Fact, Fiction & A Plan for "Stimulus" Funds

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Opinion - On Politics

Fact, Fiction & A Plan for "Stimulus" Funds

Wednesday, 15 April 2009 14:35

Over the last few weeks, South Carolinians have been subjected to a barrage of different news stories about the American Recovery and Reinvestment Act of 2009, also known as the federal stimulus.

And many constituents have contacted me alarmed by the ramifications of action or inaction regarding the federal funds that are targeted for South Carolina.
   The confusion surrounding these funds is understandable as different special interest groups have used fear and empty promises while politically posturing. I hope to clear up much of this confusion by placing the funds in their correct context and suggesting how best to deal with them.
   First, however, I think it’s important to stop for a moment and contemplate the enormity of what’s happening in our country right now. Since this recession began, our government has pledged more than $13 trillion – or $3 trillion more than our entire national debt was at the time this crisis began.
    That is an astounding number. It means that in the last year, government has pledged to spend more taxpayer dollars than the entire amount of debt it accumulated over the previous six decades.   And an increasingly large percentage of that debt is held by foreign nations that don’t necessarily share our nation’s fundamental views on freedom and human rights.
    Additionally, over the past year the U.S. Treasury has doubled the amount of money currently in circulation while involving itself in aspects of the private sector that undermine our nation’s free market system.
    These are frightening times, and history teaches us that we are misplacing our confidence if we hope a massive expansion of government is going to pull us out of an economic downturn.
Second, I believe it is important to acknowledge that long before this crisis began, both our state and federal governments chose to embark on paths of unsustainable government growth. During the last four years and over Gov. Sanford’s objections, our legislative leaders grew state government by more than 40%.
    Obviously that was then and this is now. I’m not here to point fingers, but we do need to acknowledge that many of the same people now attacking Gov. Sanford for his position on the federal stimulus are the very people whose poor fiscal policy has amplified the severity of this crisis.
    With that as background, here’s where we are now. The governor has timely certified every penny of the $8 billion in federal stimulus allocated for our state. And all but $700 $700 million of that money – for example, Medicaid funds and Title I education dollars for failing schools – will flow directly from the federal government to state agencies without the necessity of further action by the governor.
    Gov. Sanford’s certification of that $8 billion, however, was not sufficient for our state to receive the $700 million portion of the stimulus referred to as “budget stabilization funds.” His certification only preserved South Carolina’s eligibility for that money; the governor still needs to apply for it.
    It is this $700 million in budget stabilization funds that has dominated the public debate. The governor wants to spend this money to reduce our state debt and has said he will not accept it from the federal government unless it is used for that purpose. Senior legislative leaders want to spend this one-time money on recurring budget items. The lines have been drawn.
     Some senators recently outlined what the state budget would look like unless $350 million of the one-time budget stabilization funds (the half of the $700 million available for this fiscal year) was used to fund recurring state items. Thousands of teachers laid off, prisons closed and poor people cut off from Medicaid – the parade of horribles went on and on.
    But the budget outlined not only excluded the $350 million – that was appropriate, as the governor has said he will not allow that one-time money to fund recurring needs – but also $578 million in federal stimulus money that will flow directly from the federal government to our state agencies, money that the governor has always said he would accept.
    That was wrong. Our job as legislators is to pass a responsible budget relying upon all known revenues. In the current fiscal year, state government is spending $20 billion; next year it will spend $21 billion – without counting the $350 million in one-time budget stabilization funds. We must now roll up our sleeves and, working with the governor, fund critical programs, cut lesser ones and pass a responsible budget.
    If the legislature does that, then it could go to Gov. Sanford and say: “We passed a budget that pays for recurring items with recurring revenues. We did not rely upon one-time budget stabilization funds. We made the cuts you suggested. We worked with you in good faith.”
At that point, I think the governor should reciprocate by applying for the $700 million in budget stabilization funds and using it to pay for non-recurring expenses such as capital projects in the areas of education and law enforcement. Spending the money in that way would be fiscally responsible and would not require a tax increase in two years when the federal stimulus spigot is turned off.
    In other words, if our federal leaders have decided to saddle our children and grandchildren with mountains of debt, and if they are going to have to repay the $700 million whether we accept it or not, then the governor should do his best with the poor hand dealt and make sure the money is spent here in South Carolina in the least damaging way possible.
    There is, of course, no guarantee on what the governor will do. Ultimately, he will do what he believes is in the best interests of our state. But as legislators, we can’t lapse into playing a guessing game on what he might or might not do in regard to the $700 million; our job is to pass the most responsible budget that we can, using the revenues we know we have, and then let the chips fall.
    The author represents Beaufort County in the S.C. Senate.

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