DEI ban bill would cost SC state agencies, universities at least $86 million, report says
A bill to ban diversity, equity and inclusion efforts throughout state government, colleges and schools would increase costs for South Carolina state agencies by at least $86 million annually and reduce grants and revenue by $8.2 billion, according to a state report.
The bill would impact state agencies, including public colleges and K-12 school districts, and the businesses they associate with. It is framed as a means to protect civil rights and end what it calls illegal discrimination preferences, prohibiting differential treatment on the basis of race, sex, ethnicity, gender, or sexual orientation.
Illegal discrimination preferences, under the bill, would include diversity, equity and inclusion programs, commonly known as DEI. The programs are traditionally meant to efforts to promote the fair treatment and full participation of all people, particularly groups historically underrepresented.
Each state agency would be barred from spending any money until it submits a report certifying compliance. The bill would also require a state audit every four years to ensure compliance. Failure to do so would result in the withholding of funds.
The bill has garnered a large number of supporters in the State House, with more than 70 sponsors in the House of Representatives, though it was opposed by students, teachers and community members during more than four hours of public comment during a committee meeting last week. No one spoke in favor of the legislation.
The South Carolina Revenue and Fiscal Affairs Office asked state agencies, local governments and others to estimate the potential financial impact of the bill. A report released last week found that it could cost at least $86 million to implement the program. It could also impact billions of dollars in federal grants and state revenue.
Many agencies said they would have to hire additional staffers to meet the bill’s requirements for regular reporting on DEI efforts both within their organizations and the companies they do business with.
However, the total extent of impact is unknown, the report noted, because it depends on contracts, vendors and grants that an agency or local government issues. It could also impact state revenue.
The report found that out of the 64 agencies, colleges, and local governments that responded, 45 agencies and several local governments indicated the bill would have little to no impact on their operations, and local revenue would likely be unaffected. However, others expressed concerns.
One of the biggest issues is a provision in the bill that would require private businesses that work with state government to certify that they do not have any program that promotes DEI. Among the questions raised about that provision is whether a contract with a business that has such a program would be immediately terminated, raising the potential for litigation about breach of contract and the cost of finding someone else to do that work.
At least 19 agencies and local subdivisions told the office that the provision would have a “significant” impact on government operations.
Here’s a look at how several state agencies said the bill would impact them.
Attorney General
The state Attorney General would be expected to enforce the DEI bill, make recommendations to the General Assembly and develop a platform for violation complaints.
At least nine additional full-time employees would be needed, according to the report, including attorneys, policy analysts, an investigator, a program coordinator and a program assistant. All in, it would cost the Attorney General’s office $1,371,000 in expenditures for staff compensation and operating costs.
Cost to state agencies
The state Fiscal Accountability Authority said it is unable to quantify the potential impact of resoliciting all state contracts, but believes that it would be considerable to be compliant with the bill’s provisions.
Overall impact would be depend on if current contracts are allowed to expire or be required to be terminated immediately. This could also result in litigation against the state because of breach of contract. The impact would also depend on whether private sector businesses would change their policies.
If the bill led to fewer firms competing for state contracts, acquisition costs to the state would increase, according to the report.
▪ The state’s Retirement System Investment Commission said the bill would likely not impact its contractors, because it is only allowed to consider “pecuniary factors” when making investment decisions for South Carolina’s benefit retirement plans. But if the bill were to apply to the commission, the bill would “significantly alter operations of the agency.” Most of its partners, including investment consultants, its custody bank, and other third-party service providers, would likely not be certified under this bill.
Therefore, the investment and management of the retirement system’s assets would need to be brought in-house, requiring at least 75 additional employees and $83,500,000 in expenditures to manage the retirement system portfolio.
▪ South Carolina State Library reported it would need four additional employees to bear the extra administrative workload. It would cost $397,000 in salary and fringe benefits. Furniture, equipment and software would have a one-time cost of $36,000 and recurring cost of $20,000 in software. The bill would, therefore, cost the state library $453,000 for the upcoming fiscal year, and $417,000 annually in the future.
▪ The state’s Commission on Higher Education predicts that the DEI bill would require the agency to review internal policies and look into its 128 current vendors. According to the report, the commission would need to add employees to lead compliance efforts, which would cost $167,000, and an additional $8,000 for equipment and software outfitting, for a total annual cost of $175,000. The commission also noted that inter-state reciprocal programs would also need to be studied for compliance.
▪ The state Office of Resilience, which works to lessen the impact of disasters on the state, would require two additional employees and one-time equipment, with an expected expenditure of $168,000 for the coming fiscal year and $164,000 annually thereafter.
▪ The South Carolina Educational Television Commission could not quantify the total fiscal impact the bill could have, but noted it would impact the South Carolina Procurement Code and the minority business enterprise utilization plan, which requires the commission to use minority businesses. The bill might also affect ongoing capital projects. SCETV could incur “significant costs” if the agency was required to restart procurement processes to find new vendors.
▪ The state Department of Commerce said that the bill would have a fiscal impact, but is not yet determined. The department also expressed uncertainty regarding the the department’s future ability to provide incentives to companies that locate or expand in South Carolina.
▪ The state Department of Public Health said its staff and resources would be significantly burdened by the bill, though the “significant” impact is yet to be determined.
Provisions of the bill could affect agency functions because of “essential vendors to provide technology services, operational needs, and maintain both the electronic health records and the vital records system.”
“Verifying that these vendors do not violate the provisions of this bill may be time consuming and difficult or could disrupt agency operations,” the report read.
▪ First Steps, a state agency that focuses on early childhood development, indicated the bill’s impact would be minimal, but ensuring contractors, vendors and grant recipients do not have DEI policies could require a lot of time and resources.
▪ The State Auditor’s Office said the additional work created by the DEI bill could be handled by existing staff. However, if it becomes too much, the office expects to request additional staff and funding.
Some of the Palmetto state’s largest public institutions of higher learning could be greatly affected.
▪ The University of South Carolina reported that the bill could substantially impact the school.
“Extensive compliance, reporting, and audit requirements may place demands on USC administrative staff that could divert funding and attention from core educational missions,” the report read.
According to the report, USC said that “many” of the university’s current and potential corporate partners have DEI policies and may be “unwilling” to comply, instead choosing to “sever relationships with USC, which will fiscally and operationally impact the university.” That could, in turn, impact research funding, development opportunities, and career pathways for students.
It could also limit the vendors and contractors the university would be able to choose from, which could lead to higher costs.
▪ Clemson University and The Citadel had similar sentiments. The bill could limit vendors and contractors and raise costs. For Clemson, it might affect current contracts for banking partners, information technology, architecture and construction.
Ultimately, the three colleges did not provide a dollar amount.
▪ The Medical University of South Carolina, however, said the bill would require the school to review internal policies for any violations and certify that contractors and grant recipients are also in compliance, greatly increasing administrative workload. MUSC would likely require three additional employees, which would cost at least $405,000 annually, according to the report, beginning in the next fiscal year.
The bill would also affect the Medical University Hospital Administration within MUSC, which would also have to hire additional personnel. This would cost $450,000 annually.
The bill’s impact on local governments is expected to “vary widely” depending on the number of contracts and vendors that require review.
▪ Of the two counties and 18 school districts that responded, most said they did not anticipate any financial impact. However, five districts said they would need to hire one or more additional staff members to comply with the requirements, and two said the bill would have a notable impact, as did one county.
Potential loss of revenue and grants
The DEI bill could also impact the state’s revenues related to long-term return on investments by the Retirement System Investment Commission, if it is to apply to the agency.
If the commission has to shift to a simplified investment approach as part of the transition to internal management, it’s 30-year annual expected return will fall from 7% to 6%, a loss of $7.8 billion in expected investment return over 10 years.
The Office of Resilience said the bill may substantially impact the grant revenue South Carolina receives. If the office is unable to determine if contractors, vendors, and grant recipients are compliant, projects currently using federal grant revenue could be delayed or canceled. And the state might be required to return funds for other grant programs.
The federal grants that could be impacted include $100 million from the American Rescue Plan Act State and Local Recovery Funds; $162 million in Community Development Block Grant for Mitigation; and $151 million in Community Development Block Grant for Disaster Recovery for Hurricane Helene.
MUSC said the bill might also lead to loss of grant funding. Current federal grants are being reviewed to ensure compliance with federal law and guidelines, according to the report, but an additional $20 million of MUSC grants may have some element of DEI that may be at risk, including some funding from private foundations. Medical research grants or mentorship training grants for students could also be affected.
This story was originally published March 12, 2025 at 3:47 PM.
