Wednesday, Nov. 11, 2009

S.C. agencies face another $120 million in cuts

Budget is pared further amid state's 'startling' rate of unemployment

State economists trimmed more than $120 million from the state budget Tuesday, forcing yet another round of cuts at S.C. state agencies.

The Board of Economic Advisors said it sees little evidence the state economy - particularly the number of jobless people - will improve in the next year. As many as 500,000 state residents may be unemployed, according to one economic measure.

"It's just so startling," BEA chairman John Rainey said of the unemployed estimate. "I don't see a lot out there about which we can be optimistic in the near term."

The cut is the third since June for a total of $344.7 million. The state budget - $7.2 billion in 2007 - is now $5.6 billion.

In addition to trimming the current budget, the BEA projected revenues will be flat next year.

That will leave lawmakers struggling to find a way to pay for an estimated $500 million in recurring obligations previously paid for with one-time money before tackling new costs in the budget that begins July 1, 2010. The decisions get even tougher the following year, when a total of $700 million in federal stimulus money runs out.

"We knew that was going away and we told agencies they need to prepare for that," said House Ways and Means chairman Dan Cooper, R-Anderson. "No one expects the economy to get better."

Cooper said he has seen some evidence of agencies preparing for future budgets, but noted agencies already have had to cut more that $1 billion in spending.

The severe recession, Cooper said, likely means long-term changes in how residents save and spend - all of which affect tax collections.

"This is a shift in the way people behave," Cooper said. "We think we've reached the bottom and everything's OK ... and then we're running behind."

Rainey and other BEA board members, including Roche president Don Herriott, agreed.

Herriott said there are positive signs for corporations, but they are not likely to start hiring again for some time.

At a meeting of state economists last month, most expected unemployment would peak between 12 percent and 13 percent and not begin to fall until this time next year. Some S.C. counties, Herriott said, are seeing jobless numbers are similar to those of the Great Depression.

"The corporations are stabilizing, but nobody's hiring," Herriott said.

Lawmakers said it is likely the State Budget and Control Board will approve across-the-board cuts later this year. Gov. Mark Sanford, who previously has called on lawmakers to return to Columbia and rewrite the budget to target cuts, declined to comment on the BEA decision.

But Rainey noted it has been difficult to anticipate this economy.

"The trajectory is clear," Rainey said. "It looks like it's down. We hope it's flat."

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