Sanford rejects $700M

COLUMBIA — Now it's up to South Carolina's legislators to decide how to spend federal stimulus money.

Gov. Mark Sanford decided he won't take it Friday after failing to persuade President Obama to let him use $700 million of the state's share to pay down debt.

Key legislators were quick to respond with assurances that they plan to spend it. Congress told states to either use the money or lose it, but either way, taxpayers here are on the hook to pay it back.

Meanwhile, U.S. House Majority Whip Jim Clyburn said Sanford has the wrong idea about what the American Recovery and Reinvestment Act is all about: creating jobs and pulling the country out of recession. Paying off debt is a priority for another day, he said. "It's time to restore confidence in the economy and hope in the American dream," said Clyburn, D-S.C.

In all, South Carolina could receive as much as $8 billion, including all the tax credits and grant money available. A portion of the money, about $2 billion, will come automatically to the state to pay for investments such as highway improvements and extending waterlines. Sanford has said he has power to influence only $700 million, but if he rejects that portion, the Legislature is able request it to balance the budget over two years.

The governor opposed the stimulus package because he doesn't think the country, or the state, should spend money it does not have. That will burden future generations and drag down the value of dollar, he said.

Sanford's stand on his principles has won him kudos with fiscal conservatives and propelled talk that he'd be a top presidential candidate for the GOP in 2012. Others, including the S.C. Senate Democratic Caucus, suggest it has damaged his reputation.

The two-term Republican governor received a reply letter Friday from Peter Orszag, director of the president's Office of Management and Budget, that told Sanford his request to use the funds to pay down the debt was denied. It was the second time Sanford had submitted such a request.

"If our General Assembly chooses to make use of this federal money, we'd ask them to use existing state resources to begin paying down our state's sizable liabilities," Sanford said.

House Speaker Bobby Harrell and Senate leader Glenn McConnell both agree that Sanford had a good idea in using stimulus money for debt. But on Friday, the Charleston Republicans said the Obama administration said no to that, and they don't know where state funds would come from to shift to debt payments when legislators are struggling to fund basic government services.

Harrell and McConnell also noted that the executive budget Sanford submitted did not include debt payments.

"Where in the world are we going to get money to pay off debt?" McConnell said.

They're missing one big difference, Sanford press secretary Joel Sawyer said. The governor didn't use any stimulus money in the budget he recommended to the Legislature in January. "If they use stimulus money, they should have money available to pay down debt," Sawyer said.

The House passed a proposed $6.6 billion budget that relies on stimulus cash. The Senate is now drafting its version of the spending plan.

The state is still awaiting word from the Obama administration on a letter U.S. Sen. Lindsey Graham wrote Wednesday that questioned the constitutionality of a provision in the federal stimulus package that allows the Legislature to bypass the governor, and receive the $700 million.