The Budget and Control Board was created by law in 1950, but its roots reach far back into South Carolina history.

Just after the Civil War, the General Assembly established the General Sinking Fund, which was designed to help pay for construction and repairs to state buildings. The Sinking Fund still exists to this day and many of its other responsibilities are now part of the Board’s Insurance Reserve Fund. While names and flow charts have changed over the decades, there has always been need for special services that help the rest of state government serve the people of South Carolina. That is why there is a Budget and Control Board today.

As World War II ground toward a victorious conclusion, the South Carolina Preparedness for Peace Commission was charged with recommending reforms to the state’s governance, taxation and economic systems to prepare them for what was expected to be a jarring transition from a wartime footing.

This report carried the seeds for what would become the state Budget and Control Board. Most of the functions that the Board was to manage already existed in state government, but the authority was scattered among many different boards and was not centralized.

This study called for complete overhaul of South Carolina state government. While not all of the report was adopted, the study outlined the basic structure and duties of what will become the state Budget and Control Board.

The commission recommended merging the existing State Budget Commission (which proposed the state budget and approved transfers between accounts); the Board of Claims, (which settled lawsuits and bills against the state);and the Sinking Fund Commission (which was in charge of building insurance and property management

These entities were to be supervised by a new “Finance Committee” consisting of the Governor and the chairmen of the two budget-writing committees.

Three years later, the General Assembly created a unique entity to help reform the state’s agency structure. The State Reorganization Commission consisted of 13 members, primarily from the General Assembly. The commission could submit plans to reorganize existing agencies to the Governor, who sent them on to the legislature. To prevent deadlock, lawmakers could only approve or disapprove the plans in full – no amendments or revisions were allowed.

In early 1950, Governor Strom Thurmond submitted Reorganization Plan 2 to the General Assembly. It called for consolidating 10 existing boards and commissions under supervision of a new Budget and Control Board. The Board itself was an expanded version of the old Budget Commission with the addition of the state’s two other fiscal officers - the State Treasurer and the Comptroller General. Lawmakers approved the plan with little disagreement.

It was fitting that the first meeting of the Board took place June 24, 1950 in the office of Governor Strom Thurmond. Most of the major figures of South Carolina politics during the second half of the 20^th Century would serve on the Board, including James F. Byrnes, Fritz Hollings, Edgar Brown, Robert McNair, Dick Riley, Rembert Dennis, and Carroll Campbell.

But it would be two administrators who are almost forgotten today that would play a decisive role in shaping the Board in its formative years. Until the creation of the Executive Director in 1978, the State Auditor served as the de facto administrative officer for the Board. Two men, James Smith and Pat Smith, held the post for more than four decades, and would quietly make the State Auditor’s Office among the most powerful in state government.

As both auditor of state agency finances and Board secretary, the Smiths were in a position to peer into every nook and cranny of state government. While governors and other elected officials came and went, the Smiths stayed. Auditor James Smith held the post from its creation in 1933 until retiring in 1965 in favor of his nephew Pat Smith, who remained until 1976.

Key to the importance of the State Auditor was his office’s role in preparing the state budget. From 1950-94, the Budget and Control Board submitted the initial budget proposal for consideration by the General Assembly. For much of this period, the legislative budget committees had little or no staff to tackle the daunting task of appropriating money to agencies. They deferred largely to the Board, which includes the chairmen of the two budget-writing committees. The Board, in turn, largely deferred to the State Auditor, who had the time and the staff to handle the task.

“Nobody reads the tons of stuff given to the Budget and Control Board by the state agencies except Pat Smith,” remarked Charles D. “Pug” Ravenel, who during his 1974 gubernatorial campaign called Smith the “most powerful man in state government today.”

“The state auditor absolutely, unilaterally developed the state budget, then he audited it, and then he controlled it,” said Bill Putnam, who was State Auditor before becoming the Board’s first Executive Director. “That, from a standpoint of honest conscientious people, was a great system But we could have been South Carolina’s version of Enron…if people hadn’t had some integrity about it.”

To a large extent, the auditor accumulated power by default. Until the 1990s, the governor lacked the power to control the executive branch of state government. The part-time legislature was not equipped to handle daily matters. The auditor “exercises his vast power because he must: no one else has the numbers on income and outgo and the expertise to make the crucial decisions that someone must make,” a political columnist wrote in 1976. “The power had to go somewhere. Most of it went to the State Auditor’s Office and the man who occupies it.”

Events would begin to make the heavy centralization of power in one office impractical. Starting in the 1960s, state government began to grow. South Carolina’s economy was developing as the nation’s economic focus shifted South and West. Equally important was the strong influx of federal dollars for social services, environmental protection and law enforcement.

The result was that total state agency expenditures grew from less than $500 million in 1965 to nearly $3 billion in 1980. Even when adjusted for inflation, the state’s overall budget tripled during this time with an average yearly growth rate of 27 percent. Federal and other funds accounted for 40 percent of state agency money in 1979-80, up from 24 percent in 64-65.

Much of that money paid for new state employees. In just five years from 1973 to 1978, South Carolina state government added nearly 14,000 positions, a 30 percent increase. Payroll grew 81 percent during that time. The Board would play both a major role in helping state government manage the influx and was also tremendously changed as an agency by the new responsibilities it assumed.

A crucial need for state government was the creation of a statewide personnel system. Traditionally, each agency set its own hiring rules, pay scales and promotion policies and employees had no protection against political or personal favoritism on the job.

“State employees now are administered by a maze of varying personnel policies which make performance in a position with one state agency almost completely different from doing the same work in another agency,” the South Carolina State Employees Association newsletter stated in 1965. “A secretary in one state office might qualify only as a stenographer or even a clerk in another, although the duties and responsibilities are identical in all of these. Pirating of employees due to differences in compensation between agencies is a commonplace practice and wasteful of human and financial resources.”

As early as 1951, legislation was introduced to create a statewide merit system similar to those that existed in 23 other states. Under such a plan, workers would take tests to qualify for hiring or promotions. Lawmakers refused to adopt the idea and eventually proposals shifted to a plan that would establish a personnel board which would create a standard system of classifying all state jobs and would set appropriate pay scales for each position based upon its duties.

Again, the state Senate said no. Finally Governor Robert McNair, who had long advocated efforts to improve state personnel practices, asked the Budget and Control Board to establish a State Personnel Division under authority the Board was granted in its 1950 enabling act. In 1968, Earl Ellis was named the state’s first personnel director.

Many other changes would take place during this era. They include:

• Creation of the state employee health insurance system in 1972 to serve state, school and local government employees. It now covers more than 400,000 workers, retirees and their dependents – or nearly one out of every 10 South Carolinians.

• Establishment of the Office of Research and Statistics in 1966. A key job initially was to improve the state’s economic forecasting and prediction tax revenues to keep up with the rapidly growing economy. It also plays a key role in mapping new state and local electoral districts, which became an important task after the U.S. Supreme Court threw out the state’s county-based legislative districting in the 1960s. Later, through grants and partnerships with other state agencies, this office would develop an invaluable database covering almost every demographic aspect of South Carolina.

• The expansion of state computer and telecommunications services that would ultimately lead to the creation of a separate technology division within the Board in 1983.

• The formation of a state motor pool. Today, General Services’ State Fleet Management Office is the nation’s largest state-government managed fleet.

• More complex and thorough regulation of agency budgetary practices and procurement.

• Improved state budget monitoring. In 1984, budget monitoring duties that had belonged to the State Auditor were shifted to the new State Budget Office.

• Expansion of retirement savings options for state workers with the creation of the Deferred Compensation plan in 1980.

• Major construction projects that were managed by the Board, including the building of the Capitol Complex.

The growth of state government made it increasingly difficult for the Board to work as it had in the past. Since its creation, the Board had largely been a collection of individual units whose directors were hired and reported directly to the five Board members. And despite the great power focused on the state auditor, that office did not have the resources to closely manage each Board division while also carrying out its many statewide duties.

The five members of the Board were expected to directly supervise seven Board divisions ranging from general services to the motor fleet. A 1976 study found that the Board members had never had the time to develop any missions or goals for these divisions, leaving no way to measure if they were working properly. The best way to do that, the study recommended, was for the Board to hire an administrative officer.

In 1978, the Board created the position of Executive Director and selected Bill Putnam to fill the post. The Executive Director’s role was and remains to serve as a point of coordination and leadership among the various Board offices and the Board itself, which sets broad policy for the agency. The position has been crucial to providing leadership for the Board and all of state government in part because it has been a stable post itself – there have been only five Executive Directors in the near quarter-century since the job was created.

Over time, the Board would shift to a greater role in setting broad policy. Gradually, the Board would spend less time on routine administrative matters, which were increasingly delegated to be handled at the staff level. The Board held 34 regular meetings in 1977-78 but just eight in 1996-97. It was a natural change for a panel where each member holds another office with crucial statewide responsibilities.

The 1990 Lost Trust scandal would indirectly lead to great changes with the Board. The corruption scandal in the General Assembly spurred calls for a complete restructuring of South Carolina government. After several years of debate, comprehensive restructuring legislation was passed in 1993.

For the Board, perhaps the biggest change was the elimination of the practice of the Budget and Control Board submitting a draft state budget for the General Assembly to consider each year. Instead, this process was replaced by having the Governor submit an Executive Budget. For decades, the Board’s budget had been drafted after long and often tedious hearings at which each agency made its plea for extra funding. The change in budget practice significantly enhanced the Governor’s ability to shape policy and set priorities.

The Board also helped play a crucial role in helping dozens of agencies relocate or merge into new entities. The board coordinated efforts over two years to merge computer systems, change telephone numbers, shift government offices and redefine the roles of employees affected by the Legislature's plan. Restructuring also changed the shape of the Board as an organization. The State Fire Marshall and several other regulatory boards were transferred to the new Department of Labor, Licensing and Regulation.

By the mid-1990s the flow of power at the heart of government had been changed. No longer was the auditor a center of authority. Budget drafting belonged to the governor. Revenue forecasting had been moved to the Board of Economic Advisors. Budget tracking and administration belonged to the Board’s Office of State Budget. The administration of the Board was now the duty of the new Office of the Executive Director. Indeed, the State Auditor was purely that – an entity that audited state finances with few extra duties.

The political climate of South Carolina would also impact the Board. Beginning with the election of Republican Governor James Edwards in 1974, the GOP would begin to rise as a true force at the ballot box. Statewide offices, including those that make up the Board, would begin to change hands more rapidly with the advent of true two-party political competition. In 1995, the election of Governor David Beasley, State Treasurer Richard Eckstrom and the naming of Rep. Henry Brown as Ways and Means Chairman gave Republicans a majority on the Board for the first time. But between 1999 and 2001 there was a complete turnover in Board membership and Democrats held a 3-2 majority.

Other changes were in the making. In 1996, voters approved a Constitutional Amendment that allowed the South Carolina Retirement Systems to begin investing part of its funds in the stock market. In 1999, South Carolina became the country’s last state pension system to begin investing in equities.

The Board managed two of the biggest and most important facilities renovations in its history – the State House and the Governor’s Mansion. A new State Data Center merging central computer operations for 11 state agencies was also completed in 1999.

In its more than five decades, the Budget and Control Board has changed significantly. But its essential role to improve efficiency and serve the agencies that serve the citizens of South Carolina is unchanged is reflected in the mission statement it follows today: “We Make Government Better.”