Deadlock keeps funds in limbo

Former teacher Donna Suhrstedt (left) of Lexington, Robyn Neville, a teacher from Columbia and social studies teacher Jarvis Lamb (right) respond to speakers Wednesday in front of the Statehouse. Hundreds of people rallied on the north steps, chanting for

COLUMBIA — Talks between Gov. Mark Sanford and South Carolina's chief legislative budget writer Sen. Hugh Leatherman broke down Wednesday, leaving just two days for the state to request $700 million in federal money or risk losing it.

Shortly after the two Republicans met in an office building next to the Statehouse, a crowd of more than 500 protesters formed at the foot of the capital's granite steps, chanting "Take the money! Take the money!"

They carried signs that read "Impeach Sanford" and "Gov. Sanford, we're here to give you the pink slip."

One woman waved the Confederate battle flag.

Off to the side, a smaller group of Sanford supporters rallied. They had their own signs, "Sanford for president" and "Stimulus stinks."

The matter has polarized many here as a national spotlight shone down on the state, including on Sanford, who is viewed by some as a conservative hero. Congress intended the Legislature to use the $700 million over the next two years to help sustain public schools and other government services as the state recovers from a gripping recession. The budget aid is only a portion of the total $8 billion South Carolina could receive from the $787 billion American Recovery and Reinvestment Act, and the only amount that is in dispute.

Sanford has until midnight Friday to accept the money, which he said he will do only if the Legislature finds an equal amount of state dollars to apply to debt. The Legislature had originally intended to bypass the governor and request the money under a provision in the stimulus package. On Wednesday, those plans suffered a second setback in as many days.

In a letter from the White House, made public Wednesday, Peter Orszag, director of the Office of Management and Budget, wrote that only Sanford can request the budget aid.

The letter is in response to U.S. Sen. Lindsey Graham, R-S.C. He wrote the White House on March 18 to seek clarification on whether the Legislature could request the money without the governor.

"I voted against the stimulus package because it was too large, unfocused, created too much debt and too few jobs," Graham said. "However, the choice for South Carolina now is whether to accept the stabilization funding or see the money go to another state.

"We can refuse to accept it, but we cannot refuse to pay it back. Based on that dilemma, I believe it is in South Carolina's best interests to apply for these funds. They will do some good."

Although Orszag sided with Sanford on the issue, he wrote: "It would be unfortunate (and we believe unintended) policy outcome if the children of South Carolina were to be deprived of their share of federal stimulus dollars, which South Carolina citizens already have paid for, because the governor chooses not to apply for available funds."

Orszag's letter comes on the heels of state Attorney General Henry McMaster's nonbinding legal opinion issued Tuesday that found the Legislature cannot bypass the governor.

Leatherman and Sanford met for about 30 minutes to discuss a potential compromise, but Leatherman said he knew the meeting was going nowhere when the governor made a comment that Leatherman perceived as a personal attack against him.

"In his anger, he became personal and accused me of just wanting to grow government, and played the blame game by saying the matter is in my lap," Leatherman said in a prepared statement. "In a crisis that demands a cool head, he became agitated. Instead of seeking common ground, he again drew a line in the sand."

Sanford press secretary Joel Sawyer said Leatherman wasn't completely honest in his remarks. And, Sawyer said, Leatherman showed that he was the one agitated, not the governor, by making an announcement to the media.

"It is unfortunate Senator Leatherman is choosing instead to play the blame game," Sawyer said.

The governor will continue to work with legislators who want to hear more about his plan to come up with a budget that funds education while paying down debt, Sawyer said. Meanwhile, legislative budget writers say there is no money to pay down debt now and that mass layoffs for teachers, law enforcement officers and other state employees are on the way without the stimulus cash.

Sanford came to Mount Pleasant Wednesday to try to make his case.

Accepting the money without paying debt could cause $700 million in the hole in two years when the federal money is gone, he told a local civic club. At that point, "Either we raise taxes dramatically or we cut those teachers that everybody has been talking about," Sanford said.

WHAT'S NEXT?

The deadline is Friday for South Carolina to accept $700 million federal aid, mostly to supplement public schools, and the standoff between the Legislature and Gov. Mark Sanford continues. Here is what could happen:

SCENARIO 1: The deadline passes and the money is left sitting in Washington. The money that was targeted for South Carolina will be divided among other states, but taxpayers here will still be obligated to pay it back.

The Legislature will have to draft a $5.6 billion budget without the stimulus cash, about 82 percent of which was destined for the public school system. Budget writers warn that the state won't be able to properly fund prisons and could risk a federal mandate to release prisoners before their sentences are up.

Additionally, at least 3,000 teachers could lose their jobs because there won't be enough money to keep public schools operating at the current levels, according to estimates used by the Senate Finance Committee. School districts have used their savings accounts to make it through the start of this recession, but those accounts are greatly depleted and districts won't be able to tap into them to continue to pay teacher salaries next school year.

"Folks will survive, but the consequences are severe," said House Speaker Bobby Harrell, R-Charleston. "We will still teach children, but because there will be so many teachers who don't have jobs anymore, there will be a whole lot more kids in each classroom. We'll still try to keep prisoners in prison, but there will be less prisons to keep them in."

Chances this will happen? Likely.

SCENARIO 2: Sanford follows the wishes of the legislative leadership, requests the money and lets lawmakers use it as they see fit. Congress intended this $700 million to be spread across the next two years to help carry government services through the recession. The Legislature would use $350 million this year, primarily toward education. Budget writers say the money would preserve the jobs of teachers, law enforcement officers and other state workers.

The flip side of this scenario would be that the Legislature bypasses the governor and goes ahead and accepts the money, which Congress intended to allow. Lawmakers would open the state up for a lawsuit and this decision would run counter to legal opinions, including that of state Attorney General Henry McMaster and the White House that both determined the decision was Sanford's alone.

Chances this will happen? Unlikely.

SCENARIO 3: The Legislature and the governor come together on a plan to accept the stimulus cash and use $700 million in state money over the next two years to pay down debt. Legislators say this is not practical because the federal stimulus money comes with strings attached.

If the state takes the money, education spending, for example, must be kept at a certain level. There is not enough money, even with the stimulus cash, to follow the rules set by Congress and find other state money to pay off debt, according to budget writers.

Basically, the governor and the Legislature don't agree on the math. Additionally, Sanford said it is about downsizing government and shifting priorities, which, among other things, could preserve the teaching jobs.

"To pay down debt, there will be layoffs involved, schoolteachers, state employees, and we'll simply transfer the costs of funding their salaries with stimulus money to the unemployment line," said House Ways and Means Committee Chairman Dan Cooper, R-Piedmont. "We'll not only be paying back the stimulus money, we'll be incurring more debt that we owe to the federal government for the unemployment funds."

Chances this will happen? Wildcard.

WHAT'S AT STAKE

• People who support taking the money, including the legislative leadership, argue that no less than 3,000 teaching jobs are on the line. The state could lose a generation of children whose developmental needs could not be met in a dramatically scaled down public education system, they say.

Also at stake is the proper funding of the Department of Corrections, which is running a deficit of more than $40 million this fiscal year. If South Carolina does not fund its prisons at a certain level, then the state risks a federal order to release prisoners.

The state is responsible to pay the money back even if it is not spent here. By congressional edict, the money would go to a national pot and be divided among other states if it is refused by South Carolina.

• Gov. Mark Sanford and his supporters argue that taking the money will only make South Carolina's financial problems worse in two years when the federal cash runs out. At that time, the Legislature would have to decide between big budget cuts or tax increases. The state is better to deal with the problem now, plus South Carolina could be better off because of the way government could be downsized and refocused.

Sanford said he will take the $700 million in federal cash, but only if the Legislature finds a way to free up an equal amount of state money to pay off debt. The White House twice denied Sanford's request to use the federal money for debt payments.