SC governor vetoes delay on paying agency overruns at Scout Motors site

Only one of the 14 line-item vetoes struck dollars allocated by the Legislature: $800,000 to the Youth Challenge Academy, which is defunct anyway. The other 13 vetoes cut clauses that tell agencies how they can or can’t spend their money.

Since the fiscal year has already begun, the budget took effect as soon as McMaster issued his vetoes.

Generally, McMaster liked the budget that legislators sent him, which is his last one before he leaves office in January, he wrote in his Monday letter to legislators.

He sliced just four clauses because he disagreed with them. Nine others duplicated state law or were out of date, he wrote in his veto message.

“This budget shows the great progress that South Carolina has made over this decade and demonstrates what is possible when we cooperate, communicate, and collaborate to serve the people of this great State,” McMaster wrote.

In the past, most of McMaster’s vetoes struck earmarks legislators requested that didn’t have enough documentation or that he otherwise didn’t think met the standards to receive state funds.

This year, amid disagreements over how much to spend on the projects in legislators’ districts, the final state spending plan didn’t include the spending sponsored by legislators.

McMaster hopes the budget stays that way, with all funding for local projects instead coming from agency-vetted suggestions, he said during a Monday news conference.

“Earmarks are not the way,” he said. “That’s not the way to run a government.”

Scout Motors

McMaster disagreed with legislators’ plan to see the results of an investigation into Department of Commerce spending at the Scout Motors site before paying nearly $150 million owed in the state’s cost overruns.

That’s on top of the $1.3 billion legislators agreed to spend in March 2023 to lure the electric vehicle maker to South Carolina. The incentives package — for site preparation, wetlands mitigation, and roadwork — included $70 million for potential overages, which the commerce department has already spent.

The state’s Legislative Audit Council must still review the spending and decide whether the Department of Commerce made any missteps during the planning and development of the manufacturing plant’s site.

The commerce department has pointed to a five-month delay to get federal permits for building on wetlands approved as a major reason for the increased cost.

The report was due 120 days after the budget took effect, meaning the money wouldn’t have gone out until mid-December at the earliest. That wasn’t soon enough, McMaster said.

“The State of South Carolina must pay its bills, including debt owed to contractors and vendors who have completed work at the Scout Motors site,” McMaster wrote in his veto letter. “For work that has been done, the bills should be paid now.”

Failing to pay contractors could hurt South Carolina’s image as a business-friendly state, the governor said.

“It hurts our reputation as a handshake state where people can depend on us,” he said.

None of the money is due right away, said Sen. Tom Davis, one of the major proponents for waiting until the report came back.

The veto “rests on the premise that $150 million is due now,” Davis said. “It is not.”

“Letting money move before the Legislative Audit Council reports will only further erode public confidence in how this project has been handled,” the Beaufort Republican said in a statement after the governor’s news conference.

The budget didn’t designate any money to the Department of Commerce as it requested to cover the overruns.

Instead, it allows the Department of Natural Resources and Department of Transportation to pull money from a fund that covers state debts.

Legislators had wrapped the $150 million into a proposed compromise on legislator-sponsored spending. But that fell apart last Tuesday when the full General Assembly returned to send the package to McMaster. Altogether, this year’s budget left about $380 million unspent.

Davis said legislators could use that to pay what’s owed after they have a better idea of what happened.

“The money is there,” Davis said.

McMaster also threw out a clause meant to keep similar situations from happening in the future.

Legislators wanted all agencies to ask permission before creating or approving “any cost overrun, budget overage, or expenditure in excess of the amount originally authorized for any program, project, or contract.”

Although McMaster agreed that agencies shouldn’t spend money without lawmakers knowing, he worried such a requirement could have unintended consequences, he wrote in his veto letter.

For instance, major construction projects, including those at the state’s public colleges or on its roadways, sometimes have unexpected cost increases. Making those agencies wait for legislators to vote on an increase could cause long delays, which in turn might “increase construction time, resulting in higher construction costs,” McMaster wrote.

Other vetoes

The only actual money McMaster vetoed would have gone toward the now-closed Youth Challenge Academy.

The program, run through the state National Guard, was meant to help teenagers struggling in traditional classrooms earn their high school degrees. But it faced years of scrutiny over claims of mismanagement and violence among staff and cadets.

When the final class of cadets graduated in June, the program shut its doors, meaning it no longer needed the money, McMaster wrote.

Most of the clauses McMaster struck cleaned up policies included in the state spending plan that mirrored state law.

Several clauses setting requirements for charter schools became unnecessary after legislators passed a law this year increasing accountability for the schools and their sponsors, he wrote.

The same was true for a clause requiring students use the bathroom or locker room aligned with their sex at birth, barring transgender students from using facilities that match their gender. A similar law passed this year made that moot, McMaster wrote.

McMaster’s budget victories

For the most part, legislators agreed with McMaster’s recommended spending.

Every step of the teacher pay scale increased $2,000, raising the minimum salary for a first-year teacher to $50,500. That surpassed McMaster’s pledge from four years ago of ensuring every K-12 teacher made at least $50,000.

Starting pay was $30,113 when McMaster took office in January 2017.

“That’s good news, because even when you count inflation, that’s gone up a whole lot,” McMaster said.

Other education funding included $18.7 million in state lottery profits to expand to all 46 counties the Meeting Street Scholarship, which provides each qualifying student up to $40,000 over four years to pay college expenses not covered by other grants and lottery-funded scholarships. The lottery profits will pay for scholarships in 32 counties, while private donors will continue to fund them in 14 counties.

McMaster also praised legislators for reducing property taxes for homeowners 65 and older. Under the spending plan, those homeowners are exempt from paying taxes on the first $75,000 of their property’s value, an increase from the $50,000 already in state law.

“That’s going to help,” he said.

One place legislators differed was in transportation funding. McMaster asked legislators to put an additional $1.1 billion toward fixing the state’s roads and bridges, pointing to increased construction costs. Legislators instead spent $377 million, with the intention of spending $1 billion over five years.

“I would’ve liked more, but we’ll take it, and we’ll squeeze it, and we’ll keep going,” McMaster said.

This was the 10th and final budget the Legislature’s passed with McMaster as governor. The state’s longest-serving governor ascended to the job in January 2017 when Gov. Nikki Haley joined the first Trump administration. So, he was governor for two years before voters first elected him to the job. Voters will choose his successor in November.

He hopes whoever takes over after him will continue to prioritize education, conservation and transportation, he said, adding that he’s optimistic the state’s coffers will continue to grow.

“I think with good leadership, with our great people, the future is very bright,” he said.