In a rapid exchange of letters with the Obama administration the Governor proposed using the $700 Million to pay down some of his state's debt rather than to more actively stimulate the economy via spending on education and other public services approved under the federal stimulus legislation' s Title XIV, the State Fiscal Stabilization Fund. Sanford's first letter on March 10th sought a waiver of Title XIV provisions. When that was summarily denied by the Director of the Office of Management and Budget (OMB), the Scrooge-like Governor, although skilled in handing out "No's" could not take an Obama "No!" sitting down. He tried again on March 20th, arguing with memorable specificity, his intention to pay down debt on education bonds and on debt related to state retirees and the Unemployment Compensation Trust Fund rather than actually spending the hundreds of million of available dollars on his state to avoid even more fiscal distress.
So, on March 17th Peter R. Orszag, the director of OMB, informed him in by letter that the:
The State Fiscal Stabilization Fund is a one-time appropriation in Title XIV of the Recovery Act. The Fund consists of approximately $48.6 billion that the U.S. Department of Education will award to States to help address State and local budget shortfalls in order to minimize or avoid reductions in education and other essential services. As a condition of receiving stabilization funds, the Recovery Act requires States’ assurances that they will advance essential education reform in four areas: (1) make progress toward rigorous college- and career-ready standards and high-quality assessments that are valid and reliable for all students; (2) establish pre-K-to-college-and-career data systems that track longitudinal progress and foster continuous educational improvement; (3) make improvements in teacher effectiveness and in the equitable distribution of qualified teachers between high- and low-poverty schools; and (4) provide intensive support and effective interventions for the lowest-performing schools. In addition, States must assure that they will maintain State support for elementary, secondary, and higher education at certain levels for fiscal years 2009, 2010, and 2011.Mr. Orszag also pointed out that nearly 19% of the $700 Million in funds the Guv fought so stridently against could be used for "public safety and other government services," which also may include other education-related spending. Hint: More job creation. "[A]lthough payment of public debt obligations" that Sanford had suggested instead of creating jobs and helping his education system improve, "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."
Checkmate, Governor? You'd think so, but the Guv has another way to avoid the apparent embarrassment of accepting funds that other states clamor for. In fact, many governors indicated "if South Carolina doesn't want it, we'll take it." The Guv may be in position to oblige them. My able former colleague at the Congressional Research Service, Legislative Attorney Kenneth Thomas, wrote (at the request of Senator Lindsay Graham(R-SC)) that the 10th Amendment to the federal constitution may bar a provision in the stimulus legislation that provides that federal funds can be made available to a state by the federal government either after certification by a governor or after the adoption of a concurrent resolution by a state legislature. The issue is fraught with heady constitutional and political federalism questions that go to the core of our state-federal relationships, and the courts may ultimately decide this, although many believe the Governor will not push back against a state legislative push against him.
In any event, responding to the Governor's stated intention to refuse the $700 Million, the state House of Representatives voted 108-8 to approve a measure declaring the Legislature's intent to accept all the stimulus money. Last week, the Senate Finance Committee voted 18-3 to accept the $700 million over Sanford's objections if necessary. Recently, Charleston Mayor Joe Riley disclosed he's among 79 mayors who have signed a letter to the governor and Legislature urging them to accept the stimulus money in question. So, it's a bottom up pro-stimulus surge to counter the top down anti-stimulus surge from the Governor's office.
Sanford appears quite alone on this. And he's a politician. Hmmmmmmm. How does that work for him? He's taking a position that nearly his entire constituency opposes. What does he gain? Fiscal purity? Far right wing kudos? Headlines? Certainly. And more. Accepting the reform-minded education stimulus funds would strike a blow to his efforts as a school choice cheerleader. This would subvert his hopes to all but replace the state's public school system with "free market innovations." One can make principled arguments for voucher systems, but Sanford's belief system would, in my opinion, lead to a fractured system built upon re-segregation by race, origin, and disability. His public school system is already graduating only about 55% of its high school students, and ranks among the worst in the nation on all measures, including teacher training. The public school system would greatly benefit from the programs offered by the Title XIV fiscal stimulus funds he plans to refuse. It's no secret why. He's not about improving the public school system; he's about dismantling it.
In addition, under the cover of the economic crisis, he's hoping to subvert the entire state government generally by (perhaps unconsciously) practicing what Naomi Klein calls "shock capitalism" by starving the state of federal stimulus funds as state tax revenues disappear via the recession. He, like most supply side anti-government wingnuts, hopes to permanently hobble state-provided services during the crisis. He certainly does not want to buoy government, to make it relevant, to actually use the power of government to provide services. In a way, this is his dream crisis - he thinks he can actually kill government, bury it, and create in South Carolina a cadre of permanently poor, non-unionized wage slaves for the industries he hopes to attract to the state with bountiful subsidies and tax breaks. This would tickle the sourpuss Ayn Rand. I hope this does not put too fine a point on it.
All this is nothing new, either for Governor Sanford or for the so-called fiscal conservatives generally, whether Republican, Democrat, libertarian, or simply insane. As a result of cuts already imposed by the South Carolina legislature this year many services have been cut, including autism services, residential facilities for mental health programs, and public schools and universities, which have been virtually gutted. Moreover, at 10.4 percent, South Carolina has the nation's second-highest unemployment rate and, according to Bureau of Labor Statistics data, it's risen by 20% since the election, and is broad-based, except for government employment which has remarkably remained steady. While the school system is by many measures adequately funded, at least by southern per pupil vs. per dollar of personal income standards, Sanford calls the public-education system "a Soviet-style monopoly." He promoted school choice by proposing a plan to give parents tax credits if they send their children to private schools. Sanford's been vocal on school choice: "On education, we must continue to push for school choice, one of the great civil rights issues of our time." The "great civil rights issue of our times"?
And Sanford's tax policy underscores his government-killer instincts. He's pushed
a budget busting list of tax changes that include eliminating the state's progressive corporate income tax and introducing an optional single rate personal income tax. While some other items on his list would raise some revenue (raising the state's regressive cigarette tax, eliminating sales tax holidays, reducing business tax "incentives"), overall, it's pretty clear that Governor Sanford's solution is to dig the revenue hole deeper." The proposal would introduce an optional flat personal income tax, index graduated tax brackets to inflation, phase out all corporate income tax over 10 years, increase the cigarette tax, introduce a landfill dumping fee and eliminate sales tax holidays. The governor also called for an evaluation of the state's property tax structure.Yes, that's NO corporate income tax whatever. These "reforms" would make South Carolina one of only five states with no corporate income tax, and in a state that is a "right to work" (anti-union) state that, indeed, as the anti-tax Tax Foundation observed, would cause them to "move from #25 to #6 on the [State Business Tax] Index, placing just behind Florida and ahead of all other states in the South. That would be a sea change . . . and make the state much more attractive for business investment from a tax perspective." Wow! Ahead of all the other progressive southern states, you say? And just behind Florida? Sanford must feel like he's floating on air.
And he is. The thin air of sure-to-be-declining tax revenues. His plans are supply side nonsense on steroids, and it has been proved time and again to not result in increased revenues for a government employing it. It results, as experience has shown, in reduced revenue, increased income disparities, and reduced services for the middle class and the poor. His craven belief system is even further highlighted by his refusal to accept a large portion of the federal lifeline being offered to his state's 10.4% and growing unemployment rate and to his poorly performing school system. Let's hope that the state legislature overrides him on this, and that our Constitution is deemed to permit their vote to prevail. It's a close call. But South Carolina is sinking. In of Governor Sanford's allies, Gary Simrill, has observed, “He’s not the ‘morning in America’ type.”