SC awash in multibillion-dollar surplus of 'other' funds

By RICK BRUNDRETT

In South Carolina, $8.6 billion represents about $1,600 for every man, woman and child.

It’s also the total amount of “other” fund surpluses that state agencies carried into the start of this fiscal year, The Nerve found in a review of records provided by the S.C. Department of Administration under the state Freedom of information Act.

The Nerve’s review found that other fund surpluses among 101 state agencies or major divisions, plus a separate state fund for county road projects, at the beginning of this fiscal year collectively were $594.4 million, or about 7.4%, more than the $8.05 billion in total reserves at the beginning of the previous fiscal year.

And those cash cushions were on top of the collective $14.17 billion in other funds that S.C. lawmakers appropriated to state agencies for fiscal year 2025, which started last July 1 and runs through June 30 of this year.

"Other" funds, which include such things as college tuition, lottery proceeds, state gasoline taxes, part of the state sales tax earmarked for K-12 education, and court fees and fines, make up a third of this fiscal year's overall $42.26 billion state budget, with the balance comprised of state general and federal funds.

Agencies typically don’t spend all of their other-fund appropriations by the Legislature in a fiscal year, with dozens of them starting this fiscal year with at least eight-figure surpluses, records show. 

For this fiscal year, state agencies collectively had $9.24 billion in other fund surpluses as of March 11 – a $592.7 million, or 6.8%, increase from last July 1, which reflected cash deposits, withdrawals and “net” transfers – though a Department of Administration spokeswoman said cash balances by agency can fluctuate throughout the fiscal year.

The overall reserves don’t include more than $3 billion in other fund balances this fiscal year with the S.C. Treasurer’s Office – the state’s main banking agency.

Excluding the Treasurer’s Office, The Nerve’s review found that other fund surpluses at the start of this fiscal year ranged from $10,095 at the S.C. Commission on Prosecution Coordination to more than $2 billion at the state Department of Transportation. The median reserve, or midway point in the list, was $10.2 million.

Following are the nine state agencies and one major fund with the largest other-fund reserves as of last July 1, according to Department of Administration records:

*Split up this fiscal year into the departments of Environmental Services and Public Health.

Big piggy banks

In a written response this month to The Nerve, S.C. Department of Transportation spokeswoman Hannah Robinson confirmed that the $2 billion overall surplus at the start of this fiscal year included the cash balance in a special fund created with the state gas-tax-hike law of 2017, which raised the base state gasoline tax by 12 cents per gallon, or 75%, over six years.

The surplus in the special fund, known as the “Infrastructure Maintenance Trust Fund,” as of Feb. 28 of this year stood at $1.44 billion, DOT records show.

The Nerve in recent years repeatedly has pointed out the growing cash balance in the fund compared to the relative slow pace of repairs to the state’s crumbling roads and bridges, though department officials have contended those reserves are designated for pending vendor payments.

At the Department of Health and Human Services (HHS), agency spokesman Jeff Leieritz said the $1 billion in other fund reserves as of last July 1 included money to “safeguard from potential future unexpected increases in health care costs for Medicaid members” and funds “committed to ongoing statewide projects,” including:

• $200 million for a neurological and rehabilitation center to be developed by the University of South Carolina in Columbia;
• $100 million for a behavioral health inpatient hospital to be developed by Prisma Health in Pickens County; and
• $47.2 million for a behavioral health “hub” under development through a “collaboration of organizations and operated by the Medical University of South Carolina in Florence.

USC and Clemson didn’t reply to written questions from The Nerve about their respective other-fund surpluses. USC’s Columbia campus showed a nearly $345 million, or about 47%, increase in its other-fund reserves from the start of fiscal year 2024 to the beginning of this fiscal year, according to Department of Administration records.

In a written response Monday to The Nerve, MUSC spokeswoman Faith Arenth didn’t specify the $47.2 million cited by HHS for a behavioral health “hub” but said the university “adheres to prudent financial management practices by maintaining a three-month operating reserve for general operations.”

“The remaining funds,” she continued, “are allocated to specific purposes, including endowments, debt service, capital projects, academic recruitment, and research initiatives,” adding that “maintaining sufficient reserves is crucial to meet debt coverage requirements.”

Department of Administration records show that MUSC started this fiscal year with a surplus of $363.7 million in other funds compared to $393.9 million at the beginning of fiscal year 2024.

At the Department of Education, agency spokesman Jason Raven said the department’s other fund reserves are “legislatively mandated for specific use and are typically allocated on a one-time, non-recurring basis to support multi-year projects,” such as school construction projects, the replacement of aging school buses and the purchase of “updated textbooks aligned with the state’s cyclical review process.”

He said in his written response that most of the reserves are state lottery funds and revenue from the Education Improvement Act of 1984, which increased the state sales tax by one cent.

As of last July 1, the agency’s other-fund surplus stood at $689.8 million, an increase of $93 million, or 15.5%, compared to the start of fiscal 2024, records show.

Department of Mental Health spokeswoman Tracy LaPointe confirmed her agency started this fiscal year with a $244.1 million surplus but said in her written response that the money represented “obligated funds for identified, active projects, many of which span multiple fiscal years,” including about $123 million for deferred maintenance at the agency’s mental health centers, inpatient hospitals and nursing homes.

She also said about $56 million in reserves is dedicated, based on advice from the state Executive Budget Office, which is part of the Department of Administration, to “ensure SCDMH can continue to provide core clinical services to patients and residents in the event of a deficit, financial recession, or other negative impact.”

In a letter this month to The Nerve, Ben Duncan, head of the S.C. Office of Resilience, said that of the $213.7 million cash balance to start this fiscal year, $162.9 million was “dedicated to land acquisitions,” noting that land preservation, “by way of either acquisition or easement, serves numerous resilience functions and provides other co-benefits.”

In comparison, the agency started fiscal year 2024 with nearly $48.3 million in other fund reserves – a $165.4 million difference compared to the beginning of this fiscal year, according to Department of Administration records.

Duncan didn’t give details of planned land acquisitions, though he said land preservation is “performed in accordance” with a state budget proviso and “coordinated with the SC Conservation Bank and other Resource Agencies identified in the Proviso.”

Besides land acquisitions, another $44.4 million of the beginning fiscal year 2025 surplus will be spent on a “variety of qualifying resilience projects,” Duncan said. Under state law, the reserve fund can be used for plans ranging from  “procurement of flood risk, land cover, and land elevation datasets for statewide planning purposes, to disaster-related housing repairs and rebuilds, and stormwater infrastructure projects,” he said.

The S.C. Department of Parks, Recreation and Tourism (PRT) started this fiscal year with a $123.3 million other-fund surplus, a $13.6 million increase from the fiscal year 2024 beginning balance of about $109.7 million, Department of Administration record show.

The reserves were needed to help cover damage costs last September from Hurricane Helene and the Table Rock complex fires in March, agency spokeswoman Samantha Queen told The Nerve in a written response this month. She said the hurricane damage forced the temporary closure of 28 of 48 state parks under the agency's jurisdiction, while the Table Rock complex fires have “impacted our spring break visitation at three parks.”

PRT's state parks are “operationally self-sufficient,” she explained, “so the revenue we generate through admissions, retail sales, and camping and cabin reservations is used to support our day-to-day operations, from paying park staff to paying utilities.”

“Those closures impact reservations, admissions, and retail revenue; and damage from both disasters led to additional expenses,” Queen said, adding, “It’s been a costly and difficult  year.”

‘Flawed projections’

The Nerve’s review of Department of Administration records found that 43 state agencies or major divisions had other fund surpluses at the start of this fiscal year that were greater than their respective other-fund appropriations.

The Commission on Higher Education (CHE), for example, was appropriated $5.7 million in other funds for this fiscal year, though it started the year with a $167 million surplus in that category.

In a written response this month to The Nerve, commission spokesman Mark Swart said while the agency distributes more than $400 million in state lottery funding each fiscal year for college scholarships, it had accumulated a $152 million surplus in lottery funding, which he noted state lawmakers were informed about in 2023.

A November 2023 report by the state Inspector General’s Office found that, according to commission officials, the “accumulation of lottery funds was caused by flawed projections in estimating the needs of the three largest scholarship programs.”

Swart told The Nerve that the agency has taken “actions to prevent surplus and minimize carry forward in the future,” including incorporating a “more complex model” to project scholarship needs and mandating an “invoicing deadline schedule” with colleges and universities seeking reimbursement for scholarship disbursements to eligible students.

He added that the $5.7 million other-funds appropriation was the agency’s “initial operational appropriation, which is separate from lottery funding.”

Besides CHE’s situation, The Nerve’s review also found that about a dozen agencies or major divisions had other fund surpluses to start this fiscal year that were at least 50% greater than their respective cash balances at the beginning of fiscal year 2024.

At the Department of Agriculture, for example, its other fund surplus to start this fiscal year was $51.7 million, nearly $42 million more than its $9.8 million starting cash balance in fiscal 2024, records show.

In a written response this month to The Nerve, agency spokeswoman Eva Moore said the Legislature allocated $40 million to “incentivize existing South Carolina agribusinesses to expand their processing capacity,” adding that while “money has been committed to projects, the invoicing process involves us reimbursing county governments and can take a while.”

Moore also said the department “took on significant additional staff and responsibilities” with the breakup of the Department of Health and Environmental Control into the departments of Environmental Services and Public Health, which was effective last July 1, noting that there were “expenses associated with that transition that didn’t neatly end with the previous FY (fiscal year).”

According to Department of Administration records, the S.C. Housing Authority also saw a large yearly increase in its other fund surplus, starting this fiscal year with $29.4 million in reserves compared to $6.9 million at the beginning of fiscal year 2024.

In an recent this month with The Nerve, Robert Macdonald, the House Authority’s chief of staff, attributed the $22.5 million difference to an accounting change involving how the agency’s cash allocation in the state investment pool was reported, adding that the actual starting cash-balance difference between fiscal years was about $600,000.

Macdonald, who pointed out that the agency receives no general fund appropriations for its operations, said other fund reserves are needed annually in part to repay, if necessary, state revenue bonds, the proceeds of which provide mortgages for low-income homeowners and eligible recipients in other agency programs. An economic downturn, for example, could result in mortgage recipients missing their monthly payments, he said.

“The Housing Authority is on the hook for those bonds, not the state of South Carolina,” Macdonald said, noting the agency has approximately $1.6 billion in outstanding bond debt.

Brundrett is the news editor of The Nerve (www.thenerve.org). Contact him at 803-394-8273 or [email protected]. Follow The Nerve on Facebook, Instagram and X (formerlyTwitter) @thenervesc.

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