For Immediate Release
Friday, 8 December 2000

 

To the Men and Women of the SC General Assembly:

      I have spent over thirty years helping to assure South Carolina’s fiscal well being. During my tenure, we have grown stronger economically due to our traditionally conservative spending practices. Heading into the 2001 Legislative Session we face a unique problem that requires serious contemplation and a real need for all sides to work together.

      As State Treasurer, it is my job to report to you on the health of our credit rating and its direct correlation to our spending practices.

      I would like to share with you the recent travails in the State of Tennessee. In June/July 2000, Standard & Poor’s downgraded Tennessee’s general obligation debt to AA+ from AAA. According to A. G. Edwards: Bondline Newsletter (July 6, 2000): "The downgrades were attributed to ‘weak budget practices.’ For three years, Tennessee has used one-time revenue sources to balance its budget … and relied on $120 million of reserves, a reduction of appropriations and a redirection of revenue to the general fund [to close its financial gap]." Moody’s rating agency soon followed, and downgraded Tennessee’s debt rating.

      As you know, a state’s debt rating is somewhat like your personal credit rating – the better your rating the lower interest rates you will pay on your outstanding, and future, debt.

      South Carolina stands tall as one of only nine states currently receiving a AAA rating from all three major agencies. Because of that rating, we enjoy the lowest possible interest rates on our bond issues. That means that our business and citizen taxpayers pay less for needed improvements that will bolster our economic viability for the future – we meet transportation needs (roads, airports, ports); we assist with capital projects (prisons, institutions of higher learning); and, we have recently helped school districts address the statewide school facilities crisis.

      The State of South Carolina will have an estimated $74 million in net revenue growth for the fiscal year 2001-2002 budget. There have been days when our legislators would pray for that kind of revenue growth, but we have become spoiled with the huge surpluses of the past eight years. If $74 million is not enough to meet the prior spending commitments made by the Legislature it raises the real possibility of painful belt tightening that will affect our citizens.

      There are no extras left this year. Last month the Budget & Control Board agreed to use the $98.6 million capital reserve fund to offset revenue shortfalls this year – that is, shortfalls for the fiscal year we are in now (ending June 30, 2001).

      It is our constitutional obligation, and duty as representatives of the people, to balance the State’s books. It is not spelled out how this must be done. There are a myriad of ways to balance our budget. However, before any future economic downturn transforms our relatively small budget growth into deficits, we must do our duty and build a budget that protects the people of South Carolina. I believe we are on sound footing with the rating agencies if the 2001-2002 budget is fiscally responsible.

      Our budget practices will directly affect our ability to pay for needed projects. As we saw in 1992-93, the rating agencies are swift and abrupt when lowering credit ratings. They will not send a warning shot, this we know from our own experiences. That is why I must challenge you now.

      As a leader in South Carolina, I ask you to commit to make this year’s appropriations fit within the expected revenues. And, do not tie the hands of future legislators to meet their unique needs – pay for recurring expenditures with recurring revenue, not one-time monies.

      Now is the time for us to come together. In the midst of a session where some difficult issues will be addressed – with all of our differences – let the common denominator among all of us be creating a wise budget that meets the needs of our citizens.

      I look forward to working with you again in 2001, and please call on me anytime. Have a happy holiday season.

 

Sincerely,

 
Grady L. Patterson, Jr.
South Carolina State Treasurer

 
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