The $8 billion that S.C. lawmakers don't talk about

By RICK BRUNDRETT

If history is any indication, the state budget for the new fiscal year that starts Wednesday likely won’t account for the collective billions in surplus “other” funds that S.C. agencies will have on hand.

The Nerve’s review of records obtained last month from the S.C. Department of Administration under the state Freedom of Information Act found that agencies began the current 2056-26 fiscal year, which started on July 1, 2025, with a total of at least $7.9 billion in other-fund surpluses.

The amount worked out to be about $1,400 for every man, woman and child in South Carolina.

With additional cash receipts, transfers and disbursements, other-fund cash balances as of May 27 totaled $8.5 billion, The Nerve’s review found. And that’s on top of the $13.4 billion in overall other-fund appropriations for the fiscal year that ends today.

In comparison, state government started the 2024-25 fiscal year with $8.6 billion in collective over-fund surpluses, as The Nerve revealed last year.

Other funds 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. Those revenues typically make up about a third of the overall 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 any given fiscal year, with dozens of them often starting the new fiscal year with at least eight-figure surpluses.

The carried-over amounts by agency as of July 1, 2025, ranged from nearly $1.9 billion with the state Department of Transportation to $10,094 at the S.C. Commission on Prosecution Coordination, records show.

Of the 106 state agencies or divisions and a major state fund, 51, or nearly half, started this fiscal year with at least $11 million in other-fund surpluses. The median amount, or halfway point in The Nerve’s review, was $9.3 million.

As it has done in past years, The Nerve excluded the S.C. Treasurer’s Office (STO) as an agency in its latest review given that the office is the state’s banker for all agencies. Under the Freedom of Information Act, The Nerve in April requested other-fund cash balances from the STO for all state agencies for the current fiscal year, though in a written response last week, STO lawyer Erin Baldwin said the office “does not possess any records responsive to your request.”

Following are the nine state agencies and one major fund that had the largest amount of other-fund surpluses as of July 1 2025, according to Department of Administration records:

*now called the Office of Mental Health, which is part of the S.C. Department of Behavioral Health and Developmental Disabilities

A new state budget for the fiscal year that starts Wednesday is on hold after the Legislature failed to pass a final version. But state government will continue to operate at current recurring levels under a joint resolution that took effect in May, as The Nerve reported last week.

A joint House-Senate budget committee was scheduled to meet today to work on resolving differences in their respective budget versions for the upcoming fiscal year. Under earlier House and Senate proposals, the total state budget for fiscal 2026-27 would be approximately $44 billion.

Based on that amount, if state agencies begin fiscal 2026-27 with $8 billion in collective other-fund surpluses, it would represent about 18% of the total state budget.

Permission to hoard?

Besides other funds, agencies are allowed to carry over up to 10% of their appropriated state general funds from one fiscal year into the next, under an annually renewed state budget proviso. Unlike permanent state laws, a proviso has the force of law only for that fiscal year but generally can be renewed annually.

State agencies began July 1, 2025, with a total of more than $3.4 billion in general fund surpluses, according to the S.C. Comptroller General’s Office.

Under budget provisos, some agencies are granted the authority to carry over unspent other funds into the new fiscal year, typically for specific purposes.

For example, under the current state budget:

·       Proviso 1A.14 requires the Department of Education to carry over “unobligated teacher salary supplement and related employer contribution funds into the current fiscal year to be used for the same purpose.” Those funds are derived under the S.C. Education Improvement Act, which uses 1 cent of the state sales tax for specific education programs.

·       Proviso 33.16 authorizes the Department of Health and Human Services to “carry forward and expend … any cash balances from the previous fiscal year into the current fiscal year for any earmarked or restricted trust and agency, or special revenue account or subfund.”

·       Proviso 84.1 allows the Department of Transportation, which is funded primarily at the state level through the state gasoline tax, to “expend all cash balances … accruing to the department brought forward from the previous year.”

·       Proviso 86.2 provides that “all cash balances” of carried-forward County Transportation Committee (CTC) funds, which are derived from part of the state gasoline tax and are managed by CTCs or SCDOT, can be spent.

State law allows agencies in a fiscal year to spend above their respective other-fund appropriations for that year – with certain limitations – after approval from the state Executive Budget Office, which is part of the Department of Administration.

‘No restriction’

As for public universities and colleges, their other-fund revenues derive largely from student tuition and fees and are managed by their respective governing boards, which are given broad authority under state law.

In a June 11 written response to The Nerve, USC spokesman Jeff Stensland said there is “no restriction on carrying over funds” from “non-state appropriated” revenue, such as tuition and fees.

Of USC’s $909.4 million beginning cash balance for the 2025-26 fiscal year – the second-highest amount in The Nerve’s review – about $427 million is “maintained as a three-month operating reserve for general operations and auxiliary services,” Stensland said, adding, “This reserve level reflects prudent financial management practices and aligns with standard business recommendations.”

Stensland said the remaining other funds are “restricted and designated for specific purposes, including endowments, debt service, capital and plant funds, and research initiatives.”

Clemson University, MUSC and the Department of Education did not respond to The Nerve’s written questions this month about their respective other-fund surpluses.

In a June 11 written response, DOT spokeswoman Jennifer Timmons confirmed that the agency’s $1.89 billion beginning cash balance for this fiscal year – the largest other-fund amount in The Nerve’s review – included revenues from the “Infrastructure Maintenance Trust Fund" (IMTF), a special account created with the 2017 state gasoline tax-hike law.

The law raised the gas tax by 12 cents per gallon over six years – a 75% increase from the base tax. S.C. lawmakers at the time promised that the additional other funds would be used to fix the state’s crumbling roads and bridges, though The Nerve repeatedly has pointed out the relatively slow pace of completed projects while the IMTF has accumulated massive surpluses.

As of May 31, the fund had a $1.24 billion cash balance, DOT records show.

Timmons in her response to The Nerve said IMTF funds carried forward into the current fiscal year were used to support “multiple SCDOT operations, including construction programs and the maintenance of South Carolina’s statewide transportation system.”

Last month, Gov. Henry McMaster signed into a law a Senate bill that, among other things, designates $15 million annually from the IMTF for “full depth pavement repairs of repetitive potholes,” specifying that the funds “shall be in addition to existing funds allocated for pavement rehabilitation.”

The bill was signed less than a month after The Nerve revealed that from fiscal year 2020 through December 2025, DOT records showed that the agency patched as many as 8.1 million potholes statewide, though agency records released to The Nerve didn’t specify how many potholes were repaired more than once.

In The Nerve’s latest review, the Department of Health and Human Services started fiscal 2025-26 with an $805.4 million other-fund cash balance – the third-highest amount among all state agencies. The agency in a June 10 written response said the surplus included “both a reserve fund to safeguard from potential future unexpected increases in health care costs for Medicaid members and funds that are committed to ongoing statewide projects.”

The projects include, according to the department:

·       $190 million for a neurological and rehabilitation center to be developed by USC in Columbia;

·       $85 million for an inpatient behavioral health hospital to be developed by Prisma Health in Pickens County; and

·       $32 million to “support various hospitals through investments in healthcare infrastructure, behavioral health, and rural health initiatives.”

The agency noted that the cash balance as of July 1, 2025, represented less than 7% of the department’s original fiscal year budget.

At the Office of Mental Health, which formerly was the Department of Mental Health and is now part of the recently created S.C. Department of Behavioral Health and Developmental Disabilities, agency spokeswoman Beth Moore in a written response last week said about 17% of the $174.8 million in other funds carried forward into fiscal 2025-26 is “reserved to meet the state’s Medicaid matching requirements,” while another approximately 25% is “obligated for capital projects and deferred maintenance.”

“The remaining balance,” she added, "is held as an operating reserve in the event of a budget shortfall.”

Short on details

The Department of Commerce referred The Nerve’s written questions about its $194.6 million beginning 2025-26 cash balance to the agency’s “Other Funds Survey” published on the Department of Administration’s website.  State law requires that in submitting their budget proposals for the upcoming fiscal year, agencies provide the governor with “detailed statements of the sources of all federal and other funds contained in their budgets.”

But the descriptions of Commerce’s cash balances in its “Other Funds Survey” are very general.

For example, although the survey form requires agencies to “Describe in detail why the agency needs to carry forward a balance greater than one-sixth (16.5% = 60 days) of the funds identified as total expenditures for the prior fiscal year,” Commerce provided the following boiler-plate response for the top-three, single-largest fund amounts totaling nearly $128 million, or about 66% of its total $194.6 million beginning surplus:

“The funds are granted for economic development projects throughout the state. These grants can take several years to complete and cross several fiscal years. Once a commitment has been made to a business or county, it is imperative that the State, to maintain its credibility with future and present business prospects, live up to its commitment.”

Another $19.1 million in carried-forward revenues by Commerce into fiscal 2025-26 came from its “closing fund,” which, as The Nerve previously has revealed, has been used by the agency to help lure select companies to South Carolina.

Commerce in its “Other Funds Survey” described the $19.1 million only in general terms, noting that revenues “will be used or are currently committed for recruiting new jobs and investment to South Carolina,” and that the fund “offers greater flexibility than other incentive funds.”

The Nerve also sought a written response from Commerce about the $146.6 million carried over into the 2025-26 fiscal year by the state Rural Infrastructure Authority (RIA). Commerce, which typically speaks to the media on behalf of the RIA, referred The Nerve to the RIA’s “Other Funds Survey.”

That document, though, provided only general descriptions of the purpose of the agency’s funds.

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 (formerly Twitter) @thenervesc.

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