New twist in dispute over funds

South Carolina Governor Mark Sanford

Gov. Mark Sanford's efforts to avoid taking federal stimulus money turned into a political free-for-all Wednesday when U.S. Sen. Lindsey Graham joined the fray.

Graham questioned the constitutionality of a provision in the $787 billion recovery package that allows the state Legislature to bypass Sanford if the two-term Republican governor ends up rejecting the $700 million over which Sanford says he would have control.

In a letter to the Obama administration Wednesday, Graham said congressional researchers found the provision to be unclear. A distinction is important, Graham said, because the president's interpretation of the provision could permanently change the nature of the relationship between the federal and state governments, and put the 10th Amendment in jeopardy.

"There is a lot of confusion here," said Graham, R-S.C. Although Graham voted against the recovery package, he said South Carolina should accept the money it stands to receive, $8 billion in all, because either way taxpayers here will be responsible for paying it back.

If South Carolina does not take the money, it will be divided among other states. Based on Sanford's interpretation of the recovery package, he has influence over $700 million of the total money that could come to South Carolina. Most of the money is for tax credits and grant money, although some recovery funds would flow into state coffers automatically.

Sanford, however, is standing strong against accepting the money unless Obama allows him to apply it to state debt. The governor, who is awaiting a response from the White House on a revised request he submitted Tuesday, argues that Congress does not have the money to spend and that the country's economic recovery and the stability of the dollar face serious problems.

Meanwhile, the state Legislature is poised to step in and take the money if Sanford rejects it. The proposed $6.6 billion budget, which begins July 1, is built around accepting $1 billion in recovery funds, including money Sanford wants to reject.

The state budget situation continues to worsen as tax collections fall short of projections. On Wednesday, the Budget and Control Board voted 3-1 for across-the-board cuts worth $101.9 million in the current budget, which ends June 30. In all, state agencies have been dealt mid-year cuts of more than $1 billion, and are bracing for more hard times ahead in the budget legislators are drafting now.

S.C. Senate leader Glenn McConnell of Charleston and lead budget writer Sen. Hugh Leatherman of Florence, both Republicans, say Graham's got it wrong. Senate lawyers have reviewed the matter and don't find a violation of the 10th Amendment, which defines federalism and states' rights, McConnell said.

"I do not believe the process created in the federal law is in violation of the 10th Amendment. That's when Congress crams things down the throats of states," McConnell said. "In this case, Congress has given the states a choice."

Graham rejected any suggestion that he is playing politics by raising the issue at a time when the money is at stake for South Carolina. He said it is his job as an elected official for the state to put the issue on the table.

Leatherman said he does not agree with the decision Congress made when it passed the American Recovery and Reinvestment Act; but at this point, the best thing to do would be accept the money, most of which is designated for public schools.

S.C. Superintendent of Education Jim Rex, a Democrat, testified before the Senate Finance Committee Tuesday and highlighted the reasons why the money is crucial to the Department of Education.

"Right now, South Carolina school districts are building their budgets for next year, and saving classroom teaching positions is Priority One," Rex said in a statement. "Districts need to know whether those federal dollars are in the pipeline, and they need to know very quickly."

Democrats U.S. House Majority Whip Jim Clyburn, who authored the provision in question, and state Sen. Vincent Sheheen of Camden, said the issue is bigger than a political fight.

"People are hurting and tired of the political games that are being played at the expense of their future," Sheheen said in a statement. "We cannot say we are serious about economic recovery and then turn around and cut thousands of teachers from our classrooms."

At a glance

THE ISSUE: The federal American Recovery and Reinvestment Act allows the state Legislature to request money that Gov. Mark Sanford might reject. The governor wants South Carolina to use $700 million of the funds to pay off debt, but he needs President Barack Obama's permission first.

THE PROBLEM: U.S. Sen. Lindsey Graham raised concerns that the provision that allows the Legislature to bypass the governor violates the 10th Amendment and could alter the relationship between the federal and state government as defined in the Constitution.

WHAT'S NEXT: South Carolina must wait for the Obama administration to respond to two letters. The first Sanford sent Tuesday asking to use $700 million toward state debt. The second Graham sent Wednesday asking for clarification of the possible constitutional violation.

Read and comment on Yvonne Wenger's blog, The Daily Briefing.