Originally created 02/12/02

S.C. bonds periled

The Palmetto State's Republican-controlled Legislature just got some powerful ammunition in the effort to revamp Gov. Jim Hodges' budget plan.

The nation's major credit agencies say they're concerned with Hodges' proposals to come up with nearly $496 million amid a budget shortfall.

Specifically, officials from Moody's, Fitch and Standard & Poor's said it would not be a good thing if Hodges' proposals were enacted, implying that the state's Triple A rating might drop.

Hodges' plan calls for delaying routine payments, including those to school districts, to save $133.5 million. (How could this be good for education? Are hard-pressed school districts supposed to put off their creditors too?).

Although Hodges asks state agencies to make cuts to produce $150 million, he also proposes to borrow $212.4 million from special accounts and repay it later.

Jay Reiff, Hodges' communications director, says the governor is confident "we can manage our way" through the revenue shortfall and still protect the state's Triple A bond rating, the highest credit agencies give out.

Not everybody shares that confidence.

Deferring payments is "not looked upon with great approbation by either rating agencies or governments," said Ruth Corson, a managing consultant with Fitch. The delay tends to add to financial pressures down the road.

Hodges fellow Democrat, State Treasurer Grady Patterson, also sounded the alarm last week, pointing out to the Senate Finance Committee that rating agencies dislike shifting payments.

The problem here, of course, is that if the governor's plan went through and the state's bond rating came down, interest rates would go up and the state would owe more than it does now.

Hodges may think he can "manage through" the crisis, but if he fails it's South Carolina taxpayers who would be stuck with a higher bill than they are now.

Hodges is trying to have his cake and eat it too. It won't work. He needs to go back to the drawing board, this time with GOP budget writers to develop a safe and sane spending blueprint.


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