SEPT. 3, 2010 -- Two state agencies in Gov. Mark Sanford’s cabinet may soon find themselves running deficits to go along with the Department of Corrections, which has run a deficit for the last few years.
Today, Friday, September 3, is the annual deadline for cabinet agencies to present the governor’s office with budget funding proposals for the following fiscal year, which begins in July 2011.
This year, at least two of those agencies, the Department of Health and Human Services (DHHS) and the Department of Social Services (DSS), won’t make that deadline because of funding uncertainties, which may soon lead to major shortfalls, according to several state officials.
DHHS oversees Medicaid, and DSS protects vulnerable children and adults while also overseeing the food stamps program.
Health and Human Services could have a 2010-11 deficit of $200 million, agency spokesman Jeff Stensland told Statehouse Report Thursday. He said the number would have been higher if the state had not received a much-anticipated one-time infusion of $127 million in federal matching health care money. DHHS executive director Emma Forkner has been warning the legislature for more than a year that her agency was facing a “nightmare scenario.”
Further rubbing salt into the state’s budget woes, a deficit for DSS could hit $50 million, according to what House Ways and Means Chairman Dan Cooper (R-Piedmont) said he had heard this week from state officials.
Les Boles, director of the state Office of State Budget, confirmed this morning that DHHS’ potential deficit may be in the $200 million “ballpark,” but that he was not sure what DSS’s numbers might look like.
DSS director Kathleen Hayes said her agency wouldn’t know until the next fiscal quarter whether her agency would be operating at a deficit, but if it is, she said she would inform the public immediately.
Hayes said her agency had a $15 million-plus deficit in January of this year, but working with the governor’s office, was able to do away with it before the fiscal year ran out.
There are currently no plans for the legislature to return before the session is scheduled to begin in January, according to several sources.
Cooper also said his office had not yet begun work on a supplemental funding bill for the legislature to tackle in the early weeks of the new session, “because none of the agencies have told us the actual numbers.”
What’s behind it all
There are several factors compounding the budget crisis in both agencies. The two biggest factors appear to be federal policy and the recession.
Earlier this year, Sanford vetoed a line item in one part of the DHHS state budget because it relied on $214 million in federal matching health care funds in a bill Congress had yet to pass. The legislature agreed with the governor -- that including that amount was premature -- and sustained the veto.
Recently, Congress passed a bill that would supply additional federal matching health care funds, but at a significantly lower level – approximately $127 million total. Sanford, who opposed the first round of federal stimulus money for ideological reasons, announced this week he would write a letter seeking the money.
DSS has found itself in a similar funding lurch, according to Hayes, as it has been waiting find out whether Congress would tackle extending benefits for what had been the nation’s food stamps program before or after the November elections.
Not surprisingly, the national and state recessions have added an additional level of difficulty, as both agencies have seen a massive increase in demand for their services as families have lost jobs and health care coverage, but at the same time the funding sources for their mandated services have been cut.
Politics also a factor?
And a third factor, politics, may be playing a role, too.
A knowledgeable source in state government confirmed there has been an informal effort from the governor’s office to quell the release of some of the information regarding the shortfalls and possible deficits.
Several attempts to elicit comment from Sanford’s office were not returned.
If the governor’s office has done so, it could put the agencies in a precarious position, officials agreed. If agencies allow themselves to be pressured into underreporting their fiscal problems, they could face harsh criticism under the next governor’s tenure. But if they don’t play ball, Sanford’s cabinet leaders could then inadvertently give him more fiscal black eyes.
For the past two years, the state’s unemployment office took on a heavy load of criticism for not informing the legislature and the public about the true magnitude of its looming shortfall, which has taken hundreds of millions in federal loans to rectify.
State Rep. Tracy Edge (R-N. Myrtle Beach). who chairs the House subcommittee that crafts the DHHS budget, said he didn’t trust DHHS director Forkner’s numbers, especially after he claimed she underreported the growth in DHHS over the past two years at legislative hearings.
Edge said he believed Forkner did so at the direction of her cabinet boss, the governor. Forkner was not available for comment.
Neither Hayes at DSS nor Stensland at DHHS would confirm their agencies had been approached in such a manner by any member of the Sanford administration.
Stensland did say Forkner and the agency were committed to working closely with the legislature and its stakeholders to ensure the agency makes it through this trying time.
Hayes added she worried the funding problems would negatively impact South Carolina’s struggling families and the work her agency is doing to shore them up.
Crystal ball: Whoever is governor next, state Sen. Vincent Sheheen (D-Kershaw) or the front-runner Rep. Nikki Haley (R-Lexington), will have a mess on their hands. If a society or a state is judged by how it handles its most vulnerable citizens, then Sheheen or Haley may start off the new year with a real bang. Sheheen said he would make tough decisions next year if he inherited deficits. Haley’s campaign did not return calls for comment. Then again, maybe nobody has an answer. Yet.