It’s been said that those who don’t study history are doomed to repeat it — which to me is just another way of saying there’s no education in the second kick of a mule.
While it’s good advice no matter how you say it, it’s unfortunately advice that too many in Columbia ignore all too often when it comes to the financial health of the state. Given what’s happening on Wall Street right now and with our own state budget, it’s worth taking a minute to remember how we got to where we are and to ask for your help in making sure that these mistakes aren’t repeated yet again.
Right now in Columbia, we’re dealing with budget shortfalls that were predictable, preventable and guaranteed to happen with the run-up in state spending. State government spending has grown more than 40 percent over the last four years — well ahead of the growth in South Carolina’s underlying economy and well ahead of the growth of people’s paychecks over the same time.
The result is that at a time where budgets of agencies like the Department of Corrections and others are already stretched to the limit, another $415 million is going to have to be trimmed from state government. What has happened in the credit markets will mean the size and duration of the budget cuts yet to come will grow. It now seems that legislative leadership is finally moving toward the same page many of their rank-and-file members were already on in saying that making those cuts across the board is no way to run government. As we soon deal with this budget situation, three real challenges lie before us, and I ask for your help because we believe with the right approach there can be a silver lining to today’s dark clouds. It is an opportunity to force long-term changes that will keep us from repeating these same mistakes.
First, we can’t think short-term and paper over problems in the hope that this economic downturn will be short lived. It won’t. The reason for our spending fights with the Legislature lie in the simple reality that growing government faster than the economy always produces problems and because we knew the business cycle was not dead. Things don’t go upward forever and our grandparents had it right when they talked about saving for the rainy days that always come. I believe this downturn, and consequently our budget challenges, will be prolonged and as a consequence it is very important that we not paper over shortfalls with things called annualizations. In laymen’s terms this means borrowing from Peter to pay Paul, and it creates budgetary holes for the following year. Instead, where we do make cuts they should be done as families and businesses do and make them real, rather than just cuts that exist only on paper.
Second, this should serve as an opportunity to deal with the capital side of the budget and other permanent liabilities, because they ultimately have an impact in the operating portion of our budget. The Comptroller General and I have tried several times — and been voted down — to put a hold on capital projects, given the increasingly stormy financial waters. Simply put, we didn’t think it made sense to build a host of new buildings when we’re facing shortfalls that make it tough to maintain what the state already has. In the same vein, I’ve asked that we reconsider the new automatic cost of living increase given to state retirees, since doing so rests on a new and higher assumed rate of return of eight percent. The law was changed this summer to give retirees an immediate benefit based on future predictions, even though, well before the current meltdown in the financial markets, people like Warren Buffet were saying this kind of return was impossible. It amounts to $2.7 billion that South Carolina taxpayers will one day have to come up with if the projections don’t materialize.
Third, it is essential we use today’s financial challenges as an opportunity to force changes to our governmental structure. Redundancy in the way that our government works in South Carolina means government costs us almost 140 percent of the U.S. average. We’re the only state in the country with a Budget and Control Board that performs the Executive branch functions handled by the other 49 governors in the country. We will always over-spend if we keep doing things the way we’ve been doing them.
These will be tough budget times over the months and I believe several years ahead. Whether or not these problems are papered over or addressed for the long term will be directly driven by the degree to which each of us makes our voice heard. Please take the time to engage in the debate before us.
Mark Sanford, a Republican, is governor of South Carolina.