Education, state workers priorities for SC budget writers, but COVID may crush budget
As Republicans pump the brakes on addressing longstanding state spending priorities until they can see the end of the COVID-19 pandemic, Democrats are worried the drop in projected revenue caused by the disease’s spread could lead to cuts or the state neglecting needs around South Carolina.
Budget writers should have $1.2 billion to allocate when they begin crafting a spending plan in January. But most of that is one-time money, which limits what it can be spent on. Only $182 million in 2021-22 fiscal year is projected to be new recurring dollars available to fund ongoing needs such as state employee salaries and health care costs, according to state estimates.
That reality comes as the state expects to end this fiscal year with just a $36 million budget surplus, a far drop from the more than $800 million in new recurring dollars initially expected during the 2020-21 fiscal year.
The COVID-19 pandemic has taken a major hit on the state’s finances and may make it difficult to look at funding priorities in the 2021-22 spending plan, which takes effect July 1.
“I think it’s premature for us to look at spending priorities with COVID still re-emerging,” Republican Rep. Murrell Smith, who chairs the House Ways and Means budget-writing committee, told The State. “It’s numbers we have not seen since this summer. It’s wreaked havoc on our economy ..(W)e have … seen a precipitous drop in revenue that we never imagined.”
As COVID-19 continues, Smith said the state must focus on ensuring it can sustain the government in another economic downturn.
“We’re dealing with the impacts of COVID on the state,” Smith said, adding he hopes the state’s residents soon have a vaccine available. ”We need to concentrate on COVID, and try to get through this pandemic and try to make sure we protect the citizens of the state as best we can.”
Another unknown is whether the federal government approves a second stimulus, and if so, the question becomes how big will it be — and will money go to local and state governments, Smith said.
“That’s going to make a huge difference in how we deal with the COVID crisis,” Smith said.
Federal coronavirus relief money helped refill the state’s unemployment insurance trust fund, and paid for personal protective equipment and COVID-19 testing this year. That aid and the state’s strong tax base heading into the pandemic have helped put South Carolina in a better position than some states, avoiding cuts to services, state leaders have said.
But if the economy continues to decline, the state will have to deal with the fallout such as tending to the unemployment trust fund and possibly higher Medicaid costs as more people join the federal and state health insurance program.
“At this point, I’m taking the wait and see approach. Let’s see if the vaccine starts rolling out, starts implementing and we start putting COVID in our rearview mirror, then we can start focusing on other areas,” Smith said.
Earlier this year lawmakers adopted a continuing resolution which kept state spending levels for the budget year that started July 1 the same as the previous fiscal year.
When lawmakers return to work in January, they will face similar questions about whether to spend more in the budget starting next July on some of the state’s many needs whose costs will far exceed the money available to spend. The House is set to have the first crack at writing a budget, before sending it to the state Senate.
Smith, the House budget chairman, said he does not foresee going into budget planning with the goal of keeping spending at current levels, but lawmakers should proceed with caution.
“It’s a fluid process. If we start recognizing reductions in revenue, then we need to be prepared for that. At this point, all indications are we’re going to be coming out of the pandemic, and when we come out of the pandemic, the economic foundation of South Carolina is very strong, and as we re-open and people start traveling again, I think South Carolina is poised for a quick rebound and strong rebound.”
House Majority Leader Gary Simrill, R-York, has an optimistic view of the state’s budget prospects compared to how other states are fairing in the pandemic.
“If you compare South Carolina for the impacts of COVID-19 on tourism, on income, on restaurants (and) on service industries, we are fairing very well, considering,” Simrill said. “So I think as we look toward 2021 in recreating a budget, it is not all bleak, it’s just not rosy.”
According to the Center and Budget Policies, South Carolina’s loss in general fund revenues, as a percentage of pre-pandemic revenues, has been far less than other states around the country.
Simrill said taking care of state workers, first responders, essential workers and educators will top the list of priorities.
He added enough money will be available to take care of priorities, but the budget may have no frills.
Democrats fear cuts, stalled priorities
Democrats on the Ways and Means Committee fear money won’t be available to meet spending priorities which have had an even brighter light shined on them because of the pandemic.
State Rep. Gilda Cobb-Hunter, D-Orangeburg, wasn’t optimistic about how much money will be available amid the ongoing pandemic, with fears budget reductions may need to come.
“I am nervous about it because given the impact of the pandemic, with revenues not being what we thought they would be, I’m concerned about the cuts that are going to have to be made,” Cobb-Hunter said, adding that she’s also thinking about “the people who already were not being helped by what we had already done. It’s just really quite sad.”
Cobb-Hunter said she will still push for pay raises for state employees, but tough decisions must be made about how limited money is distributed.
“There are going to be things that will have to be put aside,” Cobb-Hunter said. “My point is, I’m hoping that yet again state employee pay will not be one of those things that’s put aside.”
And as education always comes up with state funding, money has to be used to help schools prevent COVID-19 spread, she added.
“We always say education. But if we want to say education, what we need to be focused on is how we make these schools safe for students, teachers and staff to return,” Cobb-Hunter said.
House Minority Leader Todd Rutherford said education needs to be a priority when putting together a spending plan.
“We’ve got so many kids that we lost in the struggle that we’ve got to make sure that we are educating,” the Richland Democrat said. “We’ve got teachers in schools that are going through hell right now trying to figure out in person, not in person, COVID, all of that.”
After education, the Legislature must focus on infrastructure needs, and compensating front-line workers, such as people who work for the state Department of Motor Vehicles.
“All those people that had to come to work all throughout this deserve pay raises,” Rutherford said. “They deserve hazard pay.”
But will there be enough money to meet the priorities especially when new recurring revenue estimates continue to drop?
“I think the proper term is ‘fingers crossed and hands in prayer mode’ that we have what we need, but we never have what we need,” Rutherford said. “We’re gonna try and make it through. South Carolina is in a better condition than most states, because of good fiscal budgeting in the past, and we hope to maintain that in the future.”
This story was originally published December 6, 2020 at 5:00 AM.
