SC gov doesn't want $700M in federal stimulus cash

COLUMBIA, S.C. - South Carolina Gov. Mark Sanford said Friday he won't spend $700 million in federal stimulus cash, an announcement unlikely to affect whether the state gets the money and one that came after the Republican was twice rebuffed by the White House in his attempts to use the cash to pay off state debt.


"We're obviously disappointed by the White House's decision, because it cuts against the notion of federalism and the idea of each state having the flexibility to act in a manner that best suits its needs," Sanford said. "As a result, we will not be seeking the use of these federal funds for the way they put our state even further into an unconscionable level of debt."

Sanford has become a prominent voice in opposing federal bailouts, bolstering his conservative credentials and fueling rumors he'll run for president in 2012. He contends that stimulus money will not increase employment and will merely add to federal debt that will lead to higher taxes. A day earlier, Alaska Gov. Sarah Palin said she would reject nearly a third of an estimated $930 million dollars that could flow to her state.

Sanford, who is in Nevada for Air Force Reserve training, released a statement about an hour after the White House Director Peter Orszag denied his request to use a portion of federal stimulus money over which he had some control to pay off school construction debt.

Orszag on Friday sent Sanford a letter saying the money can't be used on debt payments and instead needs to restore funding cuts from state budgets, and should help aid schools and better train teachers.

The goal of the $787 billion stimulus package in part is "to make critical investments in long-term economic growth, such as providing every child the chance for a world-class education," Orszag wrote.

In all, South Carolina is to get about $2.8 billion in federal stimulus money over two years. The state's mayors had implored Sanford to take all the money he could, and the Republican-dominated Legislature has already made plans to spend the portion that the governor balked on.

South Carolina in January had the second-highest unemployment rate in the nation and lawmakers had to cut $1 billion from a $7 billion budget as the recession dampened revenue collections. The House last week passed a $6.6 billion budget patched together with $1 billion in stimulus cash.

Sanford's anti-bailout stance in part led to House Majority Whip James Clyburn, D-S.C., inserting language into the bill allowing state legislators to override governors.

Friday's announcements ended a week of political teeth-gnashing over the $700 million. On Tuesday, the state's education chief said $387 million in cuts since July have led to the 300 layoffs and said more than 1,200 vacancies are going unfilled. Without the other cash, "I don't think we'd have a viable public school system in our state," said Superintendent Jim Rex.

The same day, the head of the Atlanta-based Southern Education Foundation urged the governor to use the money to prevent the layoffs, and cited a documentary about the state's rundown, rural schools. Among those is the Dillon junior high school cited recently by President Barack Obama as so close to train tracks that teachers have to halt lessons because of the noise.

"A decision to deny an improved opportunity to learn to all South Carolinians, especially those who are low income and concentrated in the grossly inadequate schools depicted in 'Corridor of Shame,' is unconscionable," Lynn Walker Huntley wrote in a letter to Sanford.

The governor in his announcement Friday said if legislators use the money, they should offset spending on debt payments. He reiterated his contention that using one-time stimulus cash for annually funded programs will create problems.

"We simply cannot afford to base 10 percent of our state budget on money that will disappear in two years' time," he said.

Sanford's first unsuccessful attempt at using federal cash for debt would have spent it on obligations such as the state's retirement trust fund.

After that was rebuffed, he asked for permission to use $577 million to pay down most of the $579 million outstanding in school and university construction bonds over the next two years. That would free $162 million in debt payments over that period to put into education, he said.

The governor said he wanted to consider using the remaining $125 million to cover part of the $200 million borrowed from the federal government for unemployment checks because South Carolina's jobless fund has been running dry for months. It's now paying about $20 million weekly to some 135,000 people.



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