Treasurer Grady Patterson has sent a strongly worded letter to all senators, warning that the state could lose its high credit rating if it does not drastically change its proposed budget.

Patterson is upset that the Senate Finance Committee wants to spend higher-than-expected tax collections from this year for K-12 and other needs next year.

Patterson wants that money to pay an old debt of $155 million that has been hanging around the state’s neck for three years.

“The rating agencies expect us to address this deficit,” Patterson wrote. “If action is not taken by the state, we will lose the AAA credit rating, a consequence that will have long-lasting, devastating effects on the citizens of S.C.”

South Carolina is one of a half-dozen states with a AAA rating, the highest given by the debt rating agencies. That rating allows the state, including local governments and schools, to borrow money and refinance debts at the lowest interest rates.

Finance chairman Hugh Leatherman, R-Florence, said the Senate proposes to pay back some of that old debt, $50 million to be exact, in next year’s budget.

“The money’s there,” he said.

The state essentially has been floating a check it does not have the money to cover for three years.

Last fall, the state’s top financial officers held a press conference to outline a plan to repay the debt by taking money from “rainy day” funds over three years.

They also agreed that if surplus tax money came in above a certain trigger point, they would use it to pay the debt. There is dispute now about the trigger point.

At the press conference were Patterson, Comptroller General Richard Eckstrom, House Ways and Means chairman Bobby Harrell, R-Florence, and Gov. Mark Sanford.

Sanford said Thursday that he is disappointed the Senate Finance Committee wants to spend as much as $110 million from this year’s tax revenue toward next year’s needs.

“The governor’s strongly biased towards paying past debts before we consider additional spending,” spokesman Will Folks said.

Leatherman said he has no intention of using any more of the surplus to pay debt, especially after three years of budget cuts.

The state has laid off thousands of employees and cut some agencies by as much as a third.

“Do you want to cut back on education?” Leatherman said. “No, I don’t want to do that. Do you want to cut Medicaid? No, I don’t want to do that.”

The money will be paid back, Leatherman said, just over three years, not in one lump sum.

The dispute is set to bubble up during the full Senate’s budget debate the week of May 4.

Leatherman, who also is GOP majority leader in the Senate, can expect some opposition from within his own party.

Sen. Greg Ryberg, R-Aiken, said he will push to pay the money back faster. “We worked too hard to get to this position to throw it away when the monies are excess and should be properly put to repayment.”

Moody’s, a leading credit agency, decided to maintain the state’s AAA rating in a report earlier this month. But it downgraded the state’s chances of keeping that rating to “negative” from “stable.”

Moody’s analyst Maria Coritsidis said the plan to pay back the money was a key consideration in keeping the AAA rating.

“The fact that the state is putting together some organized plan to deal with the existing deficit and to deal with future deficits, we see that as a credit positive,” she said.

The plan had “any surplus general fund revenues also dedicated to eliminating the deficit,” Coritsidis said. “That was our understanding.”

Reach Bauerlein at (803) 771-8485 or vbauerlein@thestate.com