Ten State Agencies Could Receive Budget Hikes

June 16, 2010

Investigative Reports

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The NerveIf the S.C. General Assembly gets its way this week, 10 state agencies –including the House and Senate – would see their general fund budgets increase by more than $49 million collectively in 2010-11 compared to the start of this fiscal year, an analysis by The Nerve found.

Those increases would occur despite the fact that most other state agencies would see a combined $600 million decrease in their general fund budgets for the fiscal year that starts July 1.

And proposed cuts by lawmakers in 46 of 106 general fund budget categories for 2010-11 would be reduced – substantially in some cases – when $449 million in federal stimulus and other state funds designated for agency operations are considered, The Nerve’s review found.

Included on that list are 10 state public colleges and universities, some of which already have increased tuition or are considering raising it for next school year.

The Legislature this week is considering about $314 million in budget vetoes announced last Wednesday by Gov. Mark Sanford.  A two-thirds vote in each chamber is needed to override each veto. The outcome of those votes will determine the state’s spending plan for 2010-11.

In one of his 107 vetoes, Sanford chopped $3 million from the Senate chamber’s proposed budget and nearly $1.3 million from the proposed budget for the House.

“We recognize that these are tough times for agencies, and we certainly recognize the essential role that the legislative branch plays in state government,” Sanford wrote in his veto message. “However, in a year when nearly every other state agency is taking a budget cut, it makes no sense to increase the budget for the Legislature.”

That message, however, apparently hasn’t sunk in with the 170-member General Assembly.

The proposed $12.3 million budget for the Senate is 46 percent higher than this year’s ratified budget, while the proposed $17.6 million budget for the House is 9 percent higher, The Nerve’s review found.  Both budgets, if approved as written, would be each chambers’ biggest in at least the past 12 years when proposed reapportionment money is included.

The general fund figures don’t include an additional $1 million earmarked for each chamber for reapportionment, or the redrawing of legislative district lines, under a budget proviso.

Senate and House leaders have repeatedly ignored The Nerve’s written questions – including the latest round sent out last week – asking them for specifics on the proposed increases in their chamber’s budgets.

The Nerve last week sent written questions to Senate President Pro Tempore Glenn McConnell, R-Charleston;  Senate Finance Committee Chairman Hugh Leatherman, R-Florence; House Speaker Bobby Harrell, R-Charleston; and House Ways and Means Committee Chairman Dan Cooper, R-Anderson.

Leatherman and Cooper were among the six legislators on a conference committee that forged the compromise budget approved by the General Assembly on June 3.

“I would not have any comments on that question,” Leatherman said about the proposed 46-percent hike for his chamber when contacted by phone Monday by The Nerve.

McConnell, Harrell and Cooper did not respond to phone messages left for them on Monday.

McConnell said on the Senate floor in April that the legislative branch is a “core function of “government,” and that the extra money was needed for the Senate for reapportionment and proposed repairs to the Gressette Building housing senators’ offices.

Of the 10 agencies that would receive general fund increases next fiscal year under the Legislature’s proposed budget, the Senate and House had the second- and ninth-highest proposed hikes, respectively, according to The Nerve’s analysis.  The state Judicial Department – which represents the third branch of government – received the biggest proposed increase – 50 percent – after Gov. Mark Sanford vetoed a bill (H. 3161) that would have doubled or tripled certain court filing fees.

The Nerve reported in April that the proposed $24 million in fee hikes likely would have given the state court system its biggest total budget in the 10 years that Jean Toal, who heads the Judicial Department, has been the S.C. Supreme Court chief justice. Sanford vetoed the bill last month, and the House sustained the veto, which ultimately led the budget conference committee to scramble to find general funds to make up the difference.
Even without the fee hike, Toal, who pushed for the increase, could still have her biggest total budget in 10 years, assuming current fee collection rates and if extra federal and state dollars earmarked in other pots of money in the proposed budget comes through, The Nerve’s analysis found.

Budget Winners

Following is a list of the 10 agencies that would receive general fund increases under the Legislature’s proposed 2010-11 budget compared to this fiscal year’s ratified budget:

  • Judicial Department – $37.4 million (FY 2011), $25 million (FY 2010). Increase:  50 percent. (The department also could receive as much as $18 million more in court fees, based on current collection rates, plus another $5 million in federal and state funds designated for operations);
  • Senate – $12.3 million (FY 2011), $8.4 million (FY 2010). Increase:  46 percent;
  • Lt. Governor’s Office – $4.5 million (FY 2011), $3.5 million (FY 2010). Increase:  30 percent. (Most of the department’s total approximate $36 million budget is for the Office on Aging; most of the proposed increase is designated for that office.);
  • Department of Revenue – $40.9 million (FY 2011), $35.9 million (FY 2010). Increase:  14 percent;
  • Department of Probation, Parole and Pardon Services – $18.8 million (FY 2011), $16.6 million (FY 2010). Increase: 13 percent;
  • Department of Public Safety – $65.9 million (FY 2011), $59.3 million (FY 2010). Increase: 11 percent;
  • Law Enforcement Training Council – $631,824 (FY 2011), $572,518 (FY 2010). Increase: 10 percent. (The balance of its approximate $14 million total budget is made up of federal and “other” funds);
  • Commission on Higher Education – $118.9 million (FY 2011), $107.9 million (FY 2010). Increase: 10 percent.
  • House of Representatives – $17.6 million (FY 2011), $16.1 million (FY 2010) Increase:  9 percent;
  • Department of Social Services – $118.8 million (FY 2011), $112.6 million (FY 2010) (Note: Most of its approximate $1.7 billion total budget is made up of federal and “other” funds) Increase:  5 percent.

The proposed increases for the 10 agencies total about $49 million – without including any other revenue sources. For example, the judicial and probation departments, the Law Enforcement Training Council and Commission on Higher Education would received a combined $8.1 million in federal and other state funds designated for agency operations under the proposed budget, The Nerve’s review found.

In his vetoes, Sanford proposed cutting nearly $2 million from the Commission on Higher Education’s general fund budget, noting in several cases that certain programs duplicated other agencies’ programs. Sanford also used his veto knife to pare agency programs that he felt was outside that agency’s core mission; for example, he cut the S.C. Technical College System’s approximate $4 million budget for economic development, contending that function should be left up to the state Department of Commerce.

Legislators passed a $5.12 billion general fund budget for 2010-11, a 10.5-percent decrease compared to the $5.7 billion budget adopted for this fiscal year.  With about $439 million in mid-year budget cuts, plus transfers from reserve accounts, the current fiscal year general fund budget stands at $5.15 billion.

Next year’s total state budget, as passed by the conference committee, is projected to be at least $21.15 billion, which includes federal and “other” funds, such as fees, fines and tuition. That’s about $450 million, or 2 percent, more than this fiscal year’s ratified $20.7 billion total budget.

Sanford in his veto message said next year’s budget is projected to increase by 7 percent to $22.2 billion, noting that this year’s total budget is the largest in state history.

Cushioning the Blow

Of the 106 general fund budget categories in the proposed 2010-11 budget, 73, or nearly 70 percent, show proposed decreases compared to this year’s ratified budget, The Nerve’s analysis found.  The proposed cuts among state agencies range from 1 percent for the Department of Juvenile Justice to a 53-percent drop for the Department of Transportation, though that agency receives nearly all of its approximate $1.3 billion total budget in federal and “other” funds.

Sanford in his vetoes proposed even deeper cuts to some state agencies. For example, he proposed eliminating the S.C. Budget and Control Board’s $25.2 million general fund budget, contending the agency has more than $1 billion in carry-forward funds, including about $60 million in unrestricted accounts.

What’s confusing about the way state lawmakers put together the total budget is that it’s made up of separate parts that aren’t tallied as a whole. Legislators typically talk only about part of “Part IA,” or the general fund budget, which is funded primarily with state income and sales tax revenues. Here’s what else is included the proposed 2010-11 total budget:

  • “Part IA” lists total funds, but it doesn’t break down federal and “other” funds by agency and purpose, so taxpayers don’t know how much of that is being used for general operations and how much of it is earmarked for specific programs. Next year’s proposed budget includes about $8.3 billion in federal funds and $7.8 billion in “other” funds under that section, but those figures often change after the fiscal year begins. The Nerve reported in April, for example, that the state’s projection for federal and “other” funds for this fiscal year had been increased by about $350 million and $465 million, respectively.  Sanford last week issued 50 of his 107 vetoes in “Part IA.”
  • “Part IB” includes “other” funds authorized in budget provisos, which unlike a permanent law, have to be renewed annually. Those provisos typically spell out if funds are to be used for general operations or specific programs, but those amounts are not included in Part IA totals. Sanford issued 40 vetoes in that section, contending, among other things, that his office has “seen no evidence” that S.C. Department of Revenue will be able to collect an estimated $96 million in “increased enforcement” collections of state taxes – double the current collection rate.
  • “Part III” is $346 million in federal stimulus money used to offset general fund budget cuts. The S.C. Supreme Court last year ruled against Sanford, who wanted to accept the approximate total $700 million in stimulus dollars only if it could be used to offset state debt, not fund agency operations.  Sanford last week issued 16 vetoes in that section, requesting that the funds be redirected to the state Medicaid program.
  • “Part IV” is $213.5 million in “enhanced Federal Medical Assistance Percentage” (FMAP) funds, or extra federal stimulus money for Medicaid programs. But more than $26 million of that is earmarked in next year’s budget for operating expenses of five other health-related agencies. Sanford vetoed the entire FMAP section, contending it would be “reckless” to include it in the budget because Congress hasn’t approved it.

For its analysis, The Nerve identified revenue sources in Parts IB, III and IV that were designated for agency operating expenses and combined them with the agencies’ proposed general fund budgets in Part IA.  When that was done, a different budget picture emerged for many state agencies:  The review found that proposed general fund decreases in 46 of 106 budget categories were reduced – sometimes dramatically – with the other revenue sources.

The other proposed revenue sources, which total about $448.7 million, include:

  • $346 million in “Part III” federal stimulus dollars;
  • $76.3 million in “Part IB” state funds, about $59 million of which would be state Medicaid dollars freed up with “Part IV” FMAP stimulus funds, and the remainder of which would be “increased enforcement” tax revenues collected by the S.C. Department of Revenue;
  • $26.4 million in “Part IV” FMAP stimulus funds.

The proposed 2010-11 general fund budget for the Department of Corrections, for example, is $295 million, a $35 million or 11 percent decrease, from this year’s ratified budget.  But the operating budget for the department – the only state agency allowed to run a deficit this year – could be as much as $344 million next fiscal year when federal stimulus funds and money from extra tax collections by the Department of Revenue are included, The Nerve’s review found.

Ten public colleges and universities – the University of South Carolina, Clemson University, the Medical University of South Carolina, the Citadel, College of Charleston, Coastal Carolina University, Francis Marion University, Lander University, Winthrop University and S.C. State University – would each receive a 28-percent general fund cut in 2010-11 compared to this fiscal year’s ratified budget.

But when federal stimulus money is added, those institutions’ operating budgets wouldn’t fall below the across-the-board, 9.04-percent mid-year cuts imposed last fall, The Nerve’s review found.  Public colleges and universities have been making up the shortfalls – and then some, critics contend –in recent years with hefty tuition hikes.

The College of Charleston, for example, recently increased its tuition for in-state students by 14.75 percent, the Charleston Post and Courier reported. The Citadel approved a 13-percent increase for South Carolina students next year, while S.C. State University and Coastal Carolina University have approved in-state increases of 5.7 and 4.91 percent, respectively, according to the newspaper and the Associated Press.

The University of South Carolina and Clemson University have not set tuition for next school year, but students at both institutions have seen tuition skyrocket in recent years. At USC, for example, tuition and fees for full-time undergraduate students at its Columbia campus has increased 42.7 percent since 2004-05, The Nerve reported last week.

And possibly worse budget news could be on the horizon for most state agencies, including colleges and universities. In his veto message last week, Sanford again warned that lawmakers will have to deal with a projected $1 billion budget hole for fiscal year 2011-12 with the expected loss of federal stimulus money.

Citing an increase of more than 50 percent in the state’s total budget since 2003, Sanford said: “We have said year after year that this spending growth is unsustainable, and the choices necessitated by this year’s budget reinforce this. However, the tough budget choices that the state is tackling this year pale in comparison to the challenges that the state will confront in FY 2011-12.”

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