USC study provides the answers wanted

Last week, yet another publicly funded study was unveiled in Columbia, this one by the University of South Carolina on business and employment.

The story that appeared in The State, like the study itself, left one with more questions than answers.

For instance, there was no indication of what the cost of the study was or who paid for it.

For that information, you’d have to turn to the article written by my colleague at The Nerve, Eric Ward. Ward reported Tuesday that the study cost $55,000 and that the partners in the study included the S.C. Department of Commerce, New Carolina and the CTC Public Benefit Corporation.

Nearly three-fourths of the $55,000 came from public sources, Ward reported.

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SC retirement system report: lipstick vs. pig

Former Gov. Mark Sanford once described the unfunded liabilities in South Carolina’s state retirement system as a ticking time bomb. The system’s unfunded liabilities total anywhere from $13 billion to as much as $53 billion.

Whatever the number, it would appear there’s a disaster in the making because at some point, SC taxpayers are going to have to cough up the coin to cover the costs.

Earlier this week, state Treasurer Curtis Loftis attempted to delve into the retirement system’s latest actuarial report during a meeting of the state’s Budget and Control Board meeting. He didn’t get very far. 

According to The Nerve (full disclosure: my employer), the report for the last fiscal year recent arrive and the news, evidently, was not good.

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Media ‘watchdogs’ snooze the day away

The Nerve, the investigative reporting arm of the SC Policy Council, broke a story Wednesday that South Carolina Research Authority Chairman Bill Masters, tired of the obstruction and obfuscation of his fellow board members and SCRA management, plans to resign within the next few weeks.

Masters, named to SCRA’s board by Gov. Mark Sanford last year, has been met with resistance from Day One. For example, earlier this fall, Masters, citing the state’s troubled budget, voted against giving substantial raises to SCRA employees and executives.

Masters was the lone SCRA board member to vote against the proposal.

And last month, Masters called for “an independent investigation into the trustworthiness” of Research Authority Chief Executive Bill Mahoney, another story broken by The Nerve, for whom, in the interests of full disclosure, I work.

So how did the rest of the South Carolina media react to word that Masters, chairman of one of key state-run economic development agencies in South Carolina, react to word of his impending resignation. It didn’t.

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Linking college construction and tuition

So why is it that even though enrollment at most state-funded colleges and universities is at record or near-record levels, tuition has continued to skyrocket over the past decade, up 100 percent or more in some cases?

Look no further than a South Carolina law which ties a college’s tuition revenue to the amount of debt it can take on for bricks-and-mortar projects, according to this report by The Nerve.

The bottom line: the more students that schools get in their doors, the more money they can get their hands on for building.

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A Comedy of Errors, with your money

To say the S.C. Employment Security Commission has been operating in an unorthodox manner is being charitable, to say the least.

However, you can only put so much lipstick on this pig.

According to an audit released by the Legislative Audit Council Tuesday, and first reported on in detail by The Nerve, the ESC paid more than $171 million in state unemployment benefits during the last three fiscal years to “employees who were terminated for misconduct, illegal acts or other offenses.”

If that weren’t enough, in 2008, the ESC “stopped referring claimants for criminal prosecution who had fraudulently obtained unemployment benefits.” Claimants defrauded the agency out of more than $7 million in Fiscal Year 2008-09 alone, the report says.

Not surprisingly, the agency, which manages the state’s unemployment insurance fund, is struggling. The state’s unemployment insurance fund is more than $700 million in debt to the feds, and climbing. Nearly a decade ago, by comparison, the fund had a surplus of more than $700 million.

Entertaining in a Keystone Cops-sort of way are the examples of people who lost their jobs for some pretty good reasons but collected unemployment anyway, according to the report. They include:

  • “An employee made unauthorized charges on his company’s credit card, which included motel rooms, hardware and Internet dating charges. He was terminated by the company, but ESC still allowed him to collect $3,586 in unemployment benefits.”
  • “An employee was discharged for absenteeism due to his incarceration. The commission allowed him to collect $5,868 in unemployment benefits.”
  • “An employee made a job-related threat and alluded to a weapon in his car. Police found a loaded firearm in the employee’s car. He was terminated for cause, but still collected $2,440 in unemployment benefits.” 

School districts spend $$$ fighting parents

South Carolina school districts appear more interested in spending tax dollars fighting parents’ attempts to get accommodations for their special-needs children rather than providing focused instruction, according to research by Janet Frazier, a citizen reporter for The Nerve.

State school districts spent more than $33 million on legal fees, claims and settlements between FY 2002 and FY 2007, much of it related to challenges from parents who disagreed with school assessments on how to educate their special-needs children, according to Frazier’s research.

That’s particularly distressing given the financial straits South Carolina finds itself in. Last month, the state Budget and Control Board announced an across-the-board 5 percent cut that will cost schools approximately $100 million.

In September, the board chopped 4 percent, which will reduce money to school districts by $85.4 million. And those reductions come on the heels of a $131 million K-12 budget cut enacted in July.

Four school districts alone racked up more than $1 million apiece in attorneys fees between FY 2002 and FY 2007: Beaufort County, Charleston County, Horry County and Richland School District One.

During the six-year period, Beaufort spent more than $1.85 million on outside lawyers and has since rung up another $1.3 million in legal fees. In addition, Beaufort paid out $4.55 million in claims in FY 2007 alone.

Thanks to federal legislation, public schools have an obligation to provide “Free Appropriate Public Education,” which is defined as an educational program that is individualized to a specific child and designed to meet that child’s unique needs.

Essentially, what that means is that when it comes to children with disabilities, schools must provide students with an education, including specialized instruction and related services, that prepares them for further education, employment and independent living.

The combined legal fees of the four districts during the six years totaled $6.6 million, or 25 percent the all money spent on outside attorney fees by South Carolina school districts, according to information found on the S.C. Department of Education website.

Of the three remaining districts, Horry County School District spent more than $1.9 million on attorney’s fees between FY 2002 and FY 2007, Richland School District One spent more than $1.8 million and Charleston spent a little more than $1 million.

Charleston also paid out a little more than $1 million related to either claims or settlements during that period.

Much of the money paid by school district in legal fees went to three large Columbia law firms: Duff, White & Turner LLC, Childs & Halligan PA, and Tupper, Grimsley & Dean PA.

Interestingly, the South Carolina Teacher of the Year, named annually by the state Department of Education, is partly sponsored by both Duff, White & Turner and Childs & Halligan.

Hidden realities of Clunker program


Not surprisingly, the government’s Cash-4-Clunkers program brings with it unintended consequences.

Multiple car dealerships in South Carolina have reported that used car prices are already extremely high because of a diminished supply of both new and used cars, according to a report by the South Carolina Policy Council.

Some used car prices, in fact, are close to that of new cars. What it all means is that middle and lower class Americans will ultimately be paying more for used cars. Afterall, decreasing supply when prices are already high will only drive up costs for consumers.

As the Policy Council points out, while President Obama has consistently said he will not raise taxes on anyone earning less than $250,000, this program will end up costing less-affluent Americans more of their money in the long run.

“… what about the 17-year-old who worked two summer jobs to try and buy a used car? How much harder will it be for him to find something within his price range?” the Policy Council asks. “Cash-4-Clunkers may not by a tax, but an unintended consequence of the program is that it will act like a de facto levy on thousands of South Carolina families.”

Cap and trade would cap prosperity in SC


South Carolina, already beset by 12 percent unemployment, stands to lose even more jobs if Congress approves a cap-and-trade system currently under consideration, according to a report posted by the South Carolina Policy Council.

Cap-and-trade proposals before Congress seek to reduce greenhouse gas emissions in the US through a system under which US producers would receive tradable permits to emit greenhouse gasses. Producers buying the permits would, in effect, pay a tax for the privilege of discharging greenhouse gasses currently emitted without charge.

The resulting “carbon tax” would have a negative effect on production and employment, according to an economic analysis by the Beacon Hill Institute.

Increased energy prices under cap-and-trade would inflict significant harm on South Carolina’s economy:

  • The South Carolina economy would lose 1,763 jobs by 2020 and 20,605 jobs by 2050;
  • Gross per-capita wages would fall by $322.53 annually by 2020 and $2,689.63 by 2050;
  • Real disposable income would fall by $1.71 billion per year by 2020 and $14.27 billion by 2050; and
  • Annual investment in the state would fall by $201.34 million by 2020 and $1.68 billion by 2050.

State and local government tax collections would also suffer from the economic damage, the Policy Council reports.

By 2020, the state of South Carolina could expect annual tax revenues to fall by more than $160 million, while local governments would lose more than $195 million in tax revenue. 

And by 2050, the state and local government tax revenue losses would swell to nearly $3 billion, with the state losing $1.34 billion and local governments losing $1.63 billion, according to information posted by the Policy Council.

Remembering Milton Friedman


Ninety-seven years ago today, Milton Friedman was born in Brooklyn to Jewish immigrants.

By the time he died in 2006, Friedman was a world-renown economist who was celebrated as the man who made free markets popular again.

The South Carolina Policy Council has a nice piece on Friedman in its Week in Review, including this highlight:

We can learn a lot from the lessons that Friedman taught us about economic growth and government actions. In his book Capitalism and Freedom, Friedman wrote:

“The Great Depression in the United States, far from being a sign of the inherent instability of the private enterprise system, is a testament to how much harm can be done by mistakes on the part of a few men when they wield vast power over the monetary system of a country.”

One of the major reasons for the severity of today’s recession are the Fed’s actions that artificially stimulated the boom period. During the recession of 2001, the Federal Reserve continued to lower interest rates to encourage more investment – from around 6 percent in 2001 to nearly zero in 2004. This helped boost prices, which led to a massive bubble.  

When government entities begin to believe they can dictate economic directions, the path is set for more extreme downturns. South Carolina’s Legislature can learn from Friedman and end its ongoing effort to control the state economy. If we allow individual incentives and motivations to lead, recovery will come about at a faster pace.

Harrell: Don’t let facts get in way of politics


Here are a few things one typically likes to see in a House Speaker: Leadership, consensus building and the ability to disseminate accurate information.

South Carolina Speaker of the House Bobby Harrell certainly came up short on the last item when he issued a press release last month titled “Hydrogen: Proving to be a Great Investment for SC.”

While the South Carolina Policy Council does a nice job here of picking apart the political half truths and outright misleading statements evident in Harrell’s release, there are also some curious mathematical miscues that left readers scratching their heads. Consider:

  • The release claimed that “Through direct state appropriations and support of the CoEE program, South Carolina has invested $12,292,911 in hydrogen over the past 5 years.  And by conservative estimates, this has spurred well over $115 million in non-state investments.  That means our state is leveraging its hydrogen investment dollars at a rate of more than 10 to 1.”

Actually, even if the $115 million figure were correct, which seems highly unlikely, that’s a match of less than 10-to-1. There would have to be at least $122.9 million in non-state investments to equal a 10-to-1 match, never mind exceed it.

  • “Since 2003, the number of unemployed people in our state has increased by more than 100%.  This has taken our state from once having the 3rd best unemployment rate in the nation to now having the 3rd worst.”

Actually, since 2003, our unemployment has moved from 6.3 percent to 12.1 percent, which is about a 92 percent increase. High, yes, but not more than 100 percent. This, of course, is Harrell’s slam at Gov. Mark Sanford, who took office in 2003. Interestingly, the unemployment rate was the same when Harrell took over as House Speaker in June 2005 as when Sanford became governor. And, for the record, the last time South Carolina had the third-lowest unemployment rate in the country was in 1998, so that hardly seems applicable in this comparison.

  • “The public/private investment in hydrogen has created 229 jobs in South Carolina.  With 65% of those jobs being created in the last 5 years, this is proving to be a growing industry.”

While technically this counts as growth, consider that 65 percent of 229 is less than 150. That means over the past five years, fewer than 30 jobs annually have been created from the tens of millions in tax dollars that have been invested in hydrogen. To tout that as a growing industry is akin to calling someone the prettiest girl in a leper colony. Not exactly something to write home about.

Here’s a bit of advice for the speaker now that the session’s over: hire yourself somebody with some analytical skills and a calculator and have them give your work product a thorough review before it goes out. It’ll likely save you a little embarrassment.