By CINDI ROSS SCOPPE – Associate Editor
IT WAS BAD enough that Gov. Nikki Haley chose to launch her first direct assault on the Legislature over an ideological fetish that is completely detached from the realities of governing. It’s worse that she cooked the numbers to make her case.
The fetish is the arbitrary cap that she, like her predecessor, insists must be placed on the state budget: Spending should not grow by more than the annual increase in population plus inflation. It’s a cap that would make sense — as a guideline, not a hard-and-fast rule — in a state that already was providing the services that it needs to provide. This never has been such a state, and it certainly isn’t now, as we’re still reeling from recession-induced budget cuts.
But let’s not argue that point, because the folks who are stinging the most from the attack don’t argue it. The House enthusiastically endorses cruise-control budgeting, passes legislation every year (which thankfully dies in the Senate) to force that arbitrary cap onto our government, and makes a point of adhering to the cap when it passes its version of the budget. This year, House negotiators, aided by the governor’s veto threat, even managed to keep the final version of the budget under that cap — a fact about which House leaders were bragging even before the governor tore into that budget based on her dubious charge of cap-busting.
As House Speaker Bobby Harrell wrote on his blog on June 24: “As a whole, General Fund allocations were well below caps proposed by the Spending Limitations Bill passed by the House earlier this year, which will cap spending according to the consumer price index and population growth. The total budget, which also includes ‘other funds’ (college tuition payments, drivers license fees, etc.) and federal monies grew less than 0.3% overall.”
So lawmakers were more than a little surprised — and angry — when Gov. Nikki Haley vetoed $105 million in the main part of the budget that the Legislature controls (the “general fund”) not because she had big problems with the expenditures, but merely because she claimed that it had grown by $75 million more than the 4.83 percent allowed by the cap. (She didn’t apply the cap to a separate bill that spent $107 million in reserve funds; she vetoed that bill because she said the state should hold more money in reserve.)
Because of the way the budget is put together, it would take more time than it’s worth to figure out exactly how far off the governor’s numbers are. But there is one fairly simple element that puts the lie to her charge: $146 million of the money that she counts against her spending cap is a loan repayment to the federal government. And not just any loan repayment, but a repayment that triggers an equal-sized tax cut for businesses that have been complaining about how much they’re having to pay for abusing the unemployment insurance system for years.
This is not important merely because no rational person would count paying down a loan in order to reduce taxes as the sort of “spending” that needs to be limited. Even the ridiculous proposals to impose an arbitrary cap acknowledge this: Neither loan payments, nor payments to reserve funds, nor tax cuts get counted against the allowable increased spending. And in fact the governor told lawmakers in her veto letter that “All additional dollars above the cap should be for taxpayer relief, for managing our state’s obligations, or held in reserve.”
So, playing by her rules, and properly removing just that one $146 million loan payment from the “expenditures,” transforms the budget from one that exceeds the artificial cap by $75 million to one that comes in $71 million under the cap.
When I asked legislators whether they thought the governor was being deliberately deceptive or simply didn’t understand the basics of the budget, I got two answers: “I don’t know,” and “Yes.”
With the exception of House Republican Leader Kenny Bingham, who made no effort to hide his outrage over the way the governor’s office misled him on the ETV funding charade, House leaders didn’t show any sign of their anger last week as they steamrolled over the vetoes. But Mr. Harrell, who has been walking on egg shells all session to avoid the open warfare he had with Mark Sanford, fired off a news release just before the voting started, noting: “The only way to assert that spending in this year’s budget went above this cap is to treat hundreds of millions of dollars in non-growth items — like debt repayment and funds set aside for reserve accounts — as ‘new spending.’ This irregular accounting practice distorts the actual ‘spending’ included in this budget and disregards the fact that, when accounted for correctly, this budget falls well below the 4.83% growth cap.”
For more perspective: Unless you count that $146 million debt payment/tax cut as “spending,” total general-fund spending for this year will be $5.9 billion — identical within rounding error to the $5.9 billion in the year just ended, but still down from $7.3 billion in 2007-08. (Even those numbers are high for cap-calculation purposes, because they include other debt and reserve-fund payments, but those are fairly stable from year to year, so they don’t throw off the percentage the way this year’s extra payment does.)
This year’s total Medicaid spending will be down 5 percent from the year just ended, because of the expiration of federal stimulus funds, while education spending will be up slightly but still less than in 2006, with per-pupil expenditures only slightly above the level attained in 1998.
The number of state employees is down by about 8,000 since 1994, to around 59,000. Over that same period, general-fund spending has increased an average of 2.4 percent per year. And, as Republican legislators love to remind us, our state ranks 50th in state tax collections as a percent of income (we’re higher when fees are included), after passing $20 billion worth of cumulative tax cuts (now worth a total of $2.28 billion per year) since they took over the House in 1995.
None of that suggests that our Legislature is or has been on a drunken spending spree and in need of an arbitrary cap — even one that’s calculated honestly.