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SC legislators can add $1.7B to their negotiations for the state's budget

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South Carolina Budget (copy)

South Carolina Rep. Gilda Cobb-Hunter, D-Orangeburg (right) reacts as House Ways and Means Chairman Murrell Smith, R-Sumter (left), promises to give a raise or bonus to state employees once revenues are a little more clear during a debate on March 23, 2021, in Columbia. The House was debating the state's $9.8 billion budget for the next fiscal year. File/Jeffrey Collins/AP

COLUMBIA — South Carolina's economy is weathering the pandemic far better than feared, giving legislators an additional $1.7 billion in tax revenue to spend in the upcoming state budget.

And that doesn't include the estimated $2 billion coming to South Carolina from the latest federal aid package.

Nor does it include the state's $525 million settlement with the federal government, after attorneys' fees, over plutonium stored at the Savannah River Site.

Legislators must craft spending plans for those windfalls, too, though agreements on how to spend all or some of that $2.5 billion likely won't come until this fall.

In the meantime, legislators can add $1.7 billion newly handed them by the state Board of Economic Advisors into their negotiations for the state budget that starts July 1. 

"It's a testament to how resilient our economy has been throughout this pandemic," House Ways and Means Chairman Murrell Smith, R-Sumter, said of the projections updated April 8.    

"We're one of just a handful of states that hasn’t seen a sharp decline," he added. "We still have a long way to go, but it looks like all the trends are looking in the right direction."

The House advanced its roughly $10 billion spending plan for 2021-22 last month, which included putting more than $550 million into reserves. Budget plans always start in the House. But last month's proposal was far more of a rough draft than normal, as Smith pledged to revisit requests, including on state employee raises, depending on the revenue update.

"The budget we just completed was a pandemic worst-case scenario budget," he told The Post and Courier. "And the worst-case scenario hasn’t taken hold."

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The Senate's budget-writing committee will put together its plan next week. A budget debate by the full Senate is slated to start April 26. 

Normally, the House tweaks whatever the Senate returns with a floor vote, which sets up negotiations on differences in the chambers' plans.  

But this year, Smith is re-starting the entire process. Ways and Means subcommittees will renew their budget-writing debates to craft a second House plan before the Senate's done. 

It's highly unlikely the Legislature will agree on a budget before the regular session ends in mid-May. But Smith thinks it could be wrapped up by early June. 

Less than a quarter of the additional $1.7 billion represents predicted economic growth in the coming fiscal year, which can be spent on recurring expenses such as salaries. The rest is surplus and unspent reserves that's supposed to be for one-time expenses such as maintenance and equipment.

It includes higher-than-expected tax collections dating to 2018 that legislators opted not to spend last year amid the economic uncertainties.  

The one-time money also includes an estimated $600 million surplus this fiscal year driven by federal aid packages that pumped money in the economy and boosted residents' spending. But the boost from federal COVID-19 aid is not expected to last.

The state has recovered 69 percent of the jobs lost when the pandemic hit, resulting in waves of business closures last spring. Yet personal income has spiked due to federal stimulus checks and additional unemployment benefits, more than offsetting the loss, said Frank Rainwater, director of the state's Revenue and Fiscal Affairs Office.  

"We’ve got an artificial high this fiscal year," he said. "Next fiscal year, we’ll drop back to more normal levels."

Smith expects to appoint a separate committee in the coming weeks to make recommendations for spending the $2.5 billion from the lawsuit settlement and the money put in state coffers from last month's nearly $2 trillion federal aid package.  

Follow Seanna Adcox on Twitter at @seannaadcox_pc.

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