State Agencies Sitting on Millions of Taxpayer Dollars

August 27, 2014

Investigative Reports

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Treasure ChestIt’s that time of year again when S.C. agencies are preparing their proposed budgets for the following fiscal year.

But the agencies likely won’t submit smaller spending plans to the General Assembly, even though some have accumulated fat reserves.

State agencies carried over a total of nearly $490 million in unspent general funds into the fiscal year that started July 1 – up about $109 million, or 28.5 percent, from the amount carried over into fiscal 2013-14, according to a year-end budget report released last week by S.C. Comptroller General Richard Eckstrom.

At least 20 agencies each carried over more than $1 million in general funds, the report shows.

When the $490 million in unspent general funds is combined with several other big pots of money – the state’s general, capital and contingency reserve funds, along with a category labeled in Eckstrom’s report as “unreserved/undesignated”– the state’s total general-fund balance as of June 30 stood at a whopping $1.16 billion.

Divided equally among the state’s approximately 1.8 million households, the $1.16 billion general-fund balance works out to be $646.26 per household.

And that balance doesn’t include “other” fund reserves; other funds include such things as fees and fines, college tuition, lottery proceeds, state gasoline taxes and a portion of the state sales tax earmarked for K-12 education. The Nerve in February reported that state agencies, including colleges and universities, as well as major state funds, started last fiscal year with a collective other-fund surplus of nearly $2.4 billion.

The state’s total 2014-15 budget, which includes state, federal and other funds, is listed at $24 billion, though it likely is more than $25 billion when federal food-stamp payments are included, which the state Department of Social Services no longer counts as part of its budget, as The Nerve reported last year.

Contacted Tuesday, Eckstrom, the state’s chief accountant, told The Nerve that the state should have adequate reserves to help cover significant losses of revenue in economic downturns, or expenses resulting from major, unexpected events, citing Hurricane Hugo as an example, which ravaged South Carolina in 1989. Eckstrom in a press release that accompanied his year-end report released last week noted that “while the state’s economic growth has continued, the rate of growth as slowed.”

But given that the state has two main “rainy day” funds – the General Reserve Fund, which stands at about $293 million, and the Capital Reserve Fund, which had a balance of $117 million as of June 30 though lawmakers typically raid it before replenishing it annually – Eckstrom questioned whether some agencies need individual reserves of more than 25 percent of their respective budgets.

“There’s no need to accumulate those types of reserves,” Eckstrom told The Nerve, though he didn’t name any specific agencies and added, “You have to look at each agency to see what you’re going to do with each reserve fund.”

The Nerve’s review of state budget records found, for example, that the House of Representatives carried over more than $19.6 million into this fiscal year for its 124-member chamber, which represents 90 percent of its nearly $21.7 million budget. The carry-over amount ranked as the fourth-highest in Eckstrom’s report, behind the state Department of Education ($28.8 million) and ahead of the S.C. Department of Commerce ($18.9 million).

The Senate carried over approximately $7 million into this fiscal year for its 46-member chamber, which equals 52 percent of its $13.3 million budget for this fiscal year.

A state budget proviso, which has to be renewed every year, allows the chambers to carry forward all unspent general funds into the following fiscal year. Generally, state agencies are allowed to carry forward up to 10 percent of their original general-fund appropriations.

The chambers’ carry-over amounts are listed in Eckstrom’s report as “special carry-forwards,” which, in contrast to “general carry-forwards,” can’t be used for general operations, Eckstrom told The Nerve.

Eckstrom could not provide details on the chambers’ planned use of their reserves, referring The Nerve to chamber officials.

Neither House Clerk Charles Reid nor Senate Clerk Jeffrey Gossett responded to written questions this week from The Nerve.

As for Commerce, its general-fund reserve amount of $18.9 million represents 26 percent of its nearly $72.4 million general-fund budget. Its total budget for this fiscal year is $135.2 million, including more than $19 million in federal funds and $44 million in other funds. As of July 1, 2013, the agency had an other-fund surplus of more than $110 million, state budget records show.

Commerce spokeswoman Allison Skipper did not respond by publication of this story to written questions from The Nerve about the agency’s surpluses.

The S.C. Department of Health and Human Services, which administers the state’s Medicaid program, carried over $280.2 million in general funds into this fiscal year – the single-largest amount in Eckstrom’s report (the state Department of Transportation ranked second with a total carry-over amount of $42.8 million) and which represents more than half of all general funds carried over into this fiscal year. Eckstrom told The Nerve that HHS likely built up its reserves, which represents 23 percent of its $1.2 billion general-fund budget, to deal with mandates under “Obamacare.

HHS’ total budget this fiscal year is nearly $7 billion. An agency spokeswoman did not immediately respond to written questions this week from The Nerve.

The only agency that responded by publication of this story was the S.C. Department of Health and Environmental Control, which carried over $11 million, or 10 percent of its $109 million general-fund budget, into this fiscal year. Its total fiscal 2014-2015 budget is $596 million.

In an email Tuesday to The Nerve, DHEC spokesman Mark Plowden said of the $11 million, $4.4 million was “one time/supplemental” funding, the majority of which was “designated for beach projects.”

The remaining $6.6 million was carried over under the state budget proviso that allows agencies to bring forward up to 10 percent of their general fund appropriations, Plowden said.

“These funds will be used to cover one-time operating expenses that will enhance the effectiveness and efficiency of the agency,” he said.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.