About 40 state workers were told not to come to work on Monday after Gov. Nikki Haley eliminated all funding for the two state agencies that employ them.

Haley struck the combined $9.5 million budgets of the South Carolina Arts Commission and the South Carolina Sea Grants Consortium late Thursday night, two of her 81 vetoes of the state’s $23 billion state budget.

Her vetoes included $10 million to help give teachers a 2 percent pay raise, $10 million to help lure companies to South Carolina and dozens of local projects and earmarks Haley criticized as “pork barrel spending.”

The Arts Commission hands out grants for arts projects statewide and oversees the state art collection. The Sea Grants Consortium helps the state’s research universities pursue federal funding to research issues relating to the South Carolina coastline. Both agencies have 20 employees.

Haley says both agencies are redundant. Research universities can apply for their own grants, she said, and the private sector can support arts projects.

“I would rather give this money to the taxpayers and let them decide which charities they are going to give money to than to allow the Legislature to decide,” she said. “It’s the responsible thing to do.”

Haley has tried to eliminate these agencies before – but this year is different. Because the state Legislature took so long to pass a budget, it pushed Haley’s budget vetoes past July 1, the start of the state’s new fiscal year. That means Haley’s vetoes eliminated the agencies’ current operating budgets.

“This situation was just never envisioned in state law,” Comptroller General Richard Eckstrom said. “The practice has not ever been to approve a new fiscal year budget during the new fiscal year.”

House Minority Leader Harry Ott, D-Calhoun, criticized the governor’s decisions.

“It is disappointing that she would put a target on the Arts Commission and the Sea Grants Consortium,” he said. “It’s been proven over and over that having access to the arts helps attract industry to South Carolina. ... The sea grants is pure research. By saying she doesn’t want it, I guess she wants to not research and not be on the forefront of trying to improve things in South Carolina.”

Eckstrom, the comptroller general, said the 40 state employees affected by Haley’s budget vetoes cannot come to work even if they wanted to because of liability issues.

“They really are not employees at this point,” he said.

Ken May, the Arts Commission’s executive director, said he plans to start a campaign to save the commission, saying he plans to use his personal cellphone to make calls.

“The state can’t wrest it from my grip,” he said.

Haley also vetoed $10 million in one-time money for pay raises for South Carolina’s public school teachers. Haley did not veto $38 million in recurring money set aside for the raises, and she did not veto an extra $152 million in public education spending, which she says is enough to pay for the raises.

“We believe teachers deserve those pay raises. ... (But) to pay $10 million (in one-time money) for expenses that are going to continue to occur is a train wreck,” Haley said. “The districts are going to have to live within their means and figure out how to respond to it.”

House lawmakers had planned to take the summer off and return to Columbia in September to take up Haley’s budget vetoes. But House Speaker Bobby Harrell said called Haley’s decisions created “ambiguity” that lawmakers must clarify as soon as possible. He called House lawmakers back to Columbia for a special session at 1 p.m. July 17.

“School starts back in a couple of months, and the governor does not want teachers to get the pay raises that they are supposed to get,” Harrell said in a statement. “The decision on whether to let the governor stop their pay raises needs to be made before the school year starts. Teachers need to be able to plan for their families.”

The state Senate will return at 1 p.m. July 18 to take up Haley’s budget vetoes.

The 2012-13 budget was a good one for state agencies, with 30 of them getting increases of at least $1 million or more over last year thanks in part to an extra $1.4 billion in new tax dollars lawmakers had to spend. Haley left most of that new spending in tact – including $48 million in raises for state workers, $2.5 million for a new electronic voting system in the House of Representatives and $2 million for the Lieutenant Governor’s Office on Aging.

But Haley said the “hundreds of millions of new tax revenues do not reflect our true economic health,” and said her vetoes are a warning to lawmakers that if they continue to hide increased spending she will have to start vetoing entire sections of the budget, much like her predecessor.

“I don’t want to be Mark Sanford,” she said. “I want to go and be able to explain to the people of this state that we made good common sense decisions based on the fact we had the ability and the processes to do so.”

In a surprising move, Haley vetoed $10 million that would have gone to the state Commerce Department to help lure companies to South Carolina.

The federal government has reached a $25 billion settlement with five of the nation’s largest banks – Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo – for improper lending practices during the housing crisis. South Carolina is one of 49 states scheduled to receive that money.

During the legislative budget debate, House and Senate Republicans wanted to give $10 million of South Carolina’s $28.2 million settlement to the Department of Commerce’s “closing fund” – which the department uses to build roads and water and sewer lines to lure large companies to come to South Carolina.

Democrats, however, said the money should be used to help struggling homeowners avoid foreclosure – and Haley agreed with them.

“It is disingenuous to take a mortgage settlement that was intended to help people with foreclosures and put it into a closing fund for Commerce,” Haley said. “We don’t win projects based on throwing money at companies. We win projects based on a good business environment of tax relief, a trained work force and being a low-unionized state.”

Rep. Gary Simrill, R-York, disagrees with Haley. He said with South Carolina’s recent economic development successes – including Boeing and Continental Tire – the “timing is right” to increase the Commerce Department’s closing fund

“Greatness has been done and South Carolina is poised for more when it comes to economic development and job creation,” he said.

Haley said her “biggest disappointment” with the budget was what she called the return of “pork barrel spending” – small, local projects that had been scarce during the lean budget years.

She vetoed $30,000 for the Irmo Veterans Park, $300,000 for the North Myrtle Beach Historical Museum, $200,000 for the City of Charleston African American Historic Sites Preservation and $200,000 for the City of Hilton Head Mitchelville capital land purchase.

“When you have a budget where there is extra money is you see that everybody goes to play,” she said. “It was embarrassing for them, it’s embarrassing for me and it should be infuriating for the taxpayers.”

Read Gov. Haley’s budget veto message below:

Read Gov. Haley’s capital reserve budget veto message below:

Reach Beam at (803) 386-7038.