State tax collections 'right on target' so far

COLUMBIA — South Carolina's economic advisers said Thursday that projections for this year's $7.1 billion state budget are "right on target," but they warn a economic slowdown is coming.

Tough budget decisions still lie ahead, said Joel Sawyer, a press secretary for Gov. Mark Sanford.

An infusion of cash in October erased a three-month deficit and put the state $13 million ahead for 2007-08, said South Carolina's chief economist, Bill Gillespie.

"You're right on target," Gillespie told the Board of Economic Advisors. "We've never been this close at this time of the year."

The news eased fears of midyear budget cuts. But board Chairman John Rainey said he still thinks the state is heading toward a slowdown but said it should be short.

"I am very, very pleasantly surprised to find we're dead-on now," Rainey said. "But one robin doesn't make a spring."

Advisors said the dollar's falling value gave South Carolina a short-term boost because it made the state's exports cheaper.

"But there is a point where the sinking dollar is not good," Rainey said.

The board estimated the state will collect an extra $229 million in 2008-09, revenue growth of 3.2 percent. That compares to $581 million in new money collected in 2005-06 and $538 million in additional money last fiscal year.

The $229 million will vanish quickly because of Medicaid growth, required education increases and projects put into the budget with one-time money.

"It means we're essentially looking at being over $200 million in the hole," Sawyer said. "The bottom line is there's some tough choices that will have to be made."

Tax cuts approved by the Legislature will reduce revenue in 2008-09 by more than $300 million, according to the board. That includes $203 million for eliminating the sales tax on food and $86 million in income tax cuts approved earlier this year.