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COVID-19 closures could shrink SC's budget surplus by $1.2 billion

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Micah Rappa takes advantage of an empty parking garage near Marion Square. The Francis Marion Hotel, adjacent to the garage, has shut it doors at least until April 9. South Carolina legislators could have $1.2 billion less to spend for the upcoming fiscal year, but even with a three-month shutdown due to the COVID-19 pandemic, the state could still have a $750 million surplus, according to updated projections Thursday. Lauren Petracca/Staff

COLUMBIA — South Carolina legislators could have $1.2 billion less to spend for the upcoming fiscal year, but even with a three-month shutdown due to the COVID-19 pandemic, the state could still have a $750 million surplus, according to updated projections Thursday.

The $10 billion spending plan the House approved last month for 2020-21 relied on a surplus of about $1.9 billion. That plan became moot days later, as the pandemic forced a wave of business closures and reductions, both voluntary and by Gov. Henry McMaster's orders.

"If there’s any bright spot," it's the timing, said Frank Rainwater, director of the state's Office of Revenue and Fiscal Affairs. 

The state's economy was doing so well until March, no cuts will be necessary to the current budget that ends June 30, he said. 

"The silver lining to the bad news" is that even with unprecedented — and still rising — unemployment, there will still be additional revenue for a reworked budget, said House Ways and Means Chairman Murrell Smith, R-Sumter. "That's a testament to how strong the economy was."  

But deciding how to spend the much smaller surplus will be difficult, especially as legislators weigh new ideas for jump-starting the economy and helping businesses and residents recover. More than 180,000 South Carolinians filed for jobless benefits over the past three weeks.

Of the still-expected surplus, only $244 million would be available for recurring expenses, such as pay raises for state employees and teachers, which could evaporate. The $3,000-per-teacher pay hike alone, which McMaster pushed and the House approved, would cost $213 million. 

The other estimated $510 million — what's left of higher-than-anticipated tax collections over the last two years — could be used for one-time expenses, such as maintenance at colleges and prison safety upgrades, which the House budget spent more than $200 million and $100 million on, respectively. 

Rainwater cautioned his office is still months away from receiving tax data needed to make more reliable estimates.

"It may not be until June or July that we’ll have a firm handle on revenues, so we're flying blind on what’s going to happen," Rainwater said. 

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Other unknowns include whether the federal government approves additional stimulus money and — the biggest variable — how long businesses remain closed.

"If this drags on four to five months, results will get even worse," said economic researcher Robert Martin.

With all the uncertainty, legislators want to pass a continuing resolution to keep state government running at current levels past July 1, then write a budget later in the summer or fall after the economic outlook becomes clearer. 

Legislators returned to Columbia on Wednesday to do that.

But a dispute in the Senate over South Carolina's only state-owned utility, Santee Cooper, prevented them from getting it through both chambers.

Legislators will need to return to Columbia by May 14, the scheduled end of the regular session, to prevent state government from shutting down July 1.

Senate Finance Chairman Hugh Leatherman said he's pleased the Board of Economic Advisers isn't expecting a budget shortfall, but the unknowns discussed during the meeting "underscores the need for the state to operate under a continuing resolution until we get a better understanding of the COVID-19 revenue impacts." 

He said he's confident one will be passed before June 30 and is "committed to writing an informed budget that meets the needs of our citizens when we have better information."    

Follow Seanna Adcox on Twitter at @seannaadcox_pc.

Assistant Columbia bureau chief

Adcox returned to The Post and Courier in October 2017 after 12 years covering the Statehouse for The Associated Press. She previously covered education for The P&C. She has also worked for The AP in Albany, N.Y., and for The Herald in Rock Hill.

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