COLUMBIA — Gov. Henry McMaster asked legislators Thursday not to create a state budget next month as planned and instead keep government running at last fiscal year's spending levels while the economic outlook remains uncertain.
McMaster also told state agency directors who report to him not to ask for more money, regardless of what legislators do.
The Republican governor recalled that when 2020 began, there was broad support for making a "transformative investment" in education including raising teachers' salaries and extending full-day kindergarten for 4-year-olds statewide.
Other intended spending included safety upgrades at South Carolina's prisons, long-overdue repairs at pubic colleges and repaving crumbling roadways. But those plans simply vanished with pandemic-forced shutdowns.
The state's previously expected $1.8 billion surplus "evaporated almost overnight," McMaster said to begin his Cabinet meeting, held virtually.
State government is still operating under the 2019-20 budget, as per a resolution legislators passed in May that ensured services continued and employees kept getting paid when the new fiscal year started July 1.
At the time, legislators said it was impossible to craft a new spending plan with no idea how the pandemic, and the unprecedented economic crisis it was causing, would affect tax collections. They intended to write a budget in September, giving state fiscal experts more revenue data to make their projections.
But McMaster said they should wait at least a few months more. The next regular legislative session begins in January.
"I believe the responsible thing for the General Assembly to do next month is keep the state budget operating under a continuing resolution" and hold off on spending any additional money that comes in until next year, the Republican governor said to begin his Cabinet meeting.
The state's fiscal advisers meet over the next two weeks to revise their revenue projections and report how much money — if any — remains of that once-anticipated $1.8 billion surplus.
Those new estimates will determine what the House does when legislators return next month, said the chamber's chief budget writer, House Ways and Means Chairman Murrell Smith.
"It's a distinct possibility" that House leaders will concur with the governor, the Sumter Republican said.
Other options include writing a new resolution that mostly keeps government running at the same spending levels, with a few tweaks, and crafting an entirely new plan for the fiscal year that actually started July 1.
"Everything's on the table," Smith said. "I understand the governor's point and I share the same concerns that we are in an uncertain economy right now. This is not a time to have a lot of faith in estimates that aren’t rock-solid. I don't think anyone has a grasp on where we're headed."
The worst-case scenario would be to write a budget now and then have to make mid-year budget cuts because the economy worsened, he said.
But Senate Finance Chairman Hugh Leatherman, R-Florence, said Thursday he still intends to move forward with writing a budget.
He sent a letter to committee members earlier this week laying out a schedule that starts with virtual hearings Sept. 1, committee debate a week later and floor debate starting in mid-September.
"When we return to Columbia, we will begin work on a budget where 20% of the fiscal year is history," he wrote, noting that in his 20 years as the Senate's chief budget writer, 2020 is "by far the most unusual."
"There is still no clarity for the immediate future," Leatherman continued. "Therefore, we must plan for the worst and hope for the best. Our focus will be on those items most important to prepare the state for any potential mid-year revenue shortfalls."
Even if legislators don't craft a state budget when they meet in a special session next month, they must allocate $668 million remaining in a federal coronavirus relief fund that's supposed to reimburse state and local agencies for COVID-19 expenses. Congress specified that if that money's not spent by year's end, it simply reverts to federal coffers.
The Legislature spent $1.2 billion of that CARES Act funding during a special session in June, mostly for jobless benefits, schools and COVID-19 testing.