SC has $800M-plus surplus, but COVID-19 casts doubt on whether lawmakers will spend it
South Carolina has more than $800 million in new money to spend, despite the COVID-19 outbreak’s massive economic toll.
However, opposition is mounting in the State House over whether to spend any of that money this year, even though the state has had longstanding needs — from crumbling roads, to underpaid state employees to broken prisons — across state agencies that legislators had initially set to take on this year.
About $775 million of the total surplus is one-time money from savings or fees and other sources of income that can’t be counted on to return because it’s not tied to the state’s economic growth. The one-time money could help pad reserves or go toward some of the state’s spending priorities from fixing prisons and old buildings to repairing roads.
But it’s another measure of the state’s economic health that has state economists and legislators worried, a sign of the virus’ toll on state tax and fee collections.
Lawmakers will have only roughly $86 million in new yearly cash to spend, down from last year’s projections of about $815 million.
“There’s a tremendous amount of uncertainty out there,” from the federal down to the local levels, Frank Rainwater, head of the state’s Revenue and Fiscal Affairs Office said on a conference call Monday.
That uncertainty has caused a division within the State House over whether it’s smart to adopt an entirely new budget or keep the state operating as it has been during COVID-19 because it remains unknown what the economy will wind up looking like next year.
“These are uncharted waters, so the real question becomes is it time in September to finish the budget that we started back in March with so many unknowns?” House Majority Leadrer Gary Simrill, R-York, told reporters last week. “Or, is it better to have a continuing resolution that we’re operating under now, get through the fourth quarter, come back in January and then develop a budget?”
The Senate’s chief budget writer, Finance Chairman Hugh Leatherman, has said he plans to adopt a new budget. Starting Tuesday, the Senate Finance Committee will meet and hear from the officials who oversee education, tourism, prisons and roads.
“We must plan for the worst and hope for the best,” Leatherman, R-Florence, said in a recent memo to his committee. “Our focus will be on those items most important to prepare the state for any potential mid-year revenue shortfalls.”
But in the House — in lockstep with Gov. Henry McMaster — leaders there question drafting a brand new spending plan ahead of 2021.
The governor has asked lawmakers to keep spending levels the same and ensure state employees get paychecks and required state services can continue. In August, he told his cabinet to delay any additional budget requests and to make plans in case of a budget cut next year.
“There’s a lot of uncertainty in our economy,” said House budget chairman Murrell Smith, R-Sumter. “There’s no accurate way to predict what the future of the economy looks like while we have this coronavirus still affecting about every segment of our society.”
Smith told The State Monday he plans to urge his colleagues to leave the Legislature’s stopgap measure passed in May in place as a cushion should the economy continue to tank.
“The worst thing we could do is spend money now only to return in January to have a bill (that cuts agency budgets). That really concerns me,” Smith said. “What we ought to do is err on the side of caution. We need to be conservative at this juncture.”
With so few millions to spend on every year costs — money the House had set aside in his spending plan adopted in March on raising teacher and state employee salaries, for example — Smith said most of those priorities in the House budget have been slashed.
“You take the mandated items, such as employer health insurance increases and local government fund, things we know we have to do, this really leaves us with very little money to fund the remainder” of the priorities.
Lawmakers have largely avoided all talk of budget cuts, with many having flashbacks to 2008 and 2009 after the recession.
Smith said Monday he’s “very concerned.”
“That’s a distinct possibility if this economy doesn’t turn around,” Smith said. “We had $900 million of growth revenue growth six months ago. Now, we have $80 million.”
This story was originally published August 31, 2020 at 3:14 PM.
