Other Opinions

Cindi Ross Scoppe | How Haley sold legislators a subprime loan

AS THE Legislature slogged toward Thursday’s mandatory adjournment of the session, Gov. Nikki Haley sat stone-faced on the front row of a Senate committee meeting room Wednesday morning while legislators lectured her on her irresponsible money management and her refusal to work with them and her utter disregard, again, for the limits on gubernatorial power.

Frankly, she got off pretty easy for someone who was insisting that legislators stop trying to pay for part of the $200 million incentive package she promised to Volvo with money the state already has, and instead let her borrow $123 million, at budget-busting interest rates.

You might want to read that again, to make sure you got it, because it is brain-busting crazy.

“This is the worst kind of credit card debt I’ve ever seen,” Senate President Pro Tem Hugh Leatherman said of the bond package, which allows the state to pay only interest for seven years, and then eventually make a huge principal payment.

That’s called a balloon payment, it was the specialty of the subprime lenders that triggered the housing crisis that plunged our nation into the worst economic downturn since the Great Depression, and this one will add $86 million in interest to the $123 million principal.

The governor had announced that she didn’t need any help from the Legislature to land Volvo, and now that she was fighting the Legislature’s attempt to provide the cash to bail her out of her subprime promise, Rep. Chip Limehouse told her: “You do need the General Assembly to bring industry to South Carolina … because we control the purse strings.” Which he and the other nine members of the Joint Bond Review Committee were at that very moment doing, by deciding whether to let her proceed with the loan.

Message: I don’t care

When House Ways and Means Chairman Bryan White suggested that the governor write a letter asking legislators to use newly certified surplus funds to help pay for the incentive package so the state wouldn’t have to throw away all that money in interest — as his committee voted two days earlier to do — she was clearly uninterested.

“I think I did more than a letter,” she announced, and I perked up, anxious to learn of this peace offering that I somehow had overlooked. And she continued: “I did a press conference.”

Excuse me?

That’s tone deaf and slap-the-Legislature-in-the-face arrogant even by Mark Sanford standards.

Assume you want legislators to do something that’s important to you. Would you hold a news conference to give them marching orders and threaten unpleasant consequences if they don’t obey you? Or send them a letter saying, I would appreciate it if you would do this? Flies and honey and vinegar, you know.

The governor wasn’t simply refusing to ask for the Legislature’s help. As she reminded the committee, she had said at the press conference she would allow the Legislature to use unexpected revenue to cut taxes, to fix roads or to pay down debt. By refusing now to ask legislators to use the money to pay down debt — or to avoid incurring debt — she was saying she has no preference among her three options. She was saying that she’s perfectly happy throwing away $86 million on interest, if that means she can get a tax cut.

But why should she ask legislators for help? In the end, they gave her permission to go forward with her subprime loan.

Sen. Leatherman told me the next day that as upset as he was with the bond terms, and the governor’s attempts to hide the details from lawmakers, he wasn’t willing to take the miniscule chance that Volvo would pull out if lawmakers didn’t authorize the borrowing on Wednesday, as the company might have been promised. That, by the way, is a pretty good summary of how the Legislature approaches economic incentive packages.

Keep Legislature out

South Carolina has the best credit rating possible, but Gov. Haley had to resort to a subprime loan because she was determined not to ask the Legislature for the money. That meant she had to use a borrowing method that the state has nearly maxed out, and the only way keep the payments under the mandatory maximum was through the balloon-payment plan.

Commerce Secretary Bobby Hitt told legislators that he had to rely on the nearly maxed-out funding method that he controlled because, during the secret negotiations, Volvo insisted on having a commitment immediately. That’s believable, and not inappropriate. What’s inappropriate is what didn’t happen once the deal was announced. The governor didn’t go to the Legislature and ask for a more responsible way to come up with the money. Which of course it would have provided.

Gov. Haley said, and Mr. Hitt repeated, that besides wanting an answer now, Volvo insisted on keeping the Legislature out of the deal.

Frankly, it seems difficult to believe that Volvo would care how the governor got the money, once the state had legally obligated itself to spend it. Unless the company had been told that the Legislature is hostile to economic incentives. Perhaps by a governor who didn’t want to condescend to asking the Legislature for anything. Perhaps because if she asks for something from the Legislature, the Legislature might feel like it could ask something of her. You know, the sort of give-and-take that is essential to politics. Or any human endeavor.

Wrong answer

Wherever the idea came from that the Legislature was to be avoided, where I come from, “keep the Legislature out of the deal” is code for “keep it hush-hush.” That’s sort of weird, since there wasn’t anything that needed to be kept hush-hush until the governor decided she needed to keep it hush-hush, and came up with the subprime-loan plan.

I don’t blame a company for making such a demand, just like I wouldn’t blame it for asking the state to build its entire plant, and pick up its payroll for a year. Volvo has no obligation to the public.

The governor, on the other hand, does have an obligation to the public. If a governor is asked to keep the Legislature out of a a deal that involves giving away $123 million in taxpayer funds, the correct response is not “Sure!” The correct response is to explain that that’s not how we do things in this state: We don’t commit taxpayer money in secret, and we don’t shut out the branch of government that makes the spending decisions. And we certainly don’t resort to subprime borrowing in order to keep the Legislature out.

The correct response is to assure the company that there won’t be any trouble getting the Legislature to go along with the deal, because, while Nikki Haley has spent a good bit of her political career opposing economic incentives, this Legislature always, always supports them. No matter how much they cost. No matter how irresponsibly they are put together.

If any future economic recruits need proof of that, they need only look to the unanimous committee vote on Wednesday to approve the most irresponsible financing plan state leaders have signed off on since Reconstruction.

Contact Cindi Ross Scoppe, associate editorial page editor at The (Columbia) State, at cscoppe@thestate.com

  Comments