(Columbia-AP) Sept. 30, 2003 - The five members of the South Carolina Budget and Control Board announced a plan (see below) to repay the state's $155 million deficit from the fiscal year 2001-2002 and prevent futher agency budget cuts this year.

Governor Mark Sanford and Republican leaders announced the plan Tuesday morning at the State House. The admittedly ambitious, long-range plan for paying down the deficit all hinges on getting the state legislature to pass a law changing the way the state uses some of its money.

Money from two reserve funds would be used to pay down the deficit over the next four years. The plan takes the state to fiscal year 2006-2007, when the, under the plan, the deficit is forecast to be zero. The deficit could be reduced more quickly if revenue grows.

The governor also wants any growth in South Carolina's revenue above three percent to pay off the debt. He says the plan is "unprecedented, but I think very important from the stand point of clearing up a past-due bill."

Current law does not allow for deficit budgeting, because the South Carolina Constitution requires a balanced annual budget. Sanford has said the deficit violates the constitution and could hurt the state's triple-A credit rating. The plan also would cap growth in the state budget at three per-cent a year until 2009.

House minority leader Democrat James Smith, (D) Richland County, calls the plan smoke and mirrors and says it's unconstitutional, "What this essentially does is create a deficit to deal with a deficit."  He says Democrats plan to unveil their own plan shortly. The repayment plan will be introduced as a bill when the legislative session begins in January.

The Budget and Control Board is made up of Sanford, South Carolina Treasurer Grady Patterson and Comptroller General Richard Eckstrom, Chairman of the Senate Finance Committee Hugh Leatherman and Chairman of the House Ways and Means Committee Bobby Harrell.

In August state agencies cut one percent head off budget shortfalls this year and cover a $22 million deficit left over from the fiscal year that ended in June. If the state's economy and tax collections improve, the agencies will be allowed to spend the approximately $43 million.

Fiscal Discipline Plan of 2004
Under the plan announced Tuesday the General Assembly pays off the $155M deficit of FY 01-02 on or before the Summer of 2006 via legislation enacted by the Legislature and signed by the Governor in the 2004 session that:

• Adds $1 million to the General Reserve Fund (raising it to $50 million from $49 million) and directing that this $50 million be used this fiscal year to decrease the FY 01-02 deficit from $155 million to $105 million.
• Provides for $50 million of the FY 04-05 Capital Reserve Fund to be used to decrease the FY 01-02 deficit to from $105 million to $55 million.
• Provides for $55 million of the FY 05-06 Capital Reserve Fund to be used to decrease the FY 01-02 deficit to $0.

In addition to the above, it is further their intent that legislation be enacted by the General Assembly in the 2004 session that:

• Imposes a 3.0% cap on state appropriations (the "3% annual appropriations cap") for the next five fiscal years (beginning in FY 04-05 and ending in FY 08-09)
• Provides for all recurring revenues in excess of the 3% annual appropriations cap during this five-year period to be applied toward the $155 million deficit (note: the effect of this fund application may accelerate repayment of the FY 01-02 deficit and reduce/eliminate the need to use Capital Reserve Funds to pay down the FY 01-02 deficit)
• Provides that, after the FY 01-02 deficit has been paid in full, all revenues in excess of the 3% annual appropriations cap for the remainder of the appropriations cap period (which ends after FY 08-09) shall be used to augment funds in the General Reserve Fund and/or Capital Reserve Fund (a commitment that is necessary to enable us to shore up our AAA bond rating).

reporting by Scott Hawkins

updated 2:13pm by Chris Rees