The Watchdog Report
The Governor and Legislature work together to lift state from financial dungeon
By Richard Eckstrom

The State's year-end budget results are worth bragging about. Rebounding from the financial problems of 1999-2003, South Carolina ended this fiscal year with a major budget surplus of $171.5 million. Our economic health is now robust and our ending numbers were much better than the State had estimated several weeks ago.

This is in stark contrast to just three years ago when South Carolina was on virtual life support. Our State had radically increased its debt, more than doubling 1999 levels. And with $155 million in unconstitutional deficit spending in 2002, we sustained negative net worth for the first time since the Great Depression. Our "Rainy Day" Fund and Capital Reserve Fund were both drawn down, and the State even borrowed and spent $700 million from the trust accounts of others.

In 2003, Governor Sanford, then newly elected, began working with the Legislature to improve fiscal discipline in State government. Their first act was to establish an installment payment plan to pay off the unconstitutional $155 million deficit.

They paid off the deficit in 2005 and put in place financial controls to guard against repeat violations. In addition, that same year the Legislature wisely sacrificed $105 million of revenues to correct a serious accounting error made more than a decade ago.

The Governor and the Legislature also agreed to fully restore the State's Rainy Day Fund and Capital Reserve Fund. They also pledged to replace those huge sums spent in prior years from the trust accounts of others.

Today, for the first time this decade, both reserve accounts have been fully funded, and the $700 million that had been borrowed and spent from trust funds has been repaid. These conservative fiscal measures, brought about by impressive cooperation between the Governor and the Legislature, are having a "trickle down" effect on the management of State government.

Many agency managers once feared that money remaining in their budgets at year-end would be swept away to help offset deficits in other agencies. As a result they often would spend the money to avoid having it confiscated; kind of a "use it or lose it" approach. Now many are following the "save it for a rainy day" approach. In fact, unspent amounts carried forward by agencies have more than doubled since 2003, totaling more than $100 million at this time! This carry forward money provides crucial additional operating reserves for State agencies.

The message in this good financial news is that a conservative approach to government works. Although largely overlooked by the big media, the truth is that Governor Sanford has worked very well with the Legislature to lift our State from its financial dungeon. I applaud their efforts. All South Carolinians should be proud of what we've accomplished as a State in just a few short years.

Richard Eckstrom, CPA is South Carolina's Comptroller General.