Beyond the Stimulus

The South Carolina House recently joined 30 or so other state legislatures who have passed resolutions reminding the Obama Administration that the 9th and 10th Amendments to the United States Constitution still exist.

As a reminder to those of you who do not keep a copy of the Constitution in your pocket for easy reference, these two amendments attempt to limit the power of the Federal government through a couple of catch all phrases. Specifically, the 9th Amendment states that “the enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.” The 10th Amendment states that “the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

In South Carolina, the State Sovereignty Resolution was passed by the Republican majority after recognizing the massive ideological shift to the left that occurred in Washington after the last election – a shift that directly inserts the Federal government into the day to day lives of ordinary citizens while further eroding the sovereignty of the individual States.

The Republican majority was right to pass the Resolution. The Obama Administration, aided and abetted by the Democratic majority in Congress, has demonstrated through its so called “stimulus” package that it intends to use our current economic crisis to nationalize as many facets of American life as possible. Banking, finance, manufacturing, healthcare and education are all targets.

In the State House, we faced President Obama’s strategy during our budget debates when we learned that $700 million was coming from Washington to help “stabilize” our budget. The problem was that the money came with a mandate which dictated that we use 81% of it to fund the various levels of education at their 2008 levels – an irresponsible level given the severity of our economic downturn.

During the budget debate, the first question was whether to take the money at all. Though Gov. Mark Sanford has been and continues to be correct in his criticism of the way Washington has politicized the handout, very few members of the House seemed inclined to refuse the money. Only 8 brave members voted to refuse the stabilization funds – just days after the State Sovereignty Resolution was overwhelmingly passed. Once we were shown the money, there was not much left to talk about.

But where does that leave us?

With a Federal government that is completely out of control. A government, through years of self dealing between members of both political parties and special interest groups, passed legislation and adopted policies that drove us into economic chaos. A government that now advocates propping up a failed system by mortgaging the futures of generations of Americans. A government that has decided to advance a left wing partisan political agenda at the expense of State sovereignty and the will of the citizens of those individual States.

Which brings us back to those Constitutional amendments. Little doubt exists that we will take the stabilization money this time. Hard dollars always win over political rhetoric. But the time has come for the individual States to assert their Constitutional authority. Specifically, the individual States, through Constitutional Amendment, should force the Federal government to have a balanced budget and a cap on national debt. We have the power reserved to us to do it. Our survival depends on it.

The Forgotten Debt

A few days ago, the North Carolina Legislature had to pass emergency legislation to bailout their state’s health insurance plan for employees and retirees. The cost to North Carolina taxpayers will approach $700 million over the next two years, an amount that is hauntingly familiar to South Carolinians who are familiar with our own budget crisis. “We don’t really know yet what caused the health plan to suffer the unprecedented losses,” said Rep. John Blust, R-Guilford, who wanted responsibility for overseeing the health plan taken away from the Legislature and given to the Governor.
We could face a similar problem with our state retirement system. At a recent meeting of South Carolina’s Budget and Control Board, Governor Sanford showed the other board members that the unfunded liability in our government’s retirement system has grown from $200 million to $24 billion over the last decade. The most recent numbers reveal that our state has less than $20 billion in assets to pay for $44 billion in promises that have been made. This gap has grown by 20% over just the past six months – partially because our retirement system’s investments lost nearly $10 billion in the past year. And the deficits will continue to get worse unless we make significant changes to our retirement plan.
Our retirement system for state and local employees, including teachers, is one of the most generous in the country; unfortunately, we are a relatively poor state and can’t afford the current system. And if South Carolinians have any doubt that an underfunded state benefit plan can turn into a crisis, we need only look to our neighbors in North Carolina.
Governor Sanford has suggested that if we take the $700 million dollar stimulus package then we should figure out a way to reduce the unfunded amounts owed to our state employees – including teachers. Unfortunately, the debate over taking the stimulus funds from Washington has turned into a litmus test of a politician’s support for public education. The debate has been reduced to either funding public education at their 2008 levels or terminating 4000 public school teachers. This simplified presentation of the problem has obscured another threat – the silent and very real threat that we cannot afford to fund the retirement system in the future.

Fortunately most voters understand the problem of government debt better than many elected officials. The crowd at the recent “Tea Party” in Greenville showed their disgust at ever increasing deficit spending by our government. Voters have an expectation that their elected representatives act in a prudent manner. Voters expect us to ask the hard questions such as “can we afford this?” And if we cannot afford to continue funding programs beyond our means, then voters expect us to make the hard decisions – either raise taxes or cut benefits.

As both a Legislator, the spouse of a public school teacher and a pension consultant who assists over 300 corporations with compliance issues regarding their qualified retirement plans, the status of our state government’s retirement system is of special interest to me. I cannot think of a better way to support teachers than making sure that the amounts that we have promised them for their retirement becomes a reality when they retire. That is only prudent.

State Inspector General

Whether you are a liberal or conservative, governmental waste should be a bi-partisan concern. Each dollar improperly used represents opportunity wasted for both the taxpayer and the intended recipient of the governmental program.

Much of the $700 million in stabilization money coming into the state’s budget from Washington must be used to fund K-12 and Higher Education at their 2008 levels. Common sense dictates that we should hold these institutions accountable.

Each institution of higher learning in this state has an elected board who should be demanding accountability on behalf of the taxpayers. Unfortunately, most boards seem to have abandoned their oversight duties to act as cheerleaders for their schools.

From 2006 through 2008, I had the privilege of serving as a trustee at Coastal Carolina University (CCU). During most of that time, I was chairman of the board’s audit committee.

When I first arrived, I was presented with a “Comprehensive Annual Financial Report” for the year ending June 30, 2006. Included in this report was a clean audit from their external auditor of several years.

Shortly after I arrived at CCU, questions arose that the procurement code had not been followed in awarding a consulting contract. This $1,000,000 contract went back for several years and was granted to a former vice president of another state university to write procedural manuals.

Due to this issue and several other circumstances, the audit committee was formed by the board to investigate the procurement problem. The board also found a new external auditor.

The audit of the year ending June 30, 2007 by the new auditor revealed a very different scenario of the university’s management of funds. A copy of the new auditor’s report can be emailed to you if requested.

As noted in his report, the auditor found that “significant deficiencies were disclosed by the audit, some of which were material weaknesses.” Among the 23 problems noted by the auditor, the following cost the taxpayers – failure to control procurement card use by employees, failure to follow the procurement code in granting the consulting contract, failure to ascertain market values when leasing property for university use, failure to cease using state money to support the operations of its private foundations, failure to control payroll hours by paying people wages in excess of time worked, failure to account for work orders and payments to contractors.

As evidenced by this audit and the recent allegations of fraud and waste in the Department of Social Services and the Employment Security Commission, taxpayers deserve accountability.

Fortunately, thirty-nine members of the House of Representatives, both Republican and Democrat, are sponsoring H3434 to create the Office of State Inspector General. Appointed by the Governor, the State Inspector General would have the authority to investigate allegations of fraud, waste and mismanagement of funds at the various state agencies.

By having a State Inspector General who reports to the Governor, the taxpayers have a clear understanding of who they can ultimately hold accountable.

Tommy Stringer