WASHINGTON — South Carolina Gov. Mark Sanford said Tuesday that he wants to use $700 million of the $2.8 billion the state is to receive under the new stimulus law to pay unfunded pension liabilities and other debt, including debt service on bonds.
Sanford, an outspoken critic of the American Recovery and Reinvestment Act that Congress enacted last month, told members of the state legislature in a letter that he will ask President Obama for a waiver from the requirement that the funds be used for stimulus.
South Carolina’s House passed a measure last Friday that would require $350 million of stimulus aid to reduce the state’s budget deficit. The state faces an estimated $535 million budget shortfall for fiscal 2010, which will begin July 1.
The $700 million represents 25% of the $2.8 billion South Carolina would receive from the stimulus package over two fiscal years. The rest of the funds would go directly to state programs like Medicaid.
The governor said in his letter that the state has $20 billion in unfunded liabilities and the highest per-capita debt among Southeast states.
Sanford is asking for “broad flexibility” to spend the stimulus funds on debt, which could include paying down debt service, said Joel Sawyer, a spokesman for the governor. Sanford expects to send the letter to Obama in the next few days, according to Sawyer.
But a state budget analyst criticized Sanford’s plan.
“It’s a terrible idea,” said Nicholas Johnson, director of the state fiscal project at the Center on Budget and Policy Priorities in Washington, D.C. Sanford’s proposed use of the $700 million would violate the letter of the law and the economic theory behind the stimulus, he said.
Most the money in the fiscal stabilization fund in the new stimulus law is supposed to be used for education, Johnson said. About 82% of South Carolina’s portion of that fund is earmarked for education but the remainder can be spent with more discretion, he said.
“In good economic times, paying down debt is a very sensible thing to do,” Johnson said. “But it’s not what the statute says and it’s not what we need to do in the middle of a recession.”
The governor’s plan, however, would have “no effect whatsoever” on the ability of the state to receive stimulus aid for transportation, said Pete Poole, a spokesman for the state’s Transportation Department. South Carolina is to receive $463 million for transportation projects under the new law. The state’s Medicaid system also will receive the full stimulus funding, said a spokesman for the state’s Department of Health and Human Services.
But Sanford told state lawmakers in his letter that he will reject the $97 million of stimulus aid that South Carolina is to receive for the expansion of unemployment benefits. He has complained that the state’s unemployment bureau has been wasteful in spending money.
South Carolina’s 10.4% unemployment rate is the nation’s second highest, behind Michigan, according to January figures from the Labor Department released Wednesday. The Obama administration estimated that the stimulus aid would create 50,000 jobs in South Carolina.
Sanford initially threatened to reject federal stimulus aid weeks ago before Congress even passed the new law.
His remarks prompted Rep. James Clyburn, D-S.C., to include a provision in the law that requires governors to accept or decline federal aid within 45 days of the bill’s passage. To receive funds, governors must certify that “the funds will be used to create jobs and promote economic growth.”
Other governors in Southeast states also have threatened to reject some of the federal stimulus funds. Gov. Bobby Jindal of Louisiana and Gov. Haley Barbour of Mississippi, both Republicans, have said they will not accept federal aid that requires them to expand unemployment insurance.
Meanwhile, the South Carolina House on Wednesday passed by voice vote a proposed $5.8 billion budget for fiscal 2010. The budget plan does not include any bond financing and or additional debt service. The state Senate is expected to begin debating the budget next week.
South Carolina is rated Aaa by Moody’s Investors Service and AA-plus by Standard & Poor’s.
