South Carolina House to debate budget based on outdated revenue projections
(The Center Square) – The South Carolina House is set to deliberate the state’s proposed $30 billion fiscal year 2022 budget after the Ways and Means Committee unanimously approved a tentative spending plan.
The House’s proposed budget at this stage of the legislative session always is tentative. The chamber must adopt its spending plan in March, the Senate must endorse it in April and it must be signed into law by the governor before the fiscal year begins, July 1.
This year, however, everything is more tentative, especially the proposed budget the House will ponder in the coming weeks, which is conservatively based on outdated revenue forecasts certain to be significantly below actual collections.
Federal assistance under President Joe Biden’s $1.9 trillion American Rescue Plan stimulus package, which could be adopted Tuesday, is not built into the plan.
“We are again being cautious as we have been through this entire pandemic,” Ways and Means Committee Chair Rep. Murrell Smith, R-Sumter, told the panel last week.
Smith acknowledged some items included in Gov. Henry McMaster’s $30.1 billion fiscal year 2022 budget request are not funded in the tentative plan but could be when revenue estimates are updated April 8.
In the interim, Smith said, “We’re going to prepare for the worst-case scenario and hope we have better days ahead of us.”
The House plan earmarks $9.8 billion in state general revenue spending and incorporates some key components in McMaster’s budget request, including setting aside $500 million for the state’s reserve fund.
The House’s budget and the governor’s request both tab $35 million to resume step salary increases for teachers that were suspended last year because of the pandemic. The Senate already has approved a measure to reinstate the annual step raises.
The governor sought $80 million in “need-based” scholarships – $60 million for public university scholarships and $20 million for private university and historically Black colleges and universities (HBCU) scholarships – which is included in the House’s plan.
The House allocates $90 million for the Department of Corrections (DOC) to make security upgrades needed after the Lee Correctional Institution riot in 2018 killed seven inmates. McMaster’s proposal sets aside $10 million for prison security upgrades within his $39.6 million DOC budget request.
Among items in McMaster’s budget proposal not included in the House plan are pay raises for state employees and $123 million in small business grants.
Smith said both could be built back into the budget depending how revenue shakes out.
South Carolina Revenue and Fiscal Affairs (RFA) economists opted not to change their three-month-old revenue estimates in mid-February because of uncertainty over the COVID-19 pandemic’s unfolding economic effects and the Biden administration’s assistance package.
Revenue in South Carolina has grown nearly 5% since the fiscal year started July 1 – far above the 3.5% decline economists had forecast.
The RFA had forecast a 12% decrease in corporate income tax revenue but, instead, it increased 22% in 2020. There also was a 7% increase in sales tax collections, likely spurred by federal assistance to families.
State economists caution much of that increased revenue may be driven by federal pandemic assistance packages passed by Congress in 2020 and cannot be counted on as recurring revenue in fiscal 2022 budget deliberations.
Therefore, forecast revenues remain as initially projected and that is what lawmakers are working with as they deliberate on the budget – at least until April 8 when the RFA and the South Carolina Board of Economics Advisors convene to update estimated revenue.
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