difference reflects more of an accounting method than an actual cost increase. He explained that the fund starts with a base amount of general funds, which is reflected again in the budget for the following year after the additional appropriated amount is allocated to state and local agencies.

The second-highest percentage jump in both the 2010-11 House and Senate budgets are general funds transferred to counties to make up for shortfalls in the penny sales tax revenue that replaced school operating property taxes on owner-occupied homes. The House projects a 377.5-percent increase to $126.1 million, while the Senate estimates a 243.2-percent increase to $90.7 million.

Boles said the large proposed increases and the differences between the House and Senate versions primarily reflect changes in how that money is categorized between general fund appropriations and budget provisos.

More than half of the 106 budget categories in the proposed House and Senate budgets for 2010-11 show projected decreases in total funds, The Nerve’s analysis found, though those categories, according to Boles, do not include certain revenue sources. Under the proposed House budget, 60 categories show decreases compared to 59 under the Senate version.

The House budget for its own chamber, for example, would see a nearly 13-percent drop in 2010-11 compared to this fiscal year’s ratified budget, under both the House and Senate versions. But The Nerve reported last week that the 124-member chamber received a nearly $4.3-million, or about a 115-percent, hike for “other operating expenses” at the start of this fiscal year.

Compared to the initial ratified budget, the S.C. Department of Corrections – the only state agency allowed by the Budget and Control Board to run a deficit – would receive about $39 million, or 9.7 percent, and $49 million, or 12.3 percent, less in total funds next fiscal year under the House and Senate versions, respectively.

Most of the cuts would be in general funds; the total department budget is listed at more than $350 million under both versions.

Still, department spokesman Josh Gelinas told The Nerve that the Senate version “does add significant stimulus funding.” More than $40 million in federal stimulus dollars are earmarked for the department, records show, though that money is not reflected under total and state fund categories, known as “Part IA” money, in both versions.

With federal stimulus funds, the department could ask the Budget and Control Board to allow it to run a deficit next fiscal year of about $11 million compared to $29 million this fiscal year, Gelinas said. Not being allowed to run a deficit, he added, would require “laying off about 240 employees, closing two prisons and releasing 1,000 to 1,200 inmates.”

“We already are among the lowest-cost, most efficient systems in the country and already are operating at among the lowest per-inmate spending levels in the nation,” Gelinas said. “There is literally no place to look or ask about how to operate more efficiently.”

The Department of Education’s total funds would be cut by more than 8 percent under both the House and Senate versions, The Nerve’s review found. State Superintendent of Education Jim Rex announced last week that his department is laying off 80 mainly support staff.

“We’re still looking at a 45-percent cut in state funding compared to what we were getting two years ago,” department spokesman Jim Foster told The Nerve before Rex’s announcement on the layoffs. “We’ll still be required to perform the same functions, basically, but with half the money.”

If the department follows through with 80 layoffs, it would nearly double the total number of mostly full-time employees in all state agencies and offices who have been laid off this fiscal year through April 8, according to The Nerve’s earlier analysis of Budget and Control Board records.

That figure doesn’t include approximately 1,400 public teaching jobs that have been lost statewide over the past couple years, along with, according to a recent survey of S.C. school districts, another projected 1,400 to 2,500 classroom jobs that could be cut before the start of the next school year.

Total Budget Growing

 

Although the proposed House and Senate budgets for next fiscal year show general fund decreases of more than $600 million compared to the 2009-10 ratified budget, each version projects $462 million more in federal funds. That doesn’t include, however, the appropriated $346 million in federal stimulus money for budget stabilization, according to Boles.

Given Boles’ explanation, it also wouldn’t reflect an additional $213.5 million in Federal Medical Assistance Percentage (FMAP) money for next fiscal year, another type of stimulus funding.

The proposed Senate budget for next fiscal year estimates an additional $632 million in other funds, while the House version projects $590 million more in other funds; though, according to Boles, that doesn’t include funds generated by budget provisos.

A Senate budget proviso, for example, would provide the Department of Public Safety with an additional projected $22 million from a proposed increase in vehicle registration fees.

The state Judicial Department next fiscal year would receive an estimated $24 million more in increased and new court filing fees from the Senate, potentially giving the third branch of government its largest total budget in at least the past 10 years, The Nerve reported last month.

Federal and other funds each total more than general funds in both the proposed House and Senate budgets for 2010-11. While both project general funds for next fiscal year at slightly below $5.1 billion, both estimate federal funds at nearly $8.3 billion.

The Senate budget projects other funds at $7.8 billion, while the House version puts that figure at $7.76 billion.

Overall, the total proposed Senate budget for 2010-11 stands at $21.16 billion – about $60 million more than the House version. Compared to last year’s total ratified budget of $20.69 billion, the proposed Senate budget is $466 million higher, while the House version shows an estimated $406 million increase.

If the House doesn’t agree with the Senate changes, a conference committee of members of both chambers could be formed to work out differences between the two versions before sending it to Gov. Mark Sanford for approval or veto of all or part of it. A two-thirds vote in each chamber is needed to override any vetoes.

Sanford has called on lawmakers to cut $324 million from the Senate budget. He earlier warned that budget writers could face a $1 billion shortfall in fiscal 2011-12 with the loss of federal stimulus money.

Reach Brundrett at 803-779-5022, ext. 106, or rick@scpolicycouncil.com