August 2007

Budget spending hits the wall
(view full press release)

Project could fuel Columbia's future
(full article)

State pledges $15 million to back hydrogen energy research projects
(full article)

August 16, 2006
(view original press release)

Budget spending hits the wall

Announced August 16, 2007 by Comptroller General Richard Eckstrom

Growth in State revenues faltered during the final two months of the fiscal year ended June 30, 2007 (Fiscal Year 2007). Even though revenue growth had been erratic throughout the last half of the year –thus reversing a two-year trend of relatively consistent growth -- budget writers had hoped that the final two months of the year would accommodate them by generating stronger growth, and they budgeted to spend as if the stronger revenues would develop.

Robust spending plans, which were ratified one month prior to the end of the fiscal year, had relied upon anticipated revenues that ultimately failed to come to pass. In the end, actual revenues fell short of hoped-for revenues by $80.8 million.

As a result, $80.8 million in contingent and supplemental appropriations, which had been designated for expenditure in Fiscal Year 2008, can not be authorized for payment. This includes the entire $65.0 million of Contingency Reserve Appropriations and the final $15.8 million of proposed spending from $585.5 million in Supplemental Appropriations.

The $65.0 million of Contingency Reserve Appropriations, which will not be funded or paid, includes $50.0 million for an account to begin pre-funding health insurance benefits for public retirees (OPEB Trust Fund), $10.0 million for the State Department of Education to supplement school district funding, and $5.0 million for the South Carolina Research Authority for hydrogen grants.

Of the $585.5 million total in Supplemental Appropriations or "wish list spending," the final $15.8 million in listed projects will not be funded or paid. Proviso 73.12, which authorizes these supplemental appropriations, stipulates that projects are to be fully funded in the order they are listed until available funds are exhausted. However, at the point after which remaining funds are insufficient to fully fund the next project on the supplemental list, then that project is to be partially funded to the extent of remaining available funds. See attached page 10 for a list of affected projects and amounts affected.

While there are persistent signs that the state's economy is beginning to soften, our economic growth over the past two to three years has provided opportunity for State government to prepare for an economic slowdown that might be emerging. The Budgetary General Fund has fund balances on hand of $1.1 billion, including $167.7 million in the General Reserve Fund and $11 1.8 million in the Capital Reserve Fund -- both of which are at their "full funding" requirement. In addition, at June 30, 2007, agencies on average have general carry forward amounts of nearly 2% of their annual appropriations, and they have similar amounts of special carry forward, which together provide the State another $225.6 million in reserves to cushion against economic downturns. Fund balances in the Budgetary General Fund are at historically high levels at June 30, 2007.

Yet major financial challenges remain. Specifically, the State made scant headway during Fiscal Year 2007 in dealing with two very large areas of financial concern.

First, the unfunded liability in the State Retirement System continues to careen out of control with no workable solution in place to permanently fund COLAs. The Retirement System deficit now stands at $10 billion (the actual deficit becomes $16 billion if the System were to properly recognize the additional actuarially-determined liability for the State's acknowledged intention to continue granting annual COLAs).

Second, the State's unfunded liability for providing health insurance benefits for public retirees (OPEB liability) now stands at $9 billion. While State officials initially planned to establish an OPEB trust fund by June 30, 2007 to begin prefunding these retiree health insurance benefits, officials have not yet established such a trust fund nor have they committed sufficient funding for these benefits. However, legislative leaders have pledged again to establish a trust fund and more appropriately provide funding for these benefits beginning in Fiscal Year 2008.

The State's continuing withdrawal from its historical commitment to more conservative financial management is short-sighted and unfortunate. Revenue estimates have become overly aggressive, spending growth has become unsustainably robust, capital borrowing has become too commonplace, and the funding of promised employee benefits has become grossly imbalanced with the routine increases in those promised benefits.

I urge all elected State financial officials to work together and recommit to the State's historically more conservative financial management practices. These are practices that for decades justified and maintained South Carolina's former AAA bond credit rating. Only by working together on these matters will we ever be in a position to recover our lost AAA rating.

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August 15, 2007
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Project could fuel Columbia's future

A hydrogen fueling station to service a fuel-cell bus that will debut in Columbia next year and a fleet of hydrogen-powered cars the following year could be under construction soon near the city’s Canal Water Plant.

But beyond providing fuel for those vehicles, the station is seen as Columbia’s stake in the ground for the hydrogen economy.

The hope is that as automakers develop hydrogen-powered cars over the next decade, Columbia could be among the first places where they are welcome.

The Columbia station would be the only publicly accessible hydrogen fueling station in the Southeast, outside of Florida.

Just about 80 hydrogen fueling stations are either in operation or planned in the United States and Canada, the National Hydrogen Association said. The vast majority in this country are in California. Few are on the East Coast.

The Columbia City Council will be asked today to lease a city-owned 1.33-acre parcel at Gist and Richland streets to partners of the Greater Columbia Fuel Cell Challenge for a hydrogen fueling station.

The S.C. Research Authority, which manages the project, could complete a contract this week with an undisclosed company to build and operate the station.

The $2.4 million station is expected to be among the first projects funded under the State Hydrogen Infrastructure Fund, an economic incentive fund set up by S.C. lawmakers.

The fueling station needs to be running by next summer when a hybrid fuel cell-electric bus is expected to start rolling on Columbia’s streets for a year. That’s a few months earlier than planned. The bus should be in Columbia when the National Hydrogen Association annual meeting arrives in April 2009.

The S.C. Research Authority, USC and the Central Midlands Transit Authority are part of the 16-member team that landed the bus project.

The station also will be available to fuel hydrogen-powered cars expected to visit Columbia as part of the National Hydrogen Association meeting.

A couple dozen hydrogen-powered fuel cell vehicles were part of the national association’s meeting in San Antonio in April.

Columbia’s fueling station is clearly the most expensive project the fuel cell challenge has undertaken, and it is a bit of a “chicken and egg issue,” said Neil McLean, executive director of EngenuitySC, one of the partners in the fuel cell challenge.

“I think the bottom line with the fueling station is that if you are going to be a serious contender in the hydrogen economy, you’ve got to have a fueling station,” McLean said. “It is part of the price for admission.”

The station will be capable of fueling cars with gaseous hydrogen, which is the prevailing fuel for fuel-cell vehicles. But it also will be able to fuel BMW’s liquid hydrogen vehicles if the German automaker sends demonstration cars to Columbia, McLean said.

The station will receive bulk liquid hydrogen from a dealer. It will be stored on site and converted to a gas for the fuel cell vehicles. Eventually, the station will create the hydrogen fuel.

The site near the city’s Canal Water Plant — downtown on the riverfront — is easily accessible, McLean said.

“It is close to EdVenture (children’s museum), so we anticipate that we could have some kind of shuttle between there if we wanted to get kids down to it,” he said.

The site has few neighbors beyond the water plant and AT&T.

The only permit the Department of Health and Environmental Control requires for the station is a groundwater permit, and both the city and state fire marshals have signed off on the proposal, said Jim Gambrell, the city’s director of economic development.


Hydrogen fuel would lower the dependence on oil by taking advantage of the planet’s most-abundant element. The fuel is environmentally friendly — the only byproduct is water vapor.

Automakers tested hydrogen vehicles, and Honda plans to start production of the cars as early as next year. They are not expected to become widespread for at least another decade.

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August 4, 2007
(view original article)

State pledges $15 million to back hydrogen energy research projects

Legislation providing for the development of hydrogen and fuel cell research in South Carolina has created a $15 million fund to lure companies involved in hydrogen fuel research to the state.

Hydrogen research funding

The Hydrogen Infrastructure Development Act, passed by the General Assembly on June 14, has set up the fund in the state Treasury that supports development over the next three years. $5 million has been allocated to the fund for 2008.

"This substantiates South Carolina's claim to leadership in the hydrogen future," said U.S. Rep. Bob Inglis (R-SC). "We're competing with 49 states and other countries. It's a rare opportunity where we really can move forward as a state."

The South Carolina Research Authority is responsible for managing and distributing the funds, which will be available to private companies that work with the universities of South Carolina, Clemson, South Carolina State and the Savannah River National Laboratory.

The global demand for fuel- cell technology is projected to be more than $2.6 trillion by 2021. The Hydrogen Infrastructure Development Act is expected to provide the state with 40,000 jobs by 2020 and $10 billion in capital investment.

Is it the right move?

But there are some who think the act is not the only way forward for the state's economic development.

Gov. Mark Sanford, who vetoed the act in June and was overridden, says South Carolina shouldn't put all of its eggs into one basket.

"With hydrogen, we've been supportive in many areas, but it is our opinion that this bill goes beyond this zone of deliberate investment in unproven technology," Sanford has written on his Web site.

Sanford says state funds allocated this year for hydrogen and fuel-cell research not related to the Hydrogen Infrastructure Development Fund already total $3.6 million, including a $1 million grant given to the University of South Carolina.

Allocating the funds

EngenuitySC, a partnership focused on nurturing hydrogen and fuel-cell research in the state, will get $100,000 from the University of South Carolina to help with preparations for the National Hydrogen Association meeting to be held in Columbia in spring 2009.

The state Hydrogen and Fuel Cell Alliance received $367,640 in recurring funds.

"Alternative fuels certainly have a role to play," said Tim Pettit, spokesperson for Duke Energy. "If they can be developed into viable sources of energy, they can help decrease our dependence on non-renewable energy sources."

The Hydrogen Infrastructure Development Act allows a sales tax exemption for consumers purchasing hydrogen and fuel cell related technologies, as well as other alternative energy vehicles.

Taxpayers can make contributions to the Hydrogen Infrastructure Development Fund and are allowed a tax credit equal to 25 percent of a qualified contribution. Interested persons or organizations request a preliminary application at the SCRA's Web site.

Bill Mahoney, CEO of SCRA, said preliminary applications that were received by July will be evaluated with proposals due by Sept. 7.

The initial round of awards is expected to be made by October. A second round of awards for proposals submitted after Sept. 7 but before Oct. 26 is expected to be made in early December.

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