S.C. agencies sitting on nearly $500M in taxpayer funds

September 6, 2018

Investigative Reports

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By RICK BRUNDRETT

As S.C. lawmakers plan to push a massive borrowing bill next year, they likely won’t publicly talk about the fat reserves that some state agencies have accumulated – including their own chambers.

State agencies collectively carried over about $484.5 million in general funds into the fiscal year that started July 1, according to S.C. Comptroller General Richard Eckstrom’s year-end report on the 2017-18 fiscal year.

That is roughly the amount of a taxpayer-backed bond bill that died in the Legislature last year, about half of which was designated for higher education projects. Lawmakers reportedly next year plan to introduce another bill to borrow hundreds of millions of dollars – which would fall on taxpayers to repay – for repairs at colleges and universities and other state-owned buildings.

As of June 30, the state had a total general-fund balance of nearly $1.2 billion, including the approximately $484.5 million carried over by state agencies, according to Eckstrom’s report.

The report, released last month, shows that the 124-member House of Representatives and 46-member Senate collectively held more than $30 million in reserves for the chambers’ internal operations to start this fiscal year.

The House had a $25 million surplus in general funds as of July 1 – nearly $2.9 million more than its $22.2 million base budget for 2017-18, according to the report. The Senate carried over $6.1 million into this fiscal year, which represented 43 percent of its nearly $14.3 million base budget last fiscal year.

House Clerk Charles Reid and Senate Clerk Jeff Gossett did not respond to written messages this week from The Nerve about those surpluses.

The Nerve’s review of Eckstrom’s report found that 11 state agencies and a group categorized as “Legislative Support Agencies” each had, as of July 1, a general fund surplus representing at least 25 percent of its appropriated base budget for 2017-18.

The state Department of Commerce, for example, had $49.1 million in reserves – $4.2 million more than its $44.9 million base general-fund budget last fiscal year, according to the report.

Asked how much general fund reserves state agencies should have, Eckstrom – the state’s chief accountant – in a written response Wednesday to The Nerve replied: “Competent financial planners advise households to budget and set aside sufficient funds to cover a minimum of three months of household expenses – 25 percent of their annual expenses – to deal with eventualities beyond their control. Prudent budgeting policy should encourage agencies to practice like-minded budgeting discipline.”

Lawmakers allow state agencies generally to carry forward up to 10 percent of their general fund appropriations. A separate state budget proviso, which must be renewed every year, allows the House and Senate chambers to carry over all unspent funds into the following fiscal year; other state agencies through provisos can have reserves of more than 10 percent for specified purposes.

Under the S.C. Constitution, the state has two main “rainy day” funds – the General Reserve Fund and Capital Reserve Fund – which stood at $363.5 million and $145.4 million, respectively, as of June 30, according to Eckstrom’s year-end report. The Nerve has previously reported that lawmakers in recent years have raided the Capital Reserve Fund annually for their favorite projects.

The “rainy day” funds, agency carryover amounts and about $194 million in “unreserved/undesignated” general funds as of June 30 made up the total general-fund balance of nearly $1.2 billion, according the report.

More than 30 agencies each carried over at least $1 million in general funds into this fiscal year, the report shows. Eight agencies each had an additional $20 million or more in general fund reserves as of July 1.

The S.C. Department of Health and Human Services, which manages the state’s Medicaid program, had the biggest general-fund surplus – $106.5 million – of any agency as of July 1, the report shows.

In dealing with agency reserves, lawmakers have not seriously addressed whether any unspent money should be returned to taxpayers.

Biggest agency surpluses

The Nerve on Tuesday asked five state agencies – the Adjutant General’s Office and departments of Commerce; Health and Human Services; Parks, Recreation and Tourism; and Transportation – how they planned to use their respective surpluses. Only PRT and the Adjutant General’s Office responded.

In his email response, PRT director Duane Parrish said most of the nearly $31 million carried over into this fiscal year is for “beach renourishment,” and that “80% of these funds are already committed to a project and are awaiting things like matching funds, permitting, etc.”

The Nerve’s review of Eckstrom’s year-end report found that the department’s surplus as of July 1 represented 67 percent of its base general-fund budget for 2017-18. The agency had a $30 million surplus at the start of last fiscal year, comptroller general records show.

A spreadsheet provided by Parrish shows that of the $30.9 million in agency reserves as of July 1, $1.8 million is designated under a budget proviso for “advertising,” while another $1.45 million is categorized as “sports development.”

Lt. Col. Cindi King, public affairs director for the S.C. National Guard, which is part of the Adjutant General’s Office, said in an email response the agency plans to use its surplus funds for, among other things, “disaster recovery operations (approximately $47 million) from as far back as the 2014 ice storm response that are still awaiting disbursement.”

The Adjutant General’s Office had $48.5 million in general fund reserves as of July 1, which was nearly seven times its base general-fund budget for 2017-18 – the largest surplus percentage among state agencies, The Nerve’s review found. At the start of last fiscal year, it had a $59.5 million surplus, comptroller general records show.

Asked whether the agency needed a relatively large surplus given the state’s two main “rainy day” funds, King replied, “The General Reserve Fund and Capital Reserve Fund are not specifically designated to support disaster recovery operations for specific events.”

Following is a breakdown of the 10 state agencies with the largest general fund reserves at the start of this fiscal year, according to Eckstrom’s report:

  • Health and Human Services: $106.5 million
  • Commerce: $49.1 million
  • Adjutant General’s Office: $48.5 million
  • Parks, Recreation and Tourism: $30.9 million
  • Education: $29.2 million
  • House of Representatives: $25 million
  • Corrections: $23.4 million
  • Health and Environmental Control: $21.6 million
  • Transportation: $16.7 million
  • Rural Infrastructure Authority: $14 million

Brundrett is the news editor of The Nerve. Contact him at 803-254-4411 or rick@thenerve.org. Follow him on Twitter @RickBrundrett. Follow The Nerve on Facebook and Twitter @thenervesc.

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