The Palmetto Insider

The blog of the South Carolina Policy Council

Time for Transparency in Budget Debate

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While last year’s budget focused on the use of Federal Funds to balance the budget, this year’s budgetary battles may well focus on the use, and misuse, of Other Funds. In particular, flexibility provisos in the budget are being used to facilitate the transfer of more than $1.5 billion in targeted fine and fee revenue  — to supplement apparent cuts to the General Fund budget.

Read more about that here.

But at least the use of stimulus funds had a semblance of transparency – in that we had a good sense of how much each agency would receive in Federal Funds revenue. This year’s budget balancing gimmick will be less transparent — and more misleading to taxpayers.

We have highlighted what’s wrong with the House budget, but the Senate budget also has its share of problems.

As the Senate takes up the FY10-2011 budget, lawmakers should demand an open and honest debate — in particular, regarding the backdoor use of more than $1.5 billion in Other Funds revenue to supplement General Fund spending.

This transfer of funds is being made possible by Senate proviso 89.87, which could effectively increase General Fund spending from its current level of $5.1 billion to $6.7 billion.

89.87 General Flexibility Proviso

This is the general flexibility proviso that allows agencies to use restricted and earmarked (Other Funds) dollars to “maintain critical programs previously funded with general fund appropriations.” The House version of this proviso allowed agencies to spend up to the prior fiscal year (FY09-2010) appropriation. But the Senate version changes this baseline to FY08-2009. This apparently minor edit would increase spending by roughly $1 billion over the House budget, draining Other Funds by a proportionate amount.

Here are the appropriation figures from the two fiscal years:

2008-2009: $6,735,714,190

2009-2010: $5,714,023,234

In essence, proviso 89.87 allows agencies to dig through reserved and earmarked funds to bump spending up to $6.7 billion.

Such maneuvers explain why South Carolina so desperately needs budget reform. The General Assembly should be debating the true $21 billion budget – instead of pretending to pass a $5.1 billion version and then using a proviso to open the door to $1.6 billion in additional expenditures.

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Written by SC Policy Council

April 23, 2010 at 10:55 am

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