The Money Tree

January 30, 2014

Inside Insight

Print Friendly, PDF & Email

ariail the money tree

Governor Haley took some ribbing for her State of the State reference to a “money tree” as the way to fund roads. Her poorly chosen phrase is actually less worrisome than both what she meant by it and the part she left out. The whole mini-controversy offers a rare opportunity to clarify the murky state budget process.

Bear with me.

Haley’s “money tree” is additional revenue projected by the Board of Economic Advisors (BEA), whose job it is to tell lawmakers what they’ll likely have to spend from tax revenue in the state’s general fund. Basically, the BEA takes a highly educated guess at how much money lawmakers will have to appropriate from the general fund and that’s the figure the House uses in drafting the budget. But the BEA is supposed to update its forecast if it sees a significant change. Which is usually the case right about the time the budget hits the desk of the Senate Finance Chairman, who then has some extra money to appropriate.

Perhaps the “money tree” line would have been an appropriate description of the revenue – and a decent quote, too – had the governor not seriously suggested it as the source of funding for a core government service.

What she should have done was the hard work of offering legislators her priority projects and insisting that they fund them first. She should also have taken the opportunity to push lawmakers to give her full control over transportation decisions: she is, after all, elected to represent all areas of the state. She did neither. Instead, she told lawmakers to do what they did last year – use the “money tree” dollars to fund roads.

That was bad enough. What’s worse is that the extra revenue isn’t the sole source of additional road funding, but merely the leverage to borrow ten times the amount through the State Infrastructure Bank. In other words, that extra money last year turned into hundreds of millions of new debt. And adding insult to injury, the money funneled through the State Infrastructure Bank has been leveraged to borrow more than $4 billion to date, all of which has gone to only six counties!

That’s what the governor proposed to do once again.  When she said the “money tree” dollars could be “invested” to produce even more, what she meant was we can create another billion in bond debt for taxpayers with no guarantees that any of our current road priorities will be addressed.

In fairness, this practice is not at the instigation of Governor Haley.  Legislative leaders control the purse strings in the Statehouse and the Infrastructure Bank – no surprise that their counties are the ones that received the benefits of the billions in borrowed dollars.

The budget process is deliberately complicated, but it is not supposed to be. State law requires the budget to be drafted and submitted by the governor, who is elected statewide and has the priorities of the entire state to consider. Legislative budget committees are also required by law to meet openly and jointly to consider the governor’s budget, and to change it accordingly and publicly.  That law is ignored by legislators and has been every year since it was passed. It’s time for that to change. The “money tree” is a small part of the larger shell game that costs taxpayers more every year – our roads are not better for it, and neither is our state.