Sanford Succeeds in Shaking Up BCB

June 24, 2010

Investigative Reports

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The NerveIt required the leanest of lean budget times, and it didn’t happen until halfway through the final year of his constitutionally term-limited second stretch in office.

Nevertheless, with a proverbial stroke of his veto pen, Gov. Mark Sanford finally has succeeded in striking a blow for change at a powerful yet strange amalgamation of executive and legislative authority in state government unique to South Carolina – the Budget and Control Board.

Sanford – admired in some quarters, reviled in others and mostly vilified in the media – has been on a quest to reform the board, or for that matter abolish it outright, for much of his tenure as the state’s chief executive.

To be sure, the veto is not the kind of change the Budget and Control Board welcomes – the nixing of every red cent of its $25.2 million allocation from the state’s general fund in the upcoming 2010-11 fiscal year.

In the General Assembly last week, the House upheld Sanford’s veto of those millions, which otherwise would fund the Budget and Control Board’s operations in the new budget year. It begins July 1.

Both the House and Senate must vote against a veto by a two-thirds margin to override it.

The Budget and Control Board is slated to meet Wednesday at 9:30 a.m. at the State House complex. The meeting has been rescheduled three times: the first time from June 15; the second from June 17, the day the House sustained the veto; the third from Monday.

There is nothing specifically related to the veto on the agenda for the meeting.

To the average taxpaying South Carolinian riding out these dog days of summer, the Budget and Control Board might sound like simply another cog in the machinery of state government.

The BCB – just one more acronym to keep up with in the alphabet soup of agencies, right?

Well, contemplate that when looking nationally, the Budget and Control Board is anything but run of the mill in terms of state government. No doubt: South Carolina is the only state – the lone, single solitary one – that has such an entity.

True, it’s hardly the stuff of gut-busting hilarity on The Daily Show with Jon Stewart. But South Carolina is indeed notable for something other than its – shall we say – political climate.

So, is that a good thing? What’s the deal with the Budget and Control Board anyway? What gives?

If you care about efficiency, accountability and constitutionality in the Capitol workings of Columbia, the answers likely will interest you.

Explaining what the Budget and Control Board is and what it does, however, is kind of like defining mud – it’s pretty thick.

The BCB website says the agency “plays a key role in the general management of state government. This institution is unique to South Carolina and provides a broad array of services to other parts of the public sector as well as administrative and regulatory functions.”

With origins tracing to the Reconstruction period, those operations run far and wide. A shortlist of the Budget and Control Board’s activities includes overseeing:

  • buildings, vehicles and other property the state owns;
  •  the Insurance Reserve Fund, which provides property and liability coverage to more than 1,000 state and local agencies;
  • state employee benefits; and
  • mail service to state agencies.

Adding to the list, the Budget and Control Board has several divisions. They range from the Office of State Budget and the Board of Economic Advisors to the Office of Research and Statistics and the Confederate Relic Room and Military Museum.The authority of the BCB gets even more diffused in the makeup of its supervising body – a five-member panel consisting of the governor, the treasurer, the comptroller general, the head of the Senate Finance Committee and the chairman of the House Ways and Means Committee.

That’s three of the highest-ranking members of the executive branch, and two of the most powerful representatives of the legislative branch – political all. And while they all happen to wear the same party stripes right now – Republican – it was not always so.

Thus, the Budget and Control Board itself is, well, a board. But in reality, the BCB is much more expansive than that.

Sanford’s Perspective

To Sanford’s way of thinking, the Budget and Control Board is a creature from a bygone era, representing how the Legislature has concentrated power in its hands and handicapped the executive branch of state government for fear of a strong governor.

“Whether it’s in government or in the private sector, structure matters – and the fact is that the structure of the Budget and Control Board is antiquated and chronically unaccountable,” Sanford said in a news release in September 2007.

The governor issued the statement to express his support for a lawsuit seeking to dissolve the BCB. In its place he has proposed the creation of a Department of Administration with a director who would be a member of the governor’s Cabinet.

A nonprofit group named Change SC Now filed the case in 2007.

“The suit challenges the board’s existence on constitutional grounds, saying that its structure violates the constitutionally required separation of legislative and executive branch powers,” Sanford’s news release says. “The board handles administrative functions of government that are handled by governors in 49 other states, where there exist clearer lines of responsibility back to the chief executives of those states.”

Not surprisingly, the Budget and Control Board sees itself very differently.

Elsewhere on the BCB website, a historical narrative of the agency says that it has changed significantly since the first official meeting of the board. That happened in the office of then-Gov. Strom Thurmond in 1950, just a few years before the dawning of the civil rights movement.

Says the Budget and Control Board’s autobiographical history, in an awkwardly phrased conclusion, “But its essential role to improve efficiency and serve the agencies that serve the citizens of South Carolina is unchanged is reflected in the mission statement it follows today: ‘We Make Government Better.’”

Said Sanford in concluding his statement about the lawsuit, “We’re hopeful that the (S.C.) Supreme Court will ultimately decide to consider this important issue.”

The state’s highest court did, taking the unusual step of agreeing to hear the case in its original jurisdiction.

But the supremes, who are elected to 10-year terms by (connect the dots) members of the Legislature, then summarily tossed out the lawsuit. The justices did so “without a hearing and without explanation,” according to the Charleston Post and Courier.

That left unanswered the question of whether the Budget and Control Board amounts to a violation of the constitutional requirement that the branches of government must be separate and coequal.

At any rate, it was not the first time Sanford went up against the Budget and Control Board.

Right around the time the governor was backing legal action to disband the board, a panel Sanford created by executive order to take a good long hard look at the BCB released its findings.

Called the Government Efficiency and Accountability Review (GEAR) Committee, it laid out no fewer than 60 recommendations in a nearly 100-page report. “We estimated the total potential calculable savings of our recommendations to be approximately $497 million over the next three years,” the report says.

Numbering nine, the members of the panel were no lightweights.

They included Burnie Maybank, an attorney and former two-time director of the S.C. Department of Revenue. Maybank currently serves as chairman of the legislatively created Tax Realignment Commission. That task force is scrutinizing the state tax code to recommend reforms to lawmakers.

Stephen Osborne, then-senior vice president for business affairs at the College of Charleston and chief of staff for the Budget and Control Board from 2002 to 2006, also was a member of the GEAR group.

Sanford cited the committee’s suggestions as part of his rationale for vetoing the BCB’s operating funding for next year.

He also asserted that the board is sitting on piles of cash: more than “$1 billion in carry-forward funds, including approximately $60 million in unrestricted accounts,” Sanford wrote to legislators in a message accompanying his veto.

In addition, the Budget and Control board receives some $223.6 million from other state agencies in rent, fees and other charges, he said. “We believe that using available funds and implementing cost-cutting measures will sustain this agency easily over the next fiscal year.”

The BCB Responds

In an e-mail to The Nerve, Budget and Control Board spokesman Mike Sponhour provided a link to a report.

Sponhour said the report was produced by a joint legislative committee that reviewed every recommendation of Sanford’s Government Efficiency and Accountability Review Committee.

“It is important to note that the vast majority of GEAR recommendations would require either legislative action or action by the five-member (Budget and Control) Board,” Sponhour added. “Of items within the purview of agency management, many have long been accomplished such as closing the General Services Business Development Office and cutting IT and procurement fees. Cutting those fees saves money for other agencies, not the board.”

Sponhour also supplied a statement to The Nerve on behalf of the BCB addressing the veto.

“As directed by the governor’s veto message, board staff is looking at the accounts referred to in the message,” the statement says. “However, this is uncharted territory. There are legal commitments and requirements that govern almost every dollar in the accounts that the governor’s veto message suggested should be used.

“The board’s general fund budget had paid for the state’s budgeting, accounting, payroll economic forecasting and employee layoff monitoring systems,” the response continues. “In addition, the veto eliminated funds to conduct redistricting at the state or local level next year and funds for the operation and maintenance of the State House and Capitol Complex. The veto also eliminated the entire general fund budget of the Confederate Relic Room and Military Museum.”

The $25.2 million in operating funding for the BCB was part of a budget for 2010-11 that the General Assembly passed on June 3, the last day of this year’s regular legislative session.

Exceeding $21 billion, it is the largest state spending plan in South Carolina’s history. The budget consists of three pots of money: about $5 billion in general funds, $8 billion-plus in other funds and more than $8 billion in federal funds.

Despite the record-setting size of the budget, the general fund has taken a severe beating amid the recession – those leanest of lean times that increased the power of Sanford’s ammunition to shoot down the Legislature’s allocation to the Budget and Control Board for next year.

Illustrating the picture starkly, the general fund totaled some $6.7 billion in 2007-08.

Compared to $5 billion for 2010-11, that’s a reduction of $1.7 billion – about 25.3 percent. Put another way, of every general fund dollar, one in four gone.

The Budget and Control Board was not overreacting when it said the governor’s veto of its operating funding for next year marks unfamiliar terrain for the board.

John Rainey, chairman of the Board of Economic Advisors, gave voice to the seriousness of the situation after a BEA meeting last week when it conferred in a brief closed session.

The Board of Economic Advisors is one of the most important and, of late, most harshly criticized arms of the Budget and Control Board because it is charged with forecasting state revenue and the BEA’s projections have been shifting like deck chairs on the Titanic.

When The Nerve questioned why the Board of Economic Advisors needed to talk in private after its meeting last week, members said it was necessary to discuss “personnel” and “contractual” matters.

“We’re talking about us – the three guys sitting here,” Rainey said. Then he added, referring to the veto, “We don’t have any idea whether we still exist or not.”

But after the executive session Rainey offered some good news that contrasts sharply with the state budget picture for the past couple of years.

“I think the trajectory is pretty clearly upward now in this economy,” he said. “Unemployment is going down. Employment’s going up. Tax collections are going up. Things are looking better, and the numbers show that.”

If the indicators continue in the same direction, the state could end this fiscal year with a $100 million surplus, BEA members said.

Rainey said he feels “very strongly” that the Board of Economic Advisors will revise its revenue estimate for next year upward in the near future, possibly as soon as next month.

Questioned again by The Nerve about the executive session, Rainey said, “I don’t think anybody at this moment knows what configuration any of this has anymore over here.”

Reach Ward at (803) 779-5022, ext. 117, or eric@scpolicycouncil.com.