The $4 billion state officials are keeping secret

September 18, 2020

Investigative Reports

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By RICK BRUNDRETT

Many politicians and other government officials don’t want to publicly acknowledge the huge surpluses that state agencies accumulate year after year.

Even amid the coronavirus outbreak in South Carolina, 101 state agencies and two major state accounts collectively ended the fiscal year on June 30 with at least $4.3 billion in “other” fund surpluses, The Nerve found in a review of records provided by the S.C. Department of Administration under the state Freedom of Information Act.

The overall surplus was $439 million, or 11.3%, more compared to the end of fiscal 2019 for listed agencies. The current total amount works about to be about $830 for every man, woman and child in South Carolina.

It’s a huge hidden piggy bank, as The Nerve has previously revealed. And it’s not the only surplus money available this fiscal year to state agencies.

Earlier this month, The Nerve reported that general fund surpluses among state agencies and several main state accounts totaled $623.5 million as of June 30. When combined with $462.6 million more in actual general-fund revenues in fiscal 2020, leftover surplus money and balances in the constitutional “rainy day” funds, the state’s overall general-fund surplus was $1.8 billion, according to an annual public report by state Comptroller General Richard Eckstrom.

The more than $6 billion in collective general and other fund surpluses going into this fiscal year represented about 20% of the fiscal 2020 $30-billion total state budget, which included state, federal and “other” funds. In addition, lawmakers have about $525 million available this fiscal year from a legal settlement with the federal government, and this week debated divvying up at least $668 million in federal emergency COVID-19 funds.

It’s unlikely, though, that any of the massive surpluses will be returned to taxpayers.

General funds are largely made up of individual and corporate income taxes, and state sales taxes. “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. Those funds made up nearly $12 billion, or about 40%, of the fiscal 2020 total state budget.

The state Department of Transportation had a $1.04 billion other-fund surplus as of June 30 – the largest among listed state agencies, records show. It’s unclear whether that amount included the cash balance of a special state fund created with the 2017 gas-tax-hike law, which raised the state’s gas tax by 12 cents per gallon over six years, and increased other vehicle taxes and fees.

The Nerve last week reported that the special fund had a $604.2 million cash balance as of July 31. A DOT spokesman didn’t respond to a written request Thursday for comment.

The Department of Commerce, which routinely pushes taxpayer-backed incentives for corporations, started this fiscal year with a $117.3 million other-fund surplus – a nearly 13% increase from a year earlier, records show. That’s on top of the agency’s 103.1 million general-fund surplus as of June 30, according to state comptroller general records.

A Commerce spokeswoman didn’t respond to written questions Thursday from The Nerve.

At the University of South Carolina and Clemson University, officials so far haven’t publicly expressed interest in reducing tuition for students required to take online courses because of the COVID-19 outbreak, which has been an issue elsewhere in the U.S.

Yet USC’s main Columbia campus recorded a $261 million other-fund surplus as of June 30 a nearly 44% jump from the previous fiscal year – while Clemson’s other-fund surplus was $158.8 million, records show. Spokesmen at the two universities didn’t respond Thursday for comment.

At least four other state agencies – the Department of Disabilities and Special Needs (DDSN), Revenue and Fiscal Affairs (RFA) Office, Winthrop University and the state Technical College System – more than doubled their respective other-fund surpluses from the end of fiscal 2019 to June 30 of this year, records show.

In a written response to The Nerve, Technical College System spokeswoman Kelly Steinhilper said student aid programs that are supported with lottery proceeds will “always have a surplus because the summer semester crosses the state fiscal year.”

Other funds also are used to support the agency’s “readySC” company-recruiting and job-training programs, Steinhilper said. As for surpluses in those programs, last fiscal year was “anomalous” because of “an almost complete shutdown in company recruiting and training during the last quarter of the fiscal year,” she said, adding, “We don’t anticipate having a surplus of that level in the future.”

Department of Administration records show the agency had a $29.3 million other-fund surplus as of June 30, compared to $11.1 million at the end of the fiscal 2019.

In explaining the Revenue and Fiscal Affairs Office’s $41 million other-fund surplus to start this fiscal year, the office in a prepared statement said the increase represented a transfer of the “South Carolina Wireless 911 Fund” to RFA from a “non-budgeted account” with the state treasurer to “provide more transparency due to revenues and expenditures being captured in the appropriations act as a budgeted fund.”

In a written response, Justin Oates, Winthrop University’s vice president for finance and business affairs, said the Department of Administration records “represent only a portion of the university’s cash position at year end.” Winthrop had a year-end, other-fund surplus of $9.5 million, according to Department of Administration records.

Oates said the university’s draft fiscal 2020 statements show an increase of $4.4 million in cash and “cash equivalents,” and that the school’s “overall net position” increased by $2.1 million last fiscal year.

A DDSN spokeswoman didn’t respond Thursday to The Nerve’s written request for comment.

Following is a list of the top-10 state agency other-fund surpluses as of June 30, according to Department of Administration records:

  • Department of Transportation: $1.04 billion;
  • Department of Health and Human Services: $637.2 million;
  • Medical University of South Carolina: $293 million;
  • USC-Columbia: $261 million;
  • Clemson University: $158.8 million;
  • Department of Mental Health: $143.3 million;
  • Department of Health and Environmental Control: $136.8 million;
  • Department of Commerce: $117.3 million;
  • Department of Education: $116.2 million;
  • Department of Administration: $101.3 million

Brundrett is the news editor of The Nerve (www.thenerve.org). Contact him at 803-254-4411 or rick@thenerve.org. Follow him on Twitter @RickBrundrett. Follow The Nerve on Facebook and Twitter @thenervesc.

Nerve stories are free to reprint and repost with permission by and credit to The Nerve.

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