S.C.'s Stimulus Back-and-Forth

South Carolina Gov. Mark Sanford issued his latest stimulus plea today, elaborating on his previous request for a waiver that will allow him to spend $700 million (roughly 25%) of his state's stimulus money to pay down debt. That $700 million was slated for education and other projects, and Sanford is now requesting that he be allowed to use that money to pay, mostly, education-related debt.

It's clear that the Obama administration wants the money spent--and not on debt--but it's all a matter of opinion as to whether South Carolina can do this, and the governor's office thinks the revised request is in keeping with the stimulus's goals.

Sanford writes, in a letter to President Obama today:

...we think it would be consistent with statutory requirements to use this $577 million to pay down the roughly $579 million of principal for State School Facilities Bonds and Research University Infrastructure Bonds over two years...

Regarding the $125 million in the Fiscal Stabilization Fund (ARRA § 14002(b)(1)) headed to South Carolina, we'd lay out a few options for your consideration: first, paying down debt related to the state's Unemployment Compensation Trust Fund that currently exceeds $200 million and would directly impact those currently out of work in this struggling economy; second, paying down debt related to state retirees, since that would seem to satisfy the statutory requirement that these funds be used for "other government services"; or third, paying down other bonded indebtedness at the state level.

We trust these alternative proposals fit both the statutory requirements and spirit of the stimulus legislation.  Thank you again for your response, and we would again appreciate your opinion as soon as possible given that we believe this course of action will do more to ensure South Carolina's long-term economic strength than would other contemplated uses of the funds.

OMB Director Peter Orszag, in his rejection letter to Sanford yesterday, wrote that South Carolina couldn't use the money to pay down debt because it was slated for education, saying the stimulus law, according to its own language, requires the money to be spent "in support of" various forms of education. (Another section required, by statute, that money be spent "for public safety and other government services..."

So it all boils down to what one thinks of the terms "in support of" and "for." The Obama administration probably doesn't think debt payment "support[s]" education in the way they want it to, but we'll have to see if this more specific request gains traction with the White House.