South Carolina Governor Rejects Stimulus Money
March 20, 2009, 2:49 pm
South Carolina Governor Rejects Stimulus Money
By Kate Phillips
http://thecaucus.blogs.nytimes.com/2009/03/20/round-2-omb-rejects-sc-governors-stimulus-plan/?nl=pol&emc=pola2
Gov. Mark Sanford of South Carolina has just announced that he will reject about $700 million in federal stimulus money for his state, in his continuing battle with the White House over ways the money can be used.
Mr. Sanford was responding to the Obama administration’s second rejection of his requests to use about $700 million of South Carolina’s anticipated $2.8 billion in stimulus money to pay down some of the state’s debt. Peter R. Orszag, the director of the Office of Management and Budget, told him in a letter dated today that the new stimulus funds can only be used in these circumstances for government services, and cannot be applied to past debt.
Governor Sanford, a Republican, has been one of the most outspoken critics of the $787 billion stimulus act. In a statement released this afternoon, he said:
We’re obviously disappointed by the White House’s decision, because it cuts against the notion of federalism and the idea of each state having the flexibility to act in a manner that best suits its needs. As a result, we will not be seeking the use of these federal funds for the way they put our state even further into an unconscionable level of debt.
… We simply cannot afford to base 10 percent of our state budget on money that will disappear in two years’ time.
Now, state legislators can overrule a governor’s wishes and seek the money themselves for the state, thanks to a section of the stimulus act insisted upon by Representative James Clyburn, the Democratic majority whip and longtime lawmaker from South Carolina. The two have feuded publicly over the stimulus money, and Mr. Clyburn made sure the language was inserted in part because of Mr. Sanford’s opposition.
In his statement, Mr. Sanford alluded to that provision by saying he hoped, if lawmakers went ahead to obtain the $700 million in stabilization funds (the state stands to get a total $2.8 billion), that they would offset it in other ways to pay down the state’s debt. He cited a recent study that ranked South Carolina as the fourth-highest of states in terms of the annual revenue used to pay debt.
Mr. Sanford, sometimes described as a 2012 presidential contender, and other Republican governors, including most recently Gov. Sarah Palin, have been critical of funds that they contend would require long-term commitments of state monies or to programs established with the initial infusions. In doing so, they’ve become the targets of a new line of attack by the Democratic National Committee, which is firing away in repeated bursts at those who would criticize President Obama’s economic policies.
And as the nation and the Obama administration gear up for watching billions of dollars flow through pipelines to various projects in the states, a flood of new Web sites have begun to spring up separate and apart from Recovery.gov, which is still a bit feeble in its effort to allow for transparent reporting of allocations and projects. (More further down, although at some point perhaps we should establish a stimulus blog roll — just a thought.)
In South Carolina’s case, Mr. Orszag, the director of the Office of Management and Budget, rejected the initial request just four days ago. But Mr. Sanford narrowed it and submitted a second appeal.
Under the education stabilization fund requirements, Mr. Sanford said he wanted to apply $577 million to pay down the “roughly $579 million of principal for State School Facilities Bonds and Research University Infrastructure Bonds over two years.” He wrote, that doing so “would immediately free up over $162 million in debt service in the first two years and save roughly $125 million in interest payments over the next 13 years, which could then be directed towards other educational purposes - just as paying off a mortgage early frees up the typical monthly payment for other uses.”
Of another $125 million the state would be receiving under a separate category, Mr. Sanford offered up a few different options: “First, paying down debt related to the state’s Unemployment Compensation Trust Fund that currently exceeds $200 million and would directly impact those currently out of work in this struggling economy; second, paying down debt related to state retirees, since that would seem to satisfy the statutory requirement that these funds be used for “other government services”; or third, paying down other bonded indebtedness at the state level.”
But today, Mr. Orszag’s office released another rejection letter. This time, Mr. Orszag not only said Congress hadn’t intended for stimulus money aimed at educational rebuilding or government services to be used this way. He also said he had consulted with other agencies to make the determination.
“Although payment of public debt obligations is a necessary governmental expenditure,the Department of Education, in consultation with the Department of Justice and my office, has concluded that the paying down of past debt does not constitute the use of Federal funds for “government services” under the plain meaning of those words in the Act,” Mr. Orszag wrote.
As for the Democratic National Committee’s attack ad, broadcast on some television stations in the state this week against Mr. Sanford, well, Mr. Orszag didn’t address the governor’s calls for the administration to intervene and have them pulled off the air.
Meanwhile, we also wanted to keep you posted on developments in some other states. In Alaska, Democrats and some Republicans are furious with the decision by Gov. Sarah Palin to reject about 30 percent of the stimulus money aimed at Alaska.
According to the Anchorage Daily News, Ms. Palin, the Republican vice-presidential nominee, announced that she would not accept about $288 million of the $930.7 million coming her state’s way. She said she approved of money for construction projects, but not funds for government operations.
“We are not requesting funds intended to just grow government,” Ms. Palin said. “In essence we say no to operating funds for more positions in government.”
Democratic leaders and some Republicans in Alaska have already slammed the decision, citing the fact that some of the educational fund money would have gone to schools or for educational training.
“Governor Palin’s decision to reject hundreds of millions of federal dollars that we need to address serious problems in our state is very troubling,” Patti Higgins, the chairwoman of the state’s Democrats said in a statement. “It’s outrageous that Palin wants to turn down Alaskans’ fair share of federal stimulus money for education, public safety, unemployment services and health programs. It’s very clear that Palin is sacrificing the needs of Alaskans for her national political ambitions.”
On the Web front, many states are setting up their own Web sites to track their use of stimulus money. In addition, ProPublica.org, a nonprofit journalism site financed by Herb and Marion Sandler, who have been major Democratic donors, set up a stimulus blog as well as charts on the states. A separate operation, over at Stimuluswatch.org, also intends to mind the store. Republicans also have expressed a desire for an independent site.
Why all the activity? Well, the most recent reason underscoring the interest was mentioned just yesterday by the uber-inspector general, Earl Devaney, who is chairman of a new government effort to monitor the spending of stimulus money. It’s called the Recovery Accountability and Transparency Board (RAT). At a House hearing yesterday, he acknowledged that the going rate of fraud on projects — about 7 percent, would in this case, amount to $55 billion.
So, if you learn of new sites popping up, or of new projects worth watching, keep us posted.