State account error costs $60M, threatens jobs

COLUMBIA, S.C. (AP) — A blunder in setting up an account and transferring money from the state's tax agency has turned into $120 million in budget cuts that threatens jobs, the state Board of Economic Advisors chairman reported Wednesday.

The mistake stems from current state budget law. It requires the state Revenue Department to crack down on tax scofflaws and put the cash collected into a special account that would pay for redistricting, indigent defense, retirement benefits and a shortfall in covering tax breaks on homes.

"For some reason the Department of Revenue got the money and their position is the account wasn't set up over there so we didn't transfer it," Rainey said. "Maybe they should have called the treasurer and said 'Why didn't you set up the account.' But nobody did that," he said.

"This is one of those things that shouldn't have happened," he said, without specifying how many jobs could be threatened.

Because the account wasn't set up, the extra cash inflated the state's general revenue figures and Rainey's board issued overly optimistic reports used to set the state budget. The board corrected those estimates Wednesday, cutting $60 million from the current budget year estimate and $60 million from the estimate for the budget now being written in the Senate Finance Committee.

It's another round of bad news for a state budget that's plunged from $7 billion two years ago to just over $5 billion in state cash during the past two years as a deep recession has wrecked the state's tax collections. The spending plan the House passed last month sets per student public school spending at 1995 levels.

"To receive that kind of news here at the 11th hour is just unbelievable," said Senate Finance Committee Chairman Hugh Leatherman, a Florence Republican before his committee prepared to meet. "It means we're going to have one of the toughest years I've seen in 30 years on the budget. I've never seen anything like this."

The account issue along with others will leave senators cutting $126 million more from the state spending plan than the House did, Leatherman said.

Details of the blunder weren't entirely clear. The Revenue Department blamed the state Treasurer's Office for not setting up the account. The Treasurer's Office said it had set up the account and produced a memo from Sept. 15 showing that it had requested account numbers from the Comptroller General Richard Eckstrom's office.

Revenue spokeswoman Adrienne Fairwell said the Treasurer's Office never set up the account. She provided e-mails from February and March to the treasurer staffers saying agencies were looking for their cash. One March 4 said a Revenue staffer was "afraid, and rightly so, that DOR is going to get beat up over it if we don't transfer the money."

Eckstrom said the issue could have been caught earlier if the state wasn't using a 35-year-old computer system. "It's like an iron locomotive," he said.

Meanwhile, Eckstrom and Fairwell said communication issues need to be resolved.

But why shouldn't the average citizen look at it as the Keystone Kops causing a train wreck? "They should," Rainey said.

With agencies already furloughing or laying off workers and school districts cutting teaching staffs, the loss of any cash means more bad news that taxpayers may see in crowded classrooms or longer DMV lines.

Rainey and Leatherman said there's no question the account flap will cost people jobs. "We're not talking about just dollars. We're talking about people's lives," Leatherman said.

"It shouldn't have happened. Everybody admits it shouldn't have happened," Rainey said.

Columbia, SC - Copyright 2010 The Associated Press.