Budget Must Keep Promises Before Making New Ones
April 26, 2005
The common thread between a family, business or government budget lies in the fact that none is perfect. The important questions, therefore, are – does the good outweigh the bad, and is there room for improvement?
Although a number of people have worked very hard on the House and Senate versions of the budget, what I have seen so far suggests substantial room for improvement on the big issue remaining – trust funds. With the full Senate taking up the budget starting this week, South Carolinians have their last chance to make their voices heard on this year’s budget. So if you care about the amount of taxes you just paid on April 15th, or if you care about limiting the spout on new spending in our state, I think it’s worth making your view known.
Here are a few important details on this year’s budget that might be helpful as you weigh whether or not to get involved in this debate.
As a backdrop to the trust fund issue, I think it’s worth knowing how much money is budgeted for new tax relief given the new money that’s coming into Columbia. Projections show $619 million of new money coming into Columbia this year, and by mid-May that number could be around $800 million. I have long believed that you ought to give people a refund of their own money, a tax cut, if they are sending that kind of additional money into government. We pushed very hard to do that this year and while we lost on the idea of a bigger tax cut, I’d give credit to Speaker Wilkins, members of the House and a handful of Republican Senators for the way they supported us in our efforts to enact a larger income tax cut over a smaller one.
Unfortunately, there was a big push by some key Senators, including Senate Finance Chairman Hugh Leatherman, to limit the tax cut to small business owners and that position ultimately prevailed. So, sadly, this year the budget calls for a whole lot of growth in spending but only $2.5 million of income tax cuts on the $600-800 million of new money taxpayers are sending to Columbia.
This brings us to trust funds. I believe very strongly that if we are not going to return more money in the form of tax cuts to the citizens of South Carolina, the first order of business is to repay trust funds before we begin substantial commitments to new and additional spending.
A little history on our trust fund balances lies in the fact that just before I came to Columbia, our state budget – like so many others across the country – suffered very serious revenue shortfalls. At this time policy makers elected to borrow from a wide array of trust funds in dealing with these budget shortfalls. In addition to an unconstitutional deficit that accumulated during this time, roughly half a billion dollars was also borrowed from these trust and reserve accounts. Last year, we were able to completely extinguish the $155 million unconstitutional deficit, and the question before us now is, given $600-800 million of new money coming into Columbia, what do we do with the trust funds? I think we ought to pay them down in a substantial way while we have the opportunity.
Unfortunately, the House and Senate budget writers see this issue differently. They both allocated about $117 million of the $600-800 million of new money coming into Columbia to repaying that half billion owed to South Carolina trust funds. In our revised budget, we proposed repaying $362 million. The difference shows up clearly when you look at new spending, wherein I allocated $250 million to new spending while House and Senate budget writers both allocated over $500 million.
All of this leaves me with two thoughts. First, if you think our government budget shouldn’t grow at a faster rate than people’s incomes here in South Carolina, I’d ask you contact your Representative or Senator. I’d particularly ask you to contact them about repaying trust and reserve funds. These funds are there to help us in rainy days and there are plenty of storm clouds currently on the horizon. Gas has never been above $2.00 a gallon in my life, interest rates are rising and I don’t know what’s next for the economy. I do know that on the coast, you get ready for a hurricane before it starts raining, and in that same vein we’ve been granted a golden opportunity to get our financial affairs in better order. I hope we take it.
Mark Sanford is governor of South Carolina.