‘Other’ Funds Transparency Bills Slows

April 27, 2011

Investigative Reports

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The NerveProposed legislation aimed at bringing more transparency and accountability to a huge chunk of the state budget traditionally ignored by lawmakers isn’t making much headway so far this legislative session.

“Other” funds – typically fees and fines – make up more than one-third of the state budget and in recent years have surpassed general funds as a funding source.

Two bills would make permanent a special legislative committee that for the first time this fiscal year, which started July 1, began focusing on mid-year requests by state agencies for increases in other funds.

Three other bills would require proposed increases in other funds to be considered either in separate bills apart from the state budget, or in joint resolutions when sought through regulations.

None of the bills has made it out of their respective chambers, though two of them might be debated on the House floor this week.

For this fiscal year, other funds make up $8.1 billion, or 37 percent, of the adjusted total state budget of $21.8 billion. That pot of money includes such things as college tuition and fees, state lottery proceeds, a portion of the state sales tax earmarked for K-12 education, gasoline taxes, motor vehicle license fees and court filing fees.

In comparison, federal funds comprise $8.6 billion, or about 40 percent, of this fiscal year’s adjusted total state budget; and general funds, about $5.1 billion, or 23 percent.

The Senate this week is scheduled to begin debating next fiscal year’s budget. The House earlier passed its version, which calls for $7.9 billion in other funds; the Senate Finance Committee’s version appropriated $100.5 million more in other funds.

Of the $100.5 million proposed increase in the Senate Finance Committee’s version, $32.3 million is appropriated to the state Department of Social Services for child welfare programs under the heading, “projected expenditure adjustment due to zero-based budgeting.”

In a written response Tuesday to The Nerve, DSS spokeswoman Marilyn Matheus said the proposed additional other funds are “needed to count non-cash certified public expenditures from other state, county and nonprofit organizations to meet maintenance of effort requirements to draw down federal Title IV-E funds available to South Carolina that are currently not being assessed.”

Matheus said obtaining those federal funds would allow DSS to move another type of federal funding “currently supporting the child welfare program back to meeting the objectives of the family independence program without reductions in child welfare services provided to residents of South Carolina.”

Obtaining the Tittle IV-E funds also is a “way to reduce the reliance on state general funds at DSS,” she said.

Another $11 million in other funds in the Senate Finance Committee’s version is designated through a proposed budget proviso (24.15) to the S.C. Department of Disabilities and Special Needs as carryover Federal Medical Assistance Percentage (FMAP) funds.

Lawmakers in recent years typically have lowballed the other funds portion of the budget, often giving the false impression they are cutting spending. The adjusted other funds budget for this fiscal year, for example, is nearly $360 million more than what was initially appropriated by the General Assembly.

The Nerve first reported last year that since July 1, 1999, state agencies collectively had spent $3 billion more than what was initially ratified by the Legislature.

Oversight Committee Bills

Created last year through a proviso (70.27), the eight-member Joint Other Funds Oversight Committee has been considering requests by state agencies for other fund increases. The Nerve reported earlier this month that the committee since November has recommended approval of nearly $30 million in increases so far this fiscal year.

More than $20 million of that amount was requested by the state Commission on Higher Education for endowed chair programs, which use lottery proceeds and non-state matches to attract top professors, at the University of South Carolina and Medical University of South Carolina.

The Office of State Budget, a division of the S.C. Budget and Control Board, has final say on the mid-year increase requests.

Separate bills (H. 3456, S. 419) by Rep. Brian White, R-Anderson, and Sen. Nikki Setzler, D-Lexington, who serve as co-chairmen of the oversight committee, would make the panel a permanent body. The House bill passed the Ways and Means Committee earlier this month, though debate on the House floor was adjourned to this week.

Under Senate rules, House bills that are passed after May 1 cannot be considered this session by the Senate without a two-thirds affirmative vote of senators who are present.

The Senate bill on the oversight committee has an even steeper procedural climb after Sen. Greg Ryberg, R-Aiken, placed a minority report on it when it was passed out of the Senate Finance Committee. That move relegates it to the Senate’s “contested” calendar, making chances of passage slim.

Contacted last week by The Nerve, Ryberg said his opposition to the committee is philosophical.

“When you set that special committee on a permanent basis, you legitimize other funds,” Ryberg said. “There shouldn’t be other funds. It should be all part of the general fund.”

Ryberg said he believes that if fees and fines were required to be part of the general fund budget, those items would receive a more comprehensive review by the entire Legislature.

Ryberg said he doesn’t plan to remove his minority report from the Senate bill. Under Senate rules, it would take either a majority vote of present senators to move it up to “special order” status for quicker debate if a majority of the Senate Rules Committee first approved it; or a two-thirds vote of the chamber if a motion was made outside the Rules Committee.

Even if the Senate or House bill doesn’t become law this year, the oversight committee could continue to function under a proviso (70.27) in both the House and Senate Finance Committee versions of the 2011-12 state budget. Provisos, though, expire after one year unless renewed.

Setzler and White did not respond to written messages from The Nerve seeking comment on their bills.

More Transparency Sought

Of the other three bills dealing with other funds, the one on the fastest track so far is H. 3051, sponsored by Rep. Shannon Erickson, R-Beaufort.

Contacted last week by The Nerve, Erickson said she hopes her bill will be on the House calendar this week, adding she received unanimous consent to pull it out of the House Ways and Means Committee earlier this month for debate on the House floor.

Under the bill, which has 16 co-sponsors, the General Assembly would have to approve by roll-call vote a separate joint resolution any time a state agency wanted to increase a fee or fine. Hiding fee or fine increases in regulations submitted to the Legislature would be banned.

Erickson said she has been pushing her bill since she became a lawmaker more three years ago.

“It’s not that I’m never going to vote for fees,” she said. “I just want them to be thought out and completely open and transparent.”

Erickson said fee and fine increases typically are buried in regulations submitted by state agencies to legislative subcommittees. The regulations automatically take effect in 30 days if a subcommittee adjourns debate without taking any action on them, she said.

Erickson’s bill would not apply to college and university tuition and fees, which make up the biggest share of other funds in the state budget; or to shipping fees charged by the S.C. Ports Authority.

Erickson said unlike fees and fines often proposed by state regulatory agencies, college and university tuition and fees, which are set by their respective boards of trustees, typically are “not hidden.”

“We feel there are other ways to work with those,” she said.

As for the Ports Authority’s fees, Erickson said, “They have to have the ability to handle them based on market-driven factors.”

On the Senate side, two bills (S. 205, S. 14) would ban proposed fee and fine increases from being included in the state budget; instead, those increases would have to be approved in separate legislation.

Senate President Pro Tempore Glenn McConnell, R-Charleston, is the main sponsor of S.14, which hasn’t moved out of a Senate Judiciary subcommittee since January. McConnell, who is the Senate Judiciary Committee chairman, didn’t respond to a written message from The Nerve seeking comment on his bill.

Sen. Tom Davis, R-Beaufort, is a co-sponsor of McConnell’s bill and the main sponsor of S. 205, which has been stuck in the Senate Finance Committee since January.

Contacted recently by The Nerve, Davis, who sits on the Judiciary subcommittee considering McConnell’s bill, said he planned to “defer” to McConnell’s bill, though he added, “It’s iffy it will be passed out of the Senate this year.”

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