State legislatures cannot overturn a governor's decision to reject federal stimulus funds, Obama administration officials said Monday, increasing the likelihood that South Carolina will not receive the $700 million of stimulus funds refused by Gov. Mark Sanford.
Office of Management and Budget director Peter R. Orszag told U.S. Sen. Lindsey O. Graham, R-S.C., in a March 31 letter that only governors, not state legislators, can apply to the Education Department for an allocation of funds from the State Fiscal Stabilization Fund under the American Recovery and Reinvestment Act that was enacted in February.
Orszag's pronouncement hit South Carolina lawmakers "like a time bomb," Sen. Hugh K. Leatherman Sr., R-Florence, said yesterday as lawmakers scrambled to find a way to obtain the funds before the Friday deadline.
But Sanford spokesman Joel Sawyer said: "We're glad the White House concurred with the state attorney general in validating what the governor has long believed - that he should be the one directing this money. We're hopeful that the legislature will agree to pay down debt, and the ball is very much in their court."
Sanford, a Republican and outspoken critic of the stimulus law, announced March 20 that he would not accept the $700 million the state was to receive from the law's $48.6 billion State Fiscal Stabilization Fund for education and health care spending.
He followed up the announcement with letters asking President Obama for waivers that would permit the state to use the stimulus funds to pay off debt or fund retirement pension plans. Administration officials initially said they could not grant waivers and then later told Sanford that his proposal would not comply with the stimulus law's provisions.
Anticipating Sanford might reject stimulus aid, U.S. Rep. James Clyburn, D-S.C., had amended the stimulus package with a provision that was intended to give state legislatures the right to accept the federal funds.
Graham, who voted against the stimulus bill but wants South Carolina to receive the funds, asked the White House on March 18 to investigate Clyburn's provision, and the administration found it was flawed. Only governors can apply to the Education Department for fiscal stabilization fund money, Orszag said in the letter.
South Carolina will still receive the remaining three-quarters of the $2.8 billion in federal aid being provided under the new law. Clyburn's provision also required governors to accept the funds within 45 days of the enactment of the bill, by April 3.
"I want to hear the governor explain to the very schoolchildren, whom he claims will be paying for this legislation, why he thinks they don't deserve the benefit of funding that will prepare them to make those payments," Clyburn said in a statement yesterday.
Last week, Clyburn asked Education Secretary Arne Duncan to find a way to provide stimulus funds to South Carolina if Sanford refuses them.
Orszag's letter said the Obama administration "would be receptive" to congressional action to clarify the stimulus law so that state legislatures can accept funds from the Education Department. Spokespersons for Clyburn and Graham did not return calls about whether the lawmakers would sponsor legislation to clarify the stimulus law.
South Carolina state senators from both parties oppose Sanford's rejection of the funds. They appealed to the governor yesterday to accept the funds for the state's well-being. The state Senate Finance Committee estimated on Tuesday that 6,000 to 7,000 government jobs will be lost if the state does not get the funding. South Carolina already has the second-highest unemployment rate in the country.
The Finance Committee has begun debating the fiscal 2010 budget without stimulus funds included. The state House passed a budget on March 13 that included stimulus funds.
"Without this money, we are going down a path to chaos in this state," Sen. John C. Land 3d, D-Clarendon, said on the state Senate floor yesterday.
The governor's crusade to protect taxpayers is flawed, lawmakers argued, warning that the rejected stimulus funds would not go back to taxpayers and instead would be allocated to other states.
"If we don't take it, it's not going to stay in D.C., it is going to other states," Sen. Leatherman said.