Gov. Mark Sanford wants legislators to replenish the half-billion dollars that has been borrowed from the state's trust funds to balance the budget during the previous four years at a greater rate than lawmakers plan. Sanford's executive budget released late last year recommended replenishing $158 million of the $500 million borrowed from the trust funds. Last week the governor asked that about $200 million in new revenue available to the House Ways and Means Committee go the restoring the fund in order to protect the state credit rating. The better the credit rating the less money it cost when the state has to borrow money.
The governor based his decision on a report from state Treasurer Grady Patterson. Patterson said on March 7 that a "depletion of the reserve (funds)" and insufficient reduction in state expenses are primary reasons credit-rating agencies are re-examining the state's finances.
S.C. trusts and reserve funds are accounts dedicated to long-term programs that lawmakers and residents have agreed are important to South Carolina's future. The funds include money earmarked for conservation, insurance, pensions, monitoring nuclear waste and workers' compensation.
When the state borrows from these funds to finance other areas of government, it robs the account of principal that could be drawing compounding interest. The state will be monitoring nuclear waste at the Barnwell County low-level nuclear waste site for hundreds of years. The $90 million borrowed from this fund isn't drawing interest that could be used to finance the long-term observation and remediation, if it is necessary.
The House not only disagrees with Sanford on the need to put $360 million into the funds this year, its members have settled on $41 million less that the governor proposed in his executive budget. The House last week agreed to use $117 million to replenish the state "rainy-day" fund.
House Speaker David Wilkins, R-Greenville, claims the governor is creating controversy where it shouldn't exist and that other areas of government also are important. "The governor seems to think (paying back trust funds) is mutually exclusive," Wilkins told The Associated Press last week. "It took three years to take this money out of trust funds. Our plan is to pay it back over three years."
Unfortunately, both the governor and the House leadership are right. The state has to find a way to refund the trust money as soon as possible and fund priorities in state government. The looming budget battle that starts this week in the General Assembly will be an interesting battle of wills to watch.