Tens of Millions Proposed for ‘Paper’ State Agency

May 21, 2012

Investigative Reports

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eb1e687efe0ecab716584ff6b2626d4fImagine a state agency that exists only on paper but has real bank accounts totaling more than $54 million.

If the Senate Finance Committee’s version of the 2012-13 state budget is adopted, the S.C. Rural Infrastructure Authority – whenever it becomes a reality – would have a piggy bank that big.

The Finance Committee’s budget version, which will be debated again this week by the full Senate, would give $20 million in first-time general funds to the economic development agency.

The authority was created under a 2010 state law but is not yet operating. In fact, its seven-member board hasn’t even met once, a senator who sits on the board told The Nerve last week.

The authority would expand, if not duplicate, state economic development efforts in rural areas, The Nerve first reported in 2010.

The $20 million proposed appropriation – funded partly with a recently projected $292 million boost in general fund revenues – is listed by the Senate Finance Committee under the Rural Infrastructure Fund of the S.C. Budget and Control Board’s budget.

But BCB spokeswoman Lindsey Kremlick last week confirmed to The Nerve that the money, if it receives final approval, would be controlled by the Rural Infrastructure Authority once the agency is in operation.

The proposed $20 million allocation would be larger than the total proposed fiscal 2013 budgets of more than 30 state agencies, including the:

  • Department of Insurance ($18.4 million);
  • S.C. Criminal Justice Academy ($13.9 million);
  • Commission for the Blind ($10.2 million);
  • Public Service Commission ($4.6 million);
  • Administrative Law Judges division ($3.2 million); and
  • State Ethics Commission ($1.09 million).

In addition to the potential $20 million, the Rural Infrastructure Authority also would control, under a state budget proviso, three separate state funds totaling nearly $34.2 million and currently managed by the BCB’s Office of Local Government.

In total, the authority could have about $54.2 million to play with if the restructuring bill and the Senate Finance Committee’s version of the state budget are approved. What exactly the money would be used for, however, is unclear.

“I would imagine it’s going to be used for infrastructure needs – water, sewer needs,” said Sen. Billy O’Dell, R-Abbeville and a member of the authority’s governing board, when contacted last week by The Nerve.

Under the authority’s enabling legislation, which took effect May 26, 2010, the purpose of the agency is to “select and assist in financing qualified rural infrastructure by providing loans and other financial assistance to municipalities, counties, special purpose and public service districts, and public works commissions for constructing and improving rural infrastructure facilities.”

A qualified “rural infrastructure project” is defined in part as a project that would “aid the development of trade, commerce, industry, agriculture, aquaculture, and employment opportunities, all of which must be primarily located in a county designated as a distressed or least developed county.”

The state’s rural counties typically have the highest unemployment rates. Marion County, for example, led the state last month with a 16.8 percent unemployment rate, followed by Marlboro County (15.7 percent), Allendale County (15.5 percent), Barnwell County (13.7 percent) and Union County (13.5 percent), according to S.C. Department of Employment and Workforce figures released Friday.

Other state agencies already are involved with economic development projects in rural counties. Whether projects funded by the Rural Infrastructure Authority would duplicate efforts by the state Coordinating Council for Economic Development, for example, is unclear.

The panel, made up of the heads of 11 state agencies involved with economic development and administered by the state Department of Commerce, approved a total of more than $7 million last year from its Rural Infrastructure Fund to 12 rural counties, much of which was used for building construction or acquisition for new businesses, Commerce records show.

Rural infrastructure funds are derived from state job-development credits that qualifying companies cannot claim because they are located in more affluent counties. Job-development credits are refunds of a portion of employee state income tax withholdings.

Under state budget provisos since fiscal year 2006, rural infrastructure fund revenues of more than $12 million up to $17 million are transferred to another account, known as the Rural Infrastructure Bank Trust Fund, which would be controlled by the Rural Infrastructure Authority when it begins operation.

The Rural Infrastructure Bank Trust Fund, which has been managed by the BCB, has a current balance of more than $16.8 million, BCB records show.

Commerce spokeswoman Amy Love did not respond Friday to a written request from The Nerve seeking clarification of the differences between the roles of the Coordinating Council and Rural Infrastructure Authority with regard to the Rural Infrastructure Fund.

In his 2010 veto of the bill creating the Rural Infrastructure Authority, which was overridden by lawmakers, then-Gov. Mark Sanford wrote that the bill “creates a new state government entity to perform functions the Department of Commerce currently performs.”

Although created two years ago, the authority can’t spend any money because it has no organization or personnel. O’Dell told The Nerve that the authority’s seven-member board, which would be chaired under state law by the state commerce secretary, might first meet later this month, though he didn’t know the date.

Still, O’Dell said that he expects the authority “will be in operation this year.”

Another authority board member, Rep. Bill Clyburn, D-Aiken and author of the law creating the authority, could not be reached for comment last week.

Under the law, two board members are appointed by the governor; and one member each is appointed by the Senate president pro tempore, Senate Finance Committee chairman, House speaker and House Ways and Means Committee chairman.

Clyburn was appointed by Dan Cooper, an Anderson County Republican and the former Ways and Means chairman who retired from office last year; while O’Dell was appointed by former Senate President Pro Tempore Glenn McConnell, R-Charleston, who became the lieutenant governor earlier this year, according to S.C. Secretary of State’s Office records.

Lawmakers are ensured seats on the authority’s board under a separate Clyburn bill (H. 4664) that passed this year and took effect April 23.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.