S.C. budget forecasters’ decision to reduce their projections yet again confirms that the Legislature was right not to pass a budget in the spring but instead to keep operating state government under slightly tweaked terms of last year’s budget.
It does not confirm that the House was right this fall when it refused to adapt and adopt a Senate-passed plan that in addition to spending some of our still-huge reserve of one-time money automatically directed most of it to fill any budget gaps that could occur if tax collections continue to fall.
The state Board of Economic Advisors started 2020 projecting that the state would collect $461 million more in taxes in the 2020-21 fiscal year than in the 2019-20 year, or $10.25 billion. But after COVID-19 arrived, the board lowered its projection by $644 million in April and by another $58 million in May. That’s when the Legislature decided not to pass a budget for the fiscal year that started July 1 and instead keep operating state government under the terms of last year’s budget.
As the dream of a quick medical and economic recovery evaporated, forecasters reduced their projection by another $52 million in August, prompting the House to push budget debate to January. On Tuesday, with no second federal stimulus in sight, they reduced it by another $50 million.
The new projection, $9.45 billion, is still $36 million more than will be required to keep operating the government through this coming July 1. But one more reduction could trigger a state law that requires automatic across-the-board cuts when the revenue forecast drops below the budget.
The Legislature always has the authority to override any mid-year budget cuts — either by making targeted cuts, pouring in one-time revenue to make up the difference or, less responsibly, simply suspending the law that forces mid-year cuts. But at the moment, we don’t really have a Legislature.
The winners of the Nov. 3 elections have been sworn into office, but the House and Senate haven’t met yet to “organize,” and although they may hold organizational sessions between now and January, it’s not clear that they could pass any laws without the governor calling them into a special session, which would create the absurd situation of having to spend extra money (lawmakers get extra pay to attend a special session) to prevent budget cuts caused by a revenue shortfall.
Of course, the BEA can prevent such an absurdity by refusing to meet and certify a budget shortfall until the 2021 Legislature is up and running, but the fact is that even then, it will take time to pass gap-filling legislation.
That means passing that legislation should be job one for the Legislature, even before lawmakers decide whether the economic picture is clear enough to spend some of the one-time money that the COVID recession didn’t cut into. Since we still face a teacher shortage, now worsened slightly by the pandemic, it wouldn’t be inappropriate to use some of the one-time money to give teachers some or all of the annual raises that were put on hold because of the recession.
Lawmakers might also consider holding onto some of the money to prevent budget cuts next year, in case the BEA’s optimistic projections for slow but real growth next year and a return to full employment and normal tax collections by February 2022 are overly rosy. Although it’s never appropriate to use one-time funds to create new programs or new positions, there’s nothing wrong with using them to cover existing budget obligations in an emergency in order to prevent having to make cuts.