SC agency needs funds? House panel says borrow it

abeam@thestate.comFebruary 27, 2013 

— The S.C. House Ways and Means Committee has an unusual idea about how the state Department of Mental Health should pay for $55 million in repairs that its deteriorating buildings need: borrow money.

South Carolina has not borrowed money for construction or maintenance projects since 2000, the result of a changing political culture averse to debt.

Since then, state agencies have accumulated a massive backlog in needed building repairs.

State colleges and universities alone have more than a billion dollars in so-called “deferred maintenance.” And state agencies have requested at least $172 million in next year’s state budget, which takes effect July 1, for deferred maintenance. However, those agencies will get only $7.5 million, according to an early version of the budget that passed the House Ways and Means Committee earlier this month.

But, thanks to an obscure law passed in 1970, the Mental Health Department is one of only a few state agencies that has the authority to issue bonds to borrow money. It can do this because it has a steady stream of revenue from patients’ fees – money that it can borrow against because it does not come from the state’s general fund, according to Mark Binkley, deputy Mental Health director.

But the department uses those patient fees to operate.

“If we were to issue bonds and it was going to require us to set aside three to four million a year from paid and patient-fee accounts to service those bonds,” the department would have to cut the cost of its operations elsewhere by that amount, Brinkley said.

So instead of giving the department $3.5 million for maintenance projects, House budget writers gave it $3.5 million to put toward borrowing money to pay for its deferred maintenance.

“We’re never going to see bond rates this low again. This is a good time to (borrow),” said state Rep. Murrell Smith, R-Sumter, chairman of the House budget subcommittee that oversees Mental Health’s budget. “If I gave them $3.5 million (for maintenance), that just doesn’t do it for them. They can go and repair a roof, and that’s about all they can do.”

State Rep. Harry Ott, D-Calhoun, a member of the budget committee, said he supports the plan. But he questioned why lawmakers would not embrace a similar plan to pay for road repairs.

“There are some people that say by selling bonds you are somehow raising taxes because you are creating a liability down the road that’s got to be serviced,” Ott said. “I would answer them that certainly the bonds have to be serviced, but I don’t see any other way of taking care of the huge backlog of roads and bridges (repairs needed) that we’ve allowed to accumulate.”

Senate Minority Leader Nikki Setzler, D-Lexington, has introduced a bill that would have the state borrow $500 million to repair roads and bridges. However, House Republicans want to go another way. They approved a bill Wednesday that would dedicate a portion of the sales taxes on vehicle sales – about $100 million a year – for road repairs.

But Sumter’s Smith noted the state still is paying off its 2000 loan. He said it probably will be a few more years before lawmakers move to borrow money again on a large scale.

Binkley said Mental Health is exploring the idea of borrowing money to pay for maintenance. The bond issue still would have to win approval from the Joint Bond Review Committee and the state Budget and Control Board.

But Rep. Smith said the plan has not run into any opposition yet.

“So far so good,” he said.

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