Sanford: Chief Economist’s Numbers Don’t Add Up

May 25, 2010

Investigative Reports

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The NerveIf South Carolina’s chief economist, William Gillespie, is looking for a job reference, he likely won’t get one from Gov. Mark Sanford.

In a May 12 veto that received no publicity, Sanford blasted Gillespie’s record on making projections about the state’s revenues – projections lawmakers use to help write the state’s budget. Sanford vetoed a bill (H. 4347), sponsored by the House’s chief budget writer, Rep. Dan Cooper, R-Anderson, that would have required Gillespie to give final approval to legislative fiscal impact statements.

Currently, final approval rests with the state Board of Economic Advisors (BEA), comprised of a  chairman appointed by the governor; two members appointed by Cooper and Senate Finance Committee Chairman Hugh Leatherman, R-Florence; and a non-voting representative of the S.C. Department of Revenue.

“Time after time the current chief economist, Mr. Gillespie, makes incorrect revenue projections – misleading not only the General Assembly but the citizens of South Carolina,” Sanford wrote in his two-page veto message. “We believe that giving the chief economist sole responsibility for estimating a bill’s fiscal impact will further complicate an already difficult process given the chief economist’s historically poor performance.”

The House failed twice at overriding Sanford’s veto, which means the bill would have to be re-introduced next year.

The rationale behind the bill is unclear. Cooper did not respond to recent written and phone messages from The Nerve.

Rep. Harry Ott, D-Calhoun, told The Nerve this week that the bigger problem is with the Board of Economic Advisors. As the state’s chief economist, Gillespie serves as head of the BEA staff.

“I do have confidence in Dr. Gillespie,” said Ott, the House minority leader. “What this is about is holding the Board of Economic Advisors accountable as a group. It’s up to that board to determine whether Gillespie’s projections are accurate or not.”

The BEA is chaired by John Rainey, who reports to the five-member S.C. Budget and Control Board. Sanford, Cooper, Leatherman, state Treasurer Converse Chellis and S.C. Comptroller General Richard Eckstrom make up the Budget and Control Board.

Gillespie did not respond to recent written and phone messages from The Nerve.

Budget and Control Board spokesman Michael Sponhour in a written response to The Nerve declined comment on the bill or Sanford’s veto, saying only, “We don’t have any comment on the legislation as this is a public policy matter to be decided by the state’s elected leadership.”

Gillespie, who was hired by the Budget and Control Board in 1984 and promoted to chief economist in 1992, makes $80,559 annually for a 30-hour work week, according to Sponhour, noting that Gillespie is classified as a “temporary” employee.

Gillespie had been earning $121, 833 when he was working full time in the position, Sponhour said, adding that a full-time week is 37.5 hours. Gillespie had been working through the state’s Teacher and Employee Retention Incentive (TERI) program until Sept. 30, 2009; he was rehired on a “temporary” status on Oct. 5, 2009, Sponhour said.

Gillespie has a bachelor’s degree and a Ph.d. in economics from Presbyterian College and Clemson University, respectively, according to a biography provided by Sponhour. Before joining the Budget and Control Board in 1984, he was the director of regulatory economics at Tasco Corp. in California.

He also has held various positions in Washington, D.C., including manager of economics research at the U.S. Department of Energy, economist at the U.S. Bureau of Labor Statistics, and economist at the Cost of Living Council.

Sanford in his veto message said Gillespie in late 2007 was “shockingly optimistic about our state’s economic future despite national economists’ expectations to the contrary.”

And Sanford said although in February 2008 he “publicly expressed our administration’s disagreement with the chief economist’s predictions of the depth and severity of the housing crisis,” Gillespie predicted the economic slump would be “short-lived,” and that economic indicators then “do not say we’re falling into a hole.”

“Time has proven these statements to be disastrously wrong” Sanford wrote. “Since then, the chief economist has continued to report wildly inaccurate revenue projections that have necessitated additional expense to the state in the form of an emergency legislative session.”

Sanford contended that within a month of the end of last year’s session, Gillespie’s “faulty economic projections” caused the state’s budget to be $320 million out of balance. The S.C. Constitution requires a balanced budget.

Sanford said that letting Gillespie instead of the BEA have final approval of economic impact statements on legislation is a “step in the wrong direction” in part because in comparison to the BEA, Gillespie is “merely an employee selected by the director of the Budget and Control Board … which is effectively controlled by the legislative body.”

“We cannot support the idea of giving a single person, especially the chief economist, responsibility for certifying fiscal impact statements on state legislation,” Sanford wrote. “This is particularly the case when that employee is insulated from taxpayer accountability by at least two layers of government bureaucracy.”

Ironically, Gillespie approved the fiscal impact statement for the bill, records show. And what was that projection?

“This bill is not expected to affect state general fund revenue in FY 2010-11,” the impact statement said.

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