Budget surplus $15 million short; cuts needed

Some money for arts, other programs will not be available

08/30/2012 12:00 AM

08/29/2012 9:10 PM

Good news: South Carolina has a budget surplus. Bad news: It’s not enough.

The state Comptroller General’s Office said Wednesday that the state ended the 2012 fiscal year with a $379.5 million surplus. But state lawmakers had planned for about a $397 million surplus.

The difference – $14.7 million (after $2.8 million in sustained budget vetoes) – means some things in this year’s state budget won’t get paid for.

One casualty is $500,000 in grants for the S.C. Arts Commission. Gov. Nikki Haley vetoed that money, sparking an outcry from arts-supporters all across the state. Lawmakers voted overwhelmingly to override the governor’s veto – only to find out Wednesday the state did not have the money to pay for the grants anyway.

That means the promised 25 percent increase in grants to state arts groups won’t happen, said Ken May, executive director of the Arts Commission.

“It’s so unexpected. Everything we’ve been hearing about revenues is that they have been better than expected,” May said. “It’s a real shocker to hear that, ‘No, in fact, we fell short.’ ”

The state’s budget surplus is smaller for a couple of reasons.

First, people did not buy as much in the final two months of the fiscal year that ended June 30, so sales tax collections were off by about $14 million. Also, because the fiscal year ended on a Saturday, businesses that issue paychecks on a Monday ended up paying state withholding taxes in July, not June. That cost the state’s 2012 fiscal year about $16.5 million in income taxes.

“If the money is not in the bank by the end of the year, it’s not in the bank,” said Chad Walldorf, chairman of the state Board of Economic Advisors, which sets the state revenue estimates.

Most of the spending in the budget that now will be scrapped was for smaller projects, tacked on at the very end of House and Senate budget negotiations. Gov. Nikki Haley vetoed many of those items, including $200,000 for the Southeastern Wildlife Exposition, $600,000 for a Darlington County watershed project and $600,000 for market operations at the State Farmers Market. But legislators overrode her vetoes.

“It’s not a good thing that we have revenue shortfalls, so no, the governor isn’t pleased,” Haley spokesman Rob Godfrey said in an email to The State Wednesday. “But what it does show is why it is so important, as she argued from the beginning to the end of the budget process, for South Carolina to stop the foolish practice of spending every dollar every year.”

Lawmakers did put $98 million of the surplus into the state’s savings account, a transfer that is not affected by the surplus shortfall.

State economists say South Carolina’s economy continues to show mixed signals. Residential building permits were up 17 percent, and the number of homes sold is up 13 percent. But homeowners are having a tough time paying their new mortgages. Foreclosures are up, now the ninth highest in the nation, according to Robert Martin, a state economist.

Walldorf, the Board of Economic Advisors chairman, said it still is too early to tell if revenue forecasts for the state’s current budget year are on target.

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