Sanford rejects stimulus funds for S.C.

WASHINGTON, March 20 (UPI) -- South Carolina Gov. Mark Sanford said Friday he will reject $700 million in stimulus funding because U.S. officials won't let him use it to pay down state debt.

Sanford had said he hoped to use $577 million in stimulus funds to retire education bonds and $125 million to pay down other state debt, but U.S. Office of Management and Budget Director Peter Orszag notified Sanford in a letter Friday that the stimulus funds may not be used to retire old debt, The New York Times reported.

Sanford, a Republican, issued a statement saying South Carolina "simply cannot afford to base 10 percent of state budget on money that will disappear in two years' time."

"As a result, we will not be seeking the use of these federal funds for the way they put our state even further into an unconscionable level of debt," Sanford said.

Under a provision of the stimulus bill, South Carolina state legislators can overturn the governor's decision.

Sanford was one of at least two governors asking the White House for flexibility in applying funds meant to shore up state budgets, CNN Money reported Friday. Several governors have rejected millions of dollars meant to expand unemployment benefits, saying their state coffers can't absorb the funding once the federal money runs out.

"Everyone's trying to figure out the limits on flexibility," Nick Johnson, director of the Center on Budget and Policy Priorities' state fiscal project, told CNN Money.

Alaska Gov. Sarah Palin said she would take 55 percent of the federal stimulus money for capital improvement projects and would refuse money for education, unemployment benefits and other programs she says the state can't fund after the federal money runs out. In Nevada, leaders are seeking a waiver, saying their money problems are so severe they can't meet the stimulus law's requirement that it fund its higher education system at 2006 levels, the report said.