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Governor Henry McMaster signed South Carolina’s Fiscal Year 2017-2018 Appropriations Bill, H. 3720 into law earlier this month, while also vetoing 41 provisions. In a piece titled The State Budget: What You’re Spending in 2017, the South Carolina Policy Council (SCPC) disparaged not only the $27.42 billion budget itself, for being outsized and containing “[w]aste, bad policy, etc.,” but also the process leading up to it, as indiscernible and secretive. The SCPC, founded in 1986, is a think tank whose purpose is “to publish research and analysis showing the relevance of the American republic’s founding principles: limited government, free enterprise, and individual liberty and responsibility.”

The SCPC’s main criticism is that South Carolina’s government is “outpacing the economy - by a lot.” It observes that the 2017-18 budget is the largest in history, and $1.1 billion bigger than last year’s $26.3 billion budget.

In addition, “lawmakers ignored state laws requiring a transparent and coherent budget process and instead cobbled together the state spending plan in a vast array of subcommittees that no ordinary person could follow or understand.” Noting that the budget consists of the $8 billion general revenue fund, $8.6 billion in federal revenue funds, and $10.7 billion of “other” funds, it “outpaces per capita income growth… [and] reveals a massive increase in other funds spending.”

According to the legislature’s statement of revenues, the three largest components of the general revenue fund are these:

  1. Individual income taxes: $4.3 billion
  2. Sales and use taxes: $3 billion
  3. Corporate income taxes: $329 million

The SCPC bolsters its concern that the Palmetto State’s government is outpacing the economy with the facts that “[t]his year’s budget is a 4 percent increase over last year’s, but South Carolinians’ income growth will almost certainly fall below 4 percent.” Last year, the budget grew by 8 percent over the previous year’s budget, but per capita personal income growth was just 3 percent. As for spending, this year’s budget reflects a 30 percent bump, from $8.35 billion to $10.35 billion.

Regarding its judgment that the budget process was too secretive, the SCPC recognizes that about 30 percent of the budget comes from federal funding, which “influences – in some cases dictates – state policy on education, transportation, second amendment rights, entitlements, and many other areas of policy.” However, the conditions underlying receipt of federal funds were neither debated nor disclosed during the budget process, “despite a law requiring agencies to disclose every federal dollar they want to spend and the strings attached.”

The SCPC’s accusations of waste and bad policy flow from spending directives, also known as pork, that individual lawmakers slip in to support special interests, pet projects, and “favors for friends and allies of legislative leaders.” Several of these were among the vetoes that Gov. McMaster imposed, including the following:

  • Stripping power from the Commission on Higher Education
  • Suspending the law regarding the safety code for go-karts
  • School bus funding through lottery revenue
  • Allowing counties to spend road money on lighting, sidewalks, etc.

In a press release, the governor highlighted the accomplishments that stem from his 41 vetoes, totaling $56 million, claiming that he was able to:

  • Reserve roughly $6.6 million in funding for the Conservation Land Bank, allowing it to maintain its operations at roughly current levels: “South Carolina’s natural resource are a central driver of our economic prosperity. Twenty-eight million people visit our state each year, contributing to a $20 billion tourism industry. While I agree with many criticisms regarding the bank, I believe it is a useful tool for protecting our environment and maintaining our competitiveness.”
  • Maintain oversight by the Commission on Higher Education (CHE) for college spending/borrowing on buildings and facilities: “Every building, brick, fixture, and square foot of our public institutions belongs to the people of South Carolina. The CHE must be allowed to exercise its oversight authority. As governor, I look forward to appointing commission members who [are] prudent and fair."
  • Veto a “wish list” of unfunded items that would have been bankrolled by excess lottery money that does not currently exist: “Allocating funds before they are certified and available for use is not a responsible budgeting practice. If additional lottery proceeds become available, they should go to scholarships for South Carolina’s students, as voters were promised they would.”
  • Veto line items encompassing individual collections of vague and unidentifiable earmarks: “These items were not requested by the agencies receiving the funds, and members of my Cabinet cannot tell me how the money will be spent. These projects were not put before the public to stand on their own merits, and I vetoed them in the interests of transparency and accountability.”
  • Veto a provison that would have allowed tens of millions of gas tax dollars to be diverted away from road paving and maintenance for use in other lower priority activities: “Following the largest tax increase in state history, this proviso allows tens of millions of gas tax dollars to be diverted from road paving to lower priority activities. South Carolinians deserve to have every cent of the gas tax spent on road improvements.” In May, we detailed the gas tax increase legislation, which, ironically, passed only when lawmakers overrode the governor’s veto of the Infrastructure and Economic Development Reform Act.
  •  Veto burdensome regulations that are bad for business in South Carolina: “We should not require the government to insert itself into the middle of relationships between private business and their employees.”
The new budget takes effect on July 1, 2017. What lawmakers do with the governor’s veto overrides remains to be seen.
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