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2002-2004, South Carolina Statehouse Report. Published weekly during the S.C. legislative session. South Carolina Statehouse Report is a media project of The Brack Group, Charleston, S.C.

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State budget woes loom for 2 more years
By Andy Brack
S.C. Statehouse Report

JULY 21, 2002 - - The state's fiscal hangover isn't over yet, but you don't hear a lot of politicians talking about it. Maybe it's the election year. Maybe it's because they're still tuckered out from all of the cutting they did this year.

"You're going to see another austere year," Comptroller General Jim Lander predicts.

Analysts forecast at least two more cycles of lean times following $200 million in agency cuts last year and another $300 million in cuts by lawmakers in the new current budget.

While those slashes were tough, lawmakers face an even more daunting budget next year. This year, they were able to achieve savings by trimming fat, raiding some funds and refraining from a state employee pay hike. Next year, there won't be a lot of fat to cut.

"If there are cuts - - and I'm not saying there will be - - it's going to mean more jobs [will be lost] and more services [cut]," Lander said.

Bottom line: next year, lawmakers will start off behind because they already have more new expenses than revenues. Here's what they'll face:

Balancing the books. Before the state can close out last year's budget, it probably will have to find up to $163 million to make the books balance. That's because sales and income tax revenues have been lower than budget writers predicted. Look for the state Budget and Control Board to take up this sticky issue in its August meeting.

Medicaid increases. Next year, like this year, the state will have to shell out millions to keep the Medicaid program at its current service level. Why? Because there are about $170 million of increased costs of delivering health care and rises in annualized costs as more people will receive the benefit.

State employees' health. Inflation also will boost the cost of health insurance for state employees by $20 million to $60 million.

Education financing. The state's mandated portion of funding salaries for teachers will cost an extra $30 million to $60 million.

Scholarships. Because most of the state's colleges and universities raised tuition this year, there won't be enough money in the current budget to pay for LIFE and Palmetto scholarship obligations. The state likely will be short about $21 million.

Annualizations. The annual cost to pay for new programs from this year translates into a recurring new need of another $170 million in next year's budget.

Retirees. Pending the outcome of a lawsuit, the state might have to foot a $300 million bill to refund pension taxes taken from state retirees.

Growth. While the sluggish economy is perking up, growth won't return soon to levels of a few years ago. Budget experts hope for at least 4 percent growth in revenues, which would mean about $200 million in new money. But those revenues won't be enough to cover the laundry list of needs outlined above.

"The money is going to be ultra-tight next year," says Republican Rep. Adam Taylor of Laurens. "The General Assembly is going to have to take a tough look at the feasibility of raising taxes or doing cuts in services in state government."

Regardless, one thing is clear: taxpayers are going to feel some real effects a year from now because they'll be paying more in taxes or higher fees for government services. Or, there may be fewer government services available. More than likely, they're not going to like whatever happens.

-- 30 --

11/3: Use your vote wisely: a lesson
10/27: SC GOP to keep control of House
10/20: Black voters may be secret weapon
10/13: Talk is cheap; action takes courage
10/6: Creating sunshine to dampen negative ads
9/29: SC Set to be world leader in news research
9/22: SC Senate shift could be around corner
9/15: Gov's race about barbs, ads, not people
9/8: Shorfall may cause look at prison alternatives
9/2: Revitalize your patriotism by participating
8/25: S.C.'s fiscal situation could be a lot worse
8/18: State wetlands policy needed
8/11: The bully vs. the whiner
8/4: Noah's Ark approach to tax reform
7/28: Two-party system could be political outcome
7/21: State budget woes loom for 2 more years
7/14: Agencies can do better job on Internet
7/5: Thank a guardsman today for service
6/28: Hodges-Sanford race will be wild ride
6/21: Sanford-Peeler race's impact on GOP
6/14: Ethics reform needed now

More done than you'd think(1.23)
More education $ also means cuts (1.22)
PSC reform to come, but when?(1.21)



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