SC Senate’s pet projects give glimpse into budget with no direct nonprofit funding

COLUMBIA — When legislators passed a $350 million spending deal, they announced an agreement to change how the funding is doled out next year, including not sending money directly to nonprofits.

The Senate’s spending this year is an example of how that might look.

The Senate’s list of projects, which totals about $110 million, technically sends money only to local cities and counties, at the insistence of Finance Chairman Harvey Peeler.

But some spending will flow through local governments to nonprofits for work in the communities, including one conservation earmark by Peeler, according to backup budget documents provided by Gov. Henry McMaster’s office.

When announcing the changes on the floor last week, senators touted the idea as a way of increasing accountability in the process.

“My hope from that would be that local governments are going to try to monitor those nonprofits,” Senate Majority Leader Shane Massey said when legislators passed the spending bill. “That’s been one of my frustrations with nonprofits, is that you can’t monitor it.”

All told, more than $5 million in the Senate’s spending on local projects will go through a government agency to get to a nonprofit — a small fraction of the total.

The House, which did send money directly to nonprofits, is slated to follow next year, representatives said.

The agreement, which came as part of a deal to fund the hundreds of local projects left out of the full state spending plan, was not approved in the form of legislation or chamber rules. Instead, it’s a so-called gentlemen’s agreement between the chambers’ lead budget writers: Peeler and House Ways and Means Chairman Bruce Bannister.

The budget writers also agreed to keep spending more equal between the House and Senate and to pass a stopgap spending bill earlier in the year, preventing end-of-session gamesmanship between the chambers to avoid the possibility of a government shutdown.

Discussions about how to decide which projects get funded will continue, legislators said.

Critics of the process have pointed particularly to nonprofit earmarks. Past spending has gone to organizations with little background, religious affiliations or legislative ties. Some nonprofits have received money year after year, amounting to annual funding.

Churches, charities with little track record among nonprofits in line for $90M in SC budget

To create an added layer of government, senators this year included a “receiving entity” in their requests. The receiving local government can either use the money for a local project or disburse the dollars to a nonprofit.

For instance, Peeler sent $2 million to the city of York as one of his nine earmarks. The money will then go on to the Yorkville Agricultural and Education Society, a nonprofit, to preserve roughly 120 acres at the site of an abandoned orphanage.

The city of York didn’t ask for funding for the project, which is referred to as “Project Green Landing” in budget documents. But the city, which has backed the work, will become responsible for passing along the funds.

Peeler considered the project worth funding in a year of little nonprofit spending on the Senate side because of development from the Charlotte suburbs encroaching on York County, the Gaffney Republican said.

“Charlotte is spilling into York County, taking up agricultural land, any kind of vacant buildings, anything that doesn’t have something to save it,” Peeler said. “So, locals need to get behind it, and I felt like it was a worthy cause for an earmark.”

Direct funding

Legislators generally agree sending the funds through government agencies is a better method than giving the money to nonprofits directly.

“All of these projects on the Senate side are going to be subject to the oversight of state or county agencies,” said Sen. Chip Campsen. “We’re not just relying upon other entities other than that.”

“There’s more accountability and more experience,” the Isle of Palms Republican added.

Local governments are subject to regular audits, making it easier to track whether money is spent correctly. Adding a level of responsibility for local officials makes it more likely the money will get spent the way legislators intended, they said.

Since legislators control some of the funding local governments receive, they’re more likely than a nonprofit to ensure the money is spent appropriately, some said.

“I do think it’s a better way of doing it,” said Sen. Ed Sutton. “You’ve got another set of eyes looking at it.”

Sutton, a Charleston Democrat, requested funding for a resource center for homeless people run through the city of Charleston and nonprofit Star Gospel Mission. Charleston city officials asked for the money, and Sutton agreed the issue needed addressing, he said.

SC legislators approve $350M in earmarks, agree to changes next year

“I wouldn’t put my name on something I couldn’t defend myself,” Sutton said.

Local governments can have problems of their own, said Rep. Jordan Pace, who chairs the ultra-conservative Freedom Caucus.

Pace generally opposes earmarks as what he and his caucus view as examples of government overspending. Still, he agreed sending the money through local governments is a better idea than simply handing it to nonprofits.

Nonprofits aren’t subject to the same open records laws as governments, making spending more difficult to track. If legislators aren’t sure where money went, they have a harder time figuring that out if a nonprofit had it than a government entity, he said.

That doesn’t make local governments infallible, Pace said.

“It may have the veneer of accountability, but I don’t think it’s enough of a change to make the process palatable,” said the Goose Creek Republican.

If legislators are going to continue funding local projects, Pace would like to see a grant program put in place with solid caps on spending and a system of checks through government agencies. He proposed a bill that would do just that, though it had no chance. He introduced it when the Legislature returned last month for a one-day session to approve the $350 million in spending. He’d have to reintroduce it next year.

A place for nonprofits

Some legislators have floated the idea of removing nonprofits from the earmark process entirely. Others say nonprofits fill gaps government services don’t reach.

“The state simply doesn’t do it all, and we have so many great nonprofits that provide necessary services,” said Sen. Deon Tedder.

That’s especially true in rural areas, said the North Charleston Democrat. Shelters for survivors of domestic violence, rehabilitation services and food banks are all often run by nonprofits, and without funding, those might simply cease to exist in certain parts of the state, he said.

Other organizations that aren’t providing life-saving resources can bring a major boon to the state, Tedder said.

That was why he requested money for the International African American Museum, which received $500,000 to boost its marketing. While the museum, which opened in 2023, receives donations, state support can help increase its reach and draw in more visitors, Tedder said.

More visitors could also fill fundraising gaps. In June, the museum announced furloughs for all employees through year’s end.

Tourists traveling to visit the museum will spend money throughout the entire area, Tedder said.

“It’s a great return on investment, and we need to continue to support it,” he said.

Campsen had the same line of thinking when asking for money to build a recreational area on Edisto Island, he said.

The rural sea island in Charleston County has a permanent population of about 1,600, excluding the beach town that’s actually in Colleton County. Such a small tax base can’t support major local projects, such as a public park, he said. The spending plan sends $1 million to nonprofit Edisto Island Youth Recreation to build a community recreation center.

“If it weren’t for this process, they would just be kind of left out,” Campsen said.

Even legislators who generally focus their attention on local governments sometimes find a nonprofit worth supporting. Sens. Ronnie Cromer and Danny Verdin both said they prefer to make requests for government-based projects but asked for money to help nonprofits this year.

Cromer’s ask sent $20,000 to St. Paul African Methodist Episcopal Church to fix up one of a dwindling number of Rosenwald schools, built during the 1920s to give Black children in the South access to education. The schools are an important piece of history and hold a special place in alumni’s hearts, said the Prosperity Republican.

SC had 500 Rosenwald schools for Black children. Nonprofits want to save the 44 that remain.

Verdin’s $500,000 will help restore the McCullough House in Honea Path to its early 19th century glory, he said. The oldest brick building in Greenville County, which dates back to 1812, is “a gem” for the state, and Verdin felt it important to make sure it keeps standing for years to come, he said.

“If you get the right equation, it’s very possible that nonprofits or not-for-profits can be incorporated into the process,” the Laurens Republican said.

Not every nonprofit is the same, said House Majority Leader Micah Caskey, R-West Columbia. Both nonprofits and local governments exist along a spectrum of capability, he said.

When deciding which nonprofits are deserving of funding, legislators said they look for a long track record of good work. Verdin is partial to “brick and mortar” projects that bring a visible change and keep a building standing. Cromer suggested funding projects that are already underway as opposed to those that are still theoretical, though he added that can be difficult.

“We’ve got a lot of nonprofits,” Cromer said. “It’s kind of hard to choose the ones that are the most worthy and to do that follow-up.”

A nonprofit should be able to show its impact in order to get state funding, Tedder said. He didn’t think nonprofits were so much of the problem as the process of deciding which projects get money.

As is, legislators send requests to the budget writers, who choose what to fund and how much money to spend. Legislators can submit supporting documentation about why they want funding for a certain project, but there’s very little scrutiny over where money goes, he said.

“We just need a better process of going through and vetting the requests,” Tedder said.

Legislators also agreed they need more accountability once the money is spent. During the debate over the spending plan, legislators in both chambers pointed fingers at each other and claimed their colleagues were less transparent about their spending.

Publicly available information on where taxpayer funds are going has improved significantly in recent years.

Gone are the days when legislators’ requests were hidden in vaguely worded lump sums to agencies, when only the budget writers knew where the money was going.

It’s been five years since a Senate rule began requiring a listing of all legislator-sponsored spending, which was supposed to allow public debate about the worthiness of individual projects. But the few words per project offered little-to-no actual information about the intended spending.

In 2023, legislators began providing McMaster paperwork to back up their requests so he wouldn’t veto them, which the governor’s office makes publicly available after the spending’s approved. Yet, some projects still don’t include documentation of where the money is going or why other than a brief statement written by the legislator asking for the funding.

And problems persist in making sure money gets where it’s supposed to go, legislators said. No follow-up exists on the back end, leaving legislators on their own to find out if the projects they funded ever got done.

How to address those concerns will be part of the ongoing conversations about how to move forward with earmark funding, Caskey said.

“We are leagues better than we were when I first got here in terms of transparency,” said Caskey, who was first elected in 2016. “But there’s more to be done.”