Comptroller general says transparency can improve economy

HARTSVILLE — State Comptroller General Richard Eckstrom called for transparency while addressing the state of the state’s economy with Kiwanis members and their guests Thursday at the Hartsville Country Club.

He outlined the problem and explained how transparency should be part of the solution.

“Last month, we sent many more millions out in refunds to corporations than took in estimated quarterly taxes,” Eckstrom said. “The economic malaise continues.”

Eckstrom’s a brigadier general in the S.C. National Guard and a member of the U.S. Navy. He has served as treasurer of the state in the past and now, as comptroller general, the chief “bean-counter” for the state. South Carolina never had a CPA to serve as comptroller general before Eckstrom took the position in 2002.

The two largest sources of state revenue into the general fund, which operates state government across the board, are individual income tax receipts and sales tax receipts. Those two items make up 90 percent of revenue going into the general fund. There are 20 other sources of revenue for the state, with 3 to 4 percent coming in from corporate income taxes.

“I started sounding concerns in August 2007,” Eckstrom said.

He spent time pulling and graphing historical data to establish predictors for revenue streams for the state and brought his concerns to the Budget & Control Board. Gov. Mark Sanford agreed with him, but the media made the two out as “Chicken Littles,” Eckstrom said.

“Not until early 2008 did national economists start talking about the state economy heading into a recession,” he said.

Still, nothing was done to address the problem, which brings us to the current situation, Eckstrom said. October revenue to the state was down 11.5 percent compared with October 2008.

“That’s significant because that affects your quality of life ... and what services government agencies can afford to provide,” Eckstrom said. “In the economy at large, there’s a consistent picture that emerges from these revenue streams.”

And that picture is bad, Eckstrom said. Consumer confidence is low, so there’s less spending at the retail level.

“If retailers are not selling, they’re not ordering inventories. That slows the wholesale sector which in turn slows the manufacturing sector,” Eckstrom said.

The average manufacturing work week, the number of hours worked in a week, has increased since July. That uptick is coupled with a decline in average hourly rate paid for manufacturing workers, which, in turn, produces a decline in individual income tax receipts for the state.

The state is down 16.5 percent in total revenue and year-to-date down 9 percent

“We cut state spending 6 percent off the approved budgets that started in July,” Eckstrom said.

For fiscal year 2009-10, the state originally estimated revenues would be down 3 percent, but now that number has surged higher. The problem: agencies can’t spend more than they take in, or “deficit spend,” Eckstrom said.

Last fiscal year, the state overspent $98 million. While it’s not much compared with the federal deficit of $1.42 trillion last year, South Carolina has a constitutional statute barring it from deficit spending.

“Times like this are very important to have transparency in spending public funds,” Eckstrom said. “Two years ago, I pushed for fiscal transparency. Every state agency’s records are online, so people can see how public funds are being spent.”

Eckstrom met with State Superintendent Dr. Jim Rex on Wednesday in Myrtle Beach to work on getting all of the state’s 92 school districts’ fiscal information online, and he encourages towns and cities to do so, as well.

“I’m convinced transparency is the way government is going to do business in the future,” Eckstrom said. “There’s no excuse not to, even in good times. In bad times, it’s much more important.”

The public can find all kinds of information on state government spending on the comptroller general’s Web site, http://www.cg.sc.gov.

“My view is that the primary stakeholders in government are those who fund it,” Eckstrom said.

At top government levels, that common sense view has been lost altogether and the country needs a “back to basics” approach to the economic crisis, Eckstrom said.

Problems on the horizon include the public retirement system for state, city and county workers.

“Not just the public system but retirement systems in general will be fiscal battleground in next year or so,” Eckstrom said.

Terms will have to be negotiated because the state system is underfunded by $19 billion. The state’s general fund is only $6 billion for the year.

Eckstrom also discussed the recent deal to bring Boeing to South Carolina. One Kiwanis member raised concerns that the incentives package would take more away from the state than it would receive in return.

“Boeing gets nothing until it creates 3,800 jobs and invests $700 million in capital,” Eckstrom said.

The state learned its lesson from Air South deal that had no claw-back provision in it, he said.

“Ten years from now, I think we’ll look back and say it was a good deal,” he said. “We’ll see a corridor develop for the aerospace industry. It takes something like that for South Carolina to get noticed, not just incentives.”

Eckstrom noted other reasons — from good climate to the low cost of living — for relocating businesses in the Palmetto State.

“That’s how we’re going to do it, how we’re going to work our way out of it,” he said.