South Carolina Government Structure is not a Plus

The government structure of South Carolina, which was formed post Civil war is no longer functional in this modern times. Read this article to learn why South Carolina is a great state to visit, but not necessarily to live in.

Robert E. Freer, Jr., President of The Free Enterprise Foundation

It gives me a warm feeling whenever I am traveling to see in the array of license plates along the way one from the Palmetto state. In a reflex, it immediately transforms my own face into one of our aforesaid “Smiling Faces.” No one can doubt we have a glorious home. Wonderful, courteous people and the 32 million others who annually visit our “Beautiful Places,” moderate weather, historic culture and nature’s abundance all make South Carolina special.

Even as we smile, challenges to our continued prosperity cause our brows momentarily to knit. All is not perfect in our paradise. While tourism is up and appears headed even higher, our public educational system is in crisis, near the bottom of the national pack. We are producing neither the knowledge based businesses we need to compete in the 21st century nor the technically able workers required to make them go because of our educational gap. We simply must do better. Additionally, because of the unavailability of sufficient risk capital for nascent firms struggling to gain a toehold in our commercial soil, we are discouraging our own entrepreneurs from founding their ventures here.

What is particularly frustrating is that solutions are at hand but have been stymied by our need first to pass a broader set of reforms. We simply haven’t had the political will to get the job done. For at least a dozen years, reform of our antiquated form of state government has been pursued in hope of giving us the executive structure we need to compete with the states in our region. While experts may differ on detail, there is unanimity that our executive branch is in critical need of reform. Thomas Friedman of “Flat World” fame would have us worry about India and China. Heck, I am scared to death of an aggressive Georgia, North Carolina, and Florida.

Our state constitution, reflecting post civil war social and economic tensions, was inspired by “Pitchfork” Ben Tillman in 1895 and continues more than one hundred years later to reflect the populist fear of a strong executive. It sharply limits the power of the executive to see to the efficient and accountable operation of state government. With eight other executive officers, all reflecting their own popular constituencies still required by our constitution to be elected along with the governor, it makes effective administration impossible, and if that isn’t bad enough, the Lieutenant Governor, not necessarily part of “the team,” is elected on a separate ballot from the governor and has at times in past administrations been at odds with his goals.

Whatever the tensions in the South Carolina of 1895, those pressures are of another era, and if we are to place the state on a forward looking path to sustained growth and competitiveness with our neighbors, they are not worthy of holding us from doing what we must today.

In many important markers, our state is very near the bottom of the pack, and unfortunately, despite our apparent frugality, our citizens according to the Executive Budget pay one-third more per capita in state taxes than average throughout the country, and our rate of increase in government spending is 2.4 times the rate of growth in income for our citizens.

The Executive Budget for 2007 notes that “our government is duplicative and unaccountable…. “State government is a hodgepodge of some 50 independent agencies and departments.” and quotes Alexander Hamilton for the truism that, “One of the weightiest objections to a plurality in the executive…is that it tends to conceal faults, and destroy responsibility.”

In the present situation, who can we hold responsible? Our government is structurally fragmented and operationally uncoordinated. The end result is that it is often not responsive to our needs, and its structure and divisions hampers us in effectively doing anything about it.

I ask our public servants in Columbia: “With the governor in his second term and with the pressure on government to be both frugal and effective, isn’t now the time to fix this? And who better to do it than this legislature and this governor?” I do prefer government in the sunshine, but after the fits and starts of the past, I wonder if it wouldn’t be better if our legislative and executive leadership went fishing together for a weekend and worked this out in seclusion with recreation, good fellowship and then hard bargaining on whatever the impediments have been that have held us back. We’re all praying for you, and I am hopeful that our prayers will be answered. We can’t always expect, with the majority of the migration into our state coming from the North, that we will be able to count on the level of political consensus we enjoy currently.

National policy is my usual beat, but inasmuch as I am unburdening myself this week in the state arena, there is one more step we need to take to propel our economy forward and to transform our society into the knowledge based economy we seek. I have now been in this state long enough to feel confident when I say we have both the intellectual and financial capital to transform our economy. We even have described our goals in some detail, but we are going to fail until we handle the financial "Chasm" for the companies/economy we want.

The financial chasm comes for the start-up company when the investor/founder has used up all his capital and ability to fund debt, and he can't get to the revenue flow figures that even the most entrepreneurial venture fund insists upon before investing. It is at this point, we need to look to Pennsylvania for a solution that has proven to be both cost effective and has helped transform their rust belt into an opportunity belt for technology ventures.

Pennsylvania has created a state sponsored venture fund that emphasizes knowledge based employment growth through its Ben Franklin Technology Partners. Originally capitalized with $60 million in state funds and divided into four regionally targeted breeder funds, loosely attached to prominent research universities in the state, the funds, when they make an investment, get back convertible preferred shares or notes and warrants that allow them to participate in the up-side at the same time they have a debt that experience proves will be paid in sufficient percentage to more than nullify the cost of the investment to the citizens of Pennsylvania. The Pennsylvania model includes a state board with non paid directors and local boards, also non-paid, for the four breeders. The funds universally will tell you that their success in meeting their goals to help build a new Pennsylvania has been a function of the professionalism of their decision making process that is devoid of politics.

South Carolina is not as big as Pennsylvania and can get good coverage with three regional funds which I would propose be at Clemson, USC and The Citadel/MUSC. The state currently provides some funding for pure research, and a South Carolina version of Ben Franklin would help attract and retain the innovative capital we need to get promising technology firms to the point that our own commercial risk capital can then provide the capital to get them the rest of the way.

These two proposals, when considered as sequential steps, will succeed in breaking the logjam that has held us back. I would welcome the support of my readers to help get this done. I am confident that if we can find the political will to undertake these two actions, we will unleash the forces that will put South Carolina into the forefront in our region and will lead us to the vibrant economy that will secure our future.

Copyright © 2007 by Robert E. Freer, Jr. All rights reserved

About the author: Robert E. Freer, Jr. is President of The Free Enterprise Foundation. He is a Visiting Professor, at The Citadel and elected in 2005 to be their first John S. Grinalds Leader in Residence. A regular contributor to the Mercury, He can be reached by E-mail at The Citadel . Copies of his earlier columns can be found The Free Enterprise Foundation.

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