The state of South Carolina is trying to unravel a mystery. Just where did $1.8 billion that’s sitting in a state account come from? And where should the money go?
Maayan Schechter with South Carolina Public Radio has been following the saga. She joins me now.
Marshall Terry: Let’s start at the beginning. $1.8 billion is about a seventh of South Carolina's whole budget. Who first noticed this money and when?
Maayan Schechter: So yeah, I think before we talk about the $1.8 billion drama, you have to go back to earlier last year, because this is how it all started. When the then-Comptroller Richard Eckstrom publicly disclosed that a double counting of money resulted in a $3.5 billion accounting error. And so during the course of that investigation, we understand the governor's office became aware of the $1.8 billion account. And that fund occurred about seven years ago, when the state was changing its accounting system. Lawmakers say they only found out about the account last fall — and they found out about it via the new comptroller, Brian Gaines, who was appointed by the governor when Eckstrom resigned. But what is clear is that the treasurer and the former CG (comptroller general) were aware of this account for some time, for years.
Terry: Since then, it’s turned into a bunch of finger-pointing, right? Who is accusing whom here?
Schechter: Right, absolutely. We've been really focused on the Senate because the Senate launched a special committee to investigate the account. That committee has largely pointed the finger at Republican Treasurer Curtis Loftis, who they say, not only didn't tell them about the account that was created by his office, but — in a very new, serious wrinkle — that he could have jeopardized state financial information when he threatened to publish financial documents online recently.
Loftis, on the other hand, says that the former comptroller is the one who should have been communicating the account with lawmakers. He says the chair of the special committee, Sen. Larry Grooms, has it out for him, and he says the current comptroller and his office are just not communicating. Loftis has not done a lot of interviews, so all of these responses to the allegations have been done mostly through his public Facebook account.
Terry: OK, so you’ve got a lawmaker who is pointing at the state treasurer, and the state treasurer is defending himself. I just want to point our these are both Republicans. It’s not a Democrat accusing a Republican or vice versa.
Schechter: Right. Republicans control the legislature. Sen. Larry Grooms is a Republican. Most of that special committee are Republicans. Curtis Loftis is a Republican. Now the treasurer's office and the legislature, particularly the senators, have had some issues going back years.
But what lawmakers are saying is this has nothing to do with politics. This really has a lot to do with, in their words, basically, the incompetence; what they say is sloppy bookkeeping, which should have been corrected years ago, but has not been corrected since.
Terry: That leads me to my next question: What does this say about South Carolina’s bookkeeping? I mean not knowing where $1.8 billion came from seems pretty bad to me.
Schechter: It's definitely not a great look for the state. And like I mentioned, senators have referred to the bookkeeping as sloppy, but they say that the existence of the account isn't necessarily what is the problem, since it was just due to the system change.
The real concern that they have, aside from what the credit rating looks like, is that they don't know who or what this money belongs to. They don't know if it's from one account or several accounts. They don't know if it's federal dollars. And I should add that the account has accrued millions of dollars in interest. And so, unbeknownst to lawmakers, they've been spending that. So if it's federal dollars, they're very, very concerned about that.
And this is why lawmakers, particularly in the Senate, have made this argument continuously, that the people who had these agencies, like the treasurer's office and the comptroller general's office, which is the state chief accountant, should not be elected politicians. They really need to have a background in this type of financial arena to do this kind of work.
Terry: What if it turns out to be federal dollars? Is that something they’d have to pay back?
Schechter: Lawmakers have said that that may be something that they have to do. They just do not know. I mean, there's so many question marks about this account that they've been theorizing a lot of what they may or may not have to do. And they just do not know yet.
Terry: How do taxpayers fit into all of this? Is there a chance they could see some of that money sent back to them?
Schechter: I hate saying this, but that's like the $1.8 billion question, right? The Senate committee has really stressed that politicians, in particular the treasurer and others, need to slow down on telling lawmakers to send that money back to taxpayers. Because again, they just don't know who this money belongs to. Even as you mentioned, like, even if it's federal dollars, they just do not know. So they really want to find the source of this money before they just send it back to taxpayers in some kind of rebate or something else.
Terry: So what happens now?
Schechter: So the governor recently put together this task force with the treasurer, the comptroller and other stakeholders to figure out who that money belongs to. They put a July 1 deadline on that now.
Meanwhile, in the background, I think this debate over the treasurer and his future is going to continue. The treasurer has said he's going to fight these allegations from the Senate (and) he's not resigning, even though he said he won't run for reelection. He's kind of walked a little bit of that back on Facebook. A big word that is not on the table yet, but could be, is impeachment. If senators do suggest impeachment, the House has to be part of that conversation. And, with the exception of a small few legislators, the House has not been at all engaged in this investigation.
So I can't say 100% where this all goes, but I do think it's safe to say this saga is not going away, anytime soon.
