February 29, 2024

The Nerve Archive

Where Government Gets Exposed

Half-Billion Dollar Gap in State Budget

The NerveIf this year’s state budget is bleeding profusely, you wouldn’t know it by looking at the most recently released numbers.

Contrary to what the general public often is led to believe, the budget is made up of two other pots of money besides general funds: federal and “other” funds, which include such things as college tuition and various fees and fines issued by state agencies.

Although it’s no secret that the general fund, which is made up largely of state income and sales tax revenues, has been slashed over the past several  years, what is rarely publicized is that the other two pots have been getting much bigger.

An analysis by The Nerve found that the state’s projection of  other fund revenues for this fiscal year, which started July 1, has been revised upward by nearly a half-billion dollars. Similarly, the estimate for federal funds for this fiscal year has been increased by about $350 million.

The Nerve compared the initially ratified 2009-10 budget with an updated budget for this fiscal year, which was included in the 2010-11 budget passed last month by the S.C. House. The Nerve’s analysis found that:

  • While appropriated general fund revenues are projected to drop from $5.7 billion to about $5.4 billion, other funds are estimated to jump by more than $465 million, from about $7.2 billion to more than $7.6 billion. Federal funds are estimated to increase by about $350 million, from $7.8 billion to more than $8.1 billion.
  • The total state budget this fiscal year is projected to increase by nearly $489 million, or 2 percent, from about $20.7 billion to about $21.2 billion.
  • Out of 107 state agencies and other funding categories,  56, or 52 percent, show projected increases this fiscal year in their total budgets.  Thirty-three categories, or 31 percent, recorded decreases; the remaining 18 categories, or 17 percent, show no projected changes.
    The estimated increases in total funds range from $575 for the Commission for Minority Affairs to nearly $295 million for the state Department of Health and Human Services. The median projected increase is  $1.6 million.
  • Some agencies that show the biggest projected drop in general funds are predicted to have the biggest overall increases this fiscal year. The Department of Health and Human Services, for example, shows a nearly $58.5 million drop in general funds, though its total budget is estimated to increase by nearly $295 million. The Department of Education is projected to lose $85 million in general funds, yet its total budget is estimated to increase by more than $100 million. The Department of Corrections, which has been allowed by the S.C. Budget and Control Board to run a deficit this fiscal year, shows a projected overall increase of nearly $8.7 million despite an estimated $13 million drop in general funds.
  • Odds and Ends: The 2009-10 budget that was initially ratified before the start of the fiscal year on July 1 included $1.7 million in total funds for a proposed State House police force. The updated budget shows no appropriation for that category, but adds a new category – the Division of Aeronautics – with a total appropriation of $3.1 million. Other big changes between the two budget versions include projected overall increases of about $3.4 million and $2.1 million for the state Election Commission and Conservation Bank, respectively. The initial ratified appropriation for the Election Commission was about $2 million; for the Conservation Bank, it was $207,050.

Top state budget officials contacted last week by The Nerve didn’t have many clear answers for the differences between the budget versions.Paul Patrick, budget and finance director of the House Ways and Means Committee, which writes the House budget, said he is prohibited from commenting on behalf of the General Assembly. He referred all of The Nerve’s questions  to the Board of Economic Advisors and Office of State Budget, both divisions of the state Budget and Control Board.

Historically, budgets passed by the General Assembly include few details about which agencies are receiving other and federal funds, and how that money is to be spent. But in adopting the general fund, the Legislature authorizes the use of other and federal funds, though lawmakers don’t debate details of those funds.

William Gillespie, the BEA’s chief economist, told The Nerve his office doesn’t factor in most revenue from other funds when making annual revenue projections. Those projections can trigger the Budget and Control Board to impose across-the-board general fund cuts, as has been done twice this fiscal year.

“We’re required to project general fund revenue as part of that,” he said. “We’re asked by the General Assembly to project EIA (Education Improvement Act, funded by 1 cent of the 6-cent state sales tax) revenue, which is other funds. … (But) we’ve got all these other things that we are not required to project.”

As an example, he pointed out that under state law, public colleges and universities can charge tuition and fees, which are not returned to the state’s general fund but instead are kept by those agencies.

“If they don’t get the appropriations, they’ll raise their fees,” he said. “What purpose would it serve to project their other funds? They’re going to go out and do their own thing anyway.”

Asked if including all sources of other fund revenue would affect his office’s revenue projections, Gillespie replied: “I don’t know the answer to that. We would have to look at that over the years.”

Les Boles, director of the Office of State Budget, told The Nerve that the initial ratified budget for this fiscal year didn’t reflect certain other-fund revenue authorized in budget provisos. Those provisos, he said, include authorizing:

  • State Medicaid dollars freed up by new federal guidelines to be transferred from Health and Human Services to certain other state agencies.
  • The Department of Revenue to increase collections of upaid taxes.
  • Transfers from certain other funds, such as the Insurance Reserve Fund.

“We update the numbers as we go through the next (budget) cycle,” Boles said.He also said the most recent budget figures for this fiscal year do not include the full 9.04 percent in across-the-board general-fund budget cuts imposed earlier by the Budget and Control Board. The Nerve’s analysis of the two budget versions found that the 107 agencies and other funding categories show a collective 6-percent cut in general funds; most of the agencies reflect the Budget and Control Board’s initial 4-percent cut in September.

Boles attributed that situation in part to the state’s antiquated computer accounting system, adding, “You’re looking at a 30-year-old mainframe system.”

Boles said he doesn’t expect the projected increases in federal funds – which he noted is stimulus money – and other funds for this fiscal year to change greatly by the time the financial books on the year are closed.

Given those assumptions, the state’s total budget for 2009-10 would still show an increase of more than $295 million over the initial ratified budget, The Nerve’s analysis found.

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

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