$60 Million Miscommunication Will Hurt SC Budget

An apparent lack of communication between state agencies means South Carolina budget writers have $60 million less than they thought to work with, which will require additional cuts to an already lean budget.

Here's what happened:

Last year, state lawmakers agreed to spend $2,200,000 to hire additional auditors, agents and support staff at the state Department of Revenue so they could increase tax collection enforcement. In previous years when the state did that, the additional enforcement staff brought in a lot more than they cost the state.

The state Department of Revenue was supposed to set aside the money those additional staffers collected, to be used for special purposes. Most of it would go to counties to help offset shortfalls in their property tax collections because of the homestead exemption.

But the Department of Revenue didn't put the money in a special account like it was supposed to, meaning it stayed in the state's General Fund. That means lawmakers and budget officials thought they had $60 million more to spend than they really did. The money was finally transferred in March, and now the state Board of Economic Advisors sees that the General Fund has $60 million less in it, which caused the BEA to lower its revenue estimate for next year by $60 million.

Department of Revenue spokesperson Adrienne Fairwell says the agency did set the money aside--it was not spent or lost--but it didn't have the information it needed to be able to move the $60 million into the special account. The state Treasurer's office needed to set up the special account.

"The monies were there. The Department of Revenue was ready to transfer those monies, but you could not do that without there being an account available to do so," Fairwell says.

But the state Treasurer's office says the special account was available to do so. It set up the special account last September. Deputy State Treasurer Frank Rainwater says, "The Comptroller General set up that subfund with us and we notified, or the Comptroller General notified DOR back in September that the subfund had been set up.” 

He produced a memo from the Comptroller General's Office to all agency finance directors informing them that a special account had been set up for the Department of Revenue's tax collection enforcement money.

So if Revenue says it didn't know about the account and the Treasurer's office says it told them about the account, who's fault is the error?

Rainwater says it was Revenue's responsibility to transfer the money into the special account.

Fairwell says, "The Department of Revenue will not get into finger-pointing, mud-slinging. We pride ourselves on being a transparent agency. We also pride ourselves on being true and accurate. And in saying that, what I will say on behalf of the Department of Revenue is that it's more so a communication issue."

She says the agencies will do a better job of communicating in the future to prevent more problems like this one.

Senate Finance Committee Chairman Sen. Leatherman says he doesn't know who's at fault, but says, "It'll have an impact on our budget, absolutely, because that means that we have $60 million less than the House had to work with."