Here is a brief update on budget negotiations now ongoing in Columbia that could break the current impasse between senior legislative leaders and Gov. Sanford over $350 million of federal stimulus money.

To briefly recap, the total amount in dispute is $700 million, and half that amount is available for this fiscal year. The governor wants to use that half, or $350 million, to pay down debt; legislative leaders want to use this one-time federal money to pay for recurring state programs.

Yesterday, for over four hours, I presented an alternative budget to the Senate Finance Committee that funded core areas of government (education, public safety and healthcare/Medicaid), and also carved out $200 million dollars that could be used to either pay down debt or reduce tens of billions dollars worth of unfunded state liabilities.

A story in the Greenville News today (printed below) reported that I believe “using the $200 million that way would cause Sanford to consider a compromise and apply for the stimulus.”

I do believe that. If the legislature passes an honest budget that funds core services and cuts waste and makes an honest attempt to reduce our state’s massive debt and unfunded liabilites, then prospects of the governor applying for the remaining portion of the federal stimulus are improved.

Gov. Sanford is right: Spending all the one-time federal stimulus money on state programs that will need to be funded long after the federal spigot is turned off is simply not responsible. And the alternative budget I outlined yesterday addresses the governor’s concerns, but also funds core government services. If passed, no teachers would be laid off, no prisons would be closed, no folks would be kicked off Medicaid.

We can be both fiscally conservative and meet core needs if we work together. I will continue to update you on my efforts and the budget situation in the days ahead.

- Tom

From the Greenville News:

State facing ‘brutal’ new cut
Even with stimulus, agencies would take hit, senator says

By Tim Smith • CAPITAL BUREAU • April 16, 2009

COLUMBIA — Most state agencies would face a “brutal” cut of 27 percent on top of existing cuts in the latest budget plan being worked on by the Senate Finance Committee, senators were told Wednesday night.

Even if Gov. Mark Sanford applies for $350 million in federal stimulus aid for next year, only $63 million of that could be used to restore cuts that must be made, said Sen. Hugh Leatherman, chairman of the Senate Finance Committee.

“I know it’s going to be gut-wrenching for you,” Leatherman told subcommittee chairmen Wednesday evening as he passed out a list of the amounts each subcommittee must cut from agency budgets.

Leatherman said the $5.7 billion budget, even with $652 million in additional federal funds from an increased Medicaid match, faces a shortfall of $202 million.

The real problem, he said, is that in order for the state to qualify for stimulus funding and the increased match, legislators must largely leave education and Medicaid-agency budgets untouched and at certain funding levels.

Legislators can’t cut the state’s Department of Juvenile Justice and adult prison system because both are running deficits, he said, and can’t cut debt payments or local property tax breaks.

That means the rest of state government — currently funded with about $700 million — must absorb the $202 million in cuts, he said.

While some agencies receive millions of dollars in federal aid or from fees or fines, Leatherman said the cuts would still be painful and aren’t a political ploy.

“It’s the most excrutiating thing,” Leatherman told reporters afterward. “It’s brutal, really brutal.”

How brutal?

Under the plan handed out Wednesday evening, Clemson Public Service Activities would lose $11 million out of its $40 million state budget. The Department of Parks, Recreation and Tourism would lose $7.5 million out of its $27 million budget.

The state’s court system would lose $7.8 million out of its $28.7 million in state aid. The Department of Public Safety, which houses the Highway Patrol, would lose $19.3 million of its $70.5 million in state funding.

Those cuts would come on top of more than $1 billion in cuts handed agencies since last summer, the result of dwindling state revenues.
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Leatherman said if Sanford applies for the $350 million, which remains uncertain, the state could only apply $63 million toward the $202 million in cuts because the federal legislation requires most of the stimulus to go to education.

Earlier Wednesday, a group of senators represented by Sen. Tom Davis of Beaufort, Sanford’s former chief of staff, and Sen. Greg Ryberg of Aiken, proposed an alternative budget they crafted in the last week with some help from Sanford’s staff but without the governor’s blessing.

Their plan would cut agencies by $200 million to apply toward a growing debt with the federal government to pay for unemployment benefits. Officials estimate the state may owe $700 million by year’s end for the emergency loans and $1.5 billion by the end of 2010.

Davis said he believes using the $200 million that way would cause Sanford to consider a compromise and apply for the stimulus.

The governor has thus far refused to apply for the $700 million available to the state over two years for budget stabilization unless lawmakers agree to spend an equal amount on reducing state debt.

Leatherman and others on the committee poked holes in the plan, however, primarily because it would use all the federal match money throughout the budget.

Leatherman said he wasn’t sure legislators could legally use the match money that way, though Davis said the plan would only use the match money to “free up” additional state dollars for other agencies.

Others questioned the way the plan zeroes out programs in order to generate the $200 million in savings. And some, including Leatherman, said they would want assurances first that Sanford would approve the plan and apply for the stimulus.

Davis and Ryberg told the committee their plan wasn’t perfect and their aim was a compromise.

Davis said he is looking for a way to break a “logjam” between the governor and legislators.

Sen. John Land, leader of the Senate Democrats, later asked Davis if he could persuade his former boss to change his mind on the stimulus. Davis said he was making his proposal as a means to do that.

Sanford told The Greenville News that he hadn’t read the plan but praised its concept of applying $200 million in savings toward the unemployment debt.

Tags: bailout, Beaufort Senator, governor mark sanford, senator tom davis, south carolina, state senator tom davis, stimulus, tom davis

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