In terms of state finances, today's decision will be the toughest for the five-member state Budget and Control Board since Gov. Mark Sanford took office this year. At the least, there's good reason to believe that the board, which is chaired by the governor, won't choose to ignore the serious and growing budget deficit problem as it did last year.
Charleston's Rep. Bobby Harrell tells us he was among the minority on the board who wanted to deal with the $155 million deficit state leaders faced last year when budget figures were tallied. But it was an election year, and Rep. Harrell said the majority of the board didn't want to face the needed budget cuts. Instead, he said the comptroller general closed the books and relied on the cash flow from the general deposit account.
Not only does that deficit still remain, but there's a remaining $22 million deficit to be dealt with from the fiscal year that ended in June. Further, the latest economic projections have reduced the state's projected 2 percent growth rate to the status quo with last year. That reduction would remove $108 million worth of anticipated revenue from the present budget. Add those figures up and you get a total deficit of $285 million. Even if the board approves reducing that figure by $98 million from the capital reserve account, the red ink still stands at $187 million.
What to do? Well that depends, in part, on what the board members' lawyers advise, according to Rep. Harrell. There is, he says, some legal question of whether the board can deal with the deficit from a previous budget year. At issue, he says, is whether that power belongs only to the full General Assembly.
If the board can legally remove the total deficit, it is estimated to take a 4.3 percent across-the-board cut of all state agencies to accomplish that goal. In view of the cuts those agencies already have taken, that would be a hard, hard blow, particularly in terms of the funding of state-supported education.
But, new Comptroller General Richard Eckstrom warns that the consequences of inaction are dire, particularly in terms of the state's AAA credit rating, which he describes as "hanging by a thread." Further, the comptroller general points out that the previous budget deficits have been allowed to stand in defiance of the state Constitution which requires a balanced budget.
"We're not behaving like a AAA state," he said.
If the board concludes that it only can deal with the current projected budget deficit of $108 million and it uses the $98 million from capital reserve to offset that amount, the cuts in the current budget could be relatively slight. But that still leaves a huge previous deficit to be dealt with. One solution, according to Rep. Harrell, would be for the Legislature to designate a fixed untouchable amount to be used to reduce the deficit over a relatively short time span.
But will those who hand out credit ratings be satisfied by anything less than a major show of deficit reduction sooner than later? That will be part of today's debate. After listening to all the options, Rep. Harrell said he's prepared to do what's necessary "to keep the state's fiscal integrity."
The governor, who has criticized the previous administration for sweeping the seriousness of the deficit crisis under the rug, certainly seems prepared to take action. But even if it isn't an election year, don't expect today's decisions to be easy.
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