Next year's budget will be tougher than ever
By Andy Brack
SC Statehouse Report



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SEPT. 21, 2003 - South Carolina is waiting for the skinny lady to sing about good times.

After seven mid-year budget cuts over the last three years, state government is no longer a fat lady. Government has been cut to the bone, many would argue.

"For any agency function funded by state dollars, there is no fat left," said state Sen. John Land, D-Clarendon. "You've crippled these state agencies."

When lawmakers return in January, they'll find an even tougher job than this past session, which roundly was considered the most difficult ever because of budget shortfalls in the down economy. In January, lawmakers will probably have to start cutting mandated programs if they don't come up with other solutions.

Lawmakers and budget writers say the legislature could be $500 million in the hole before they even get started on next year's budget.

First, state forecasters predict no growth in state revenues. In flush years of the past, new dollars from growth from good times funded new programs, improved services and allowed budget writers to adjust for inflation without feeling pain. That's not going to be there next year.

Next, the state is carrying a $155 million deficit from the last couple of years.

Finally, the current budget includes about $270 million in funding for education, Medicaid and other programs from one-time money sources. That means if education and Medicaid health service levels are to remain the same, the state has to come up with a pool of new money.

With just those few items, we're already up to being $425 million behind. And that doesn't take into account the millions needed to fully fund education, deal with the increasing prison population, add people to the Medicaid rolls and more.

But because next year is an election year, there will be incredible pressure to keep from raising taxes. And that, in turn, may mean that state government is slashed even more.

"I think you're going to hear a lot of crying and wailing," Land said. "There is no free lunch out there."

State Sen. Jim Ritchie, R-Spartanburg, worries it's too early still to speculate about what's going to happen next year because the state has never faced the fiscal crisis it's in. There's not a model to project what will happen, he said.

With proposals beginning to get to the table on the restructuring of Medicaid, overall government restructuring and revamping the state's tax structure, there may be a way out of the mess, he said.

If there's not a way out - - and you shouldn't expect it - - lawmakers will either cut agency budgets, raise revenues or both. (A word to the wise: look for the "both" option.)

Among the taxes and fees that will be considered:

  • Sales tax exemptions. South Carolina currently loses more than $1 billion in tax revenues every year because it exempts more than 60 items - everything from sales taxes on phone bills and electricity to sales taxes on newspapers and livestock.

  • Cigarette tax increases. Last year, a proposal to raise the per-pack cigarette tax to the national average failed. Because it could bring in $180 million, look for it to return.

  • Sales tax increases. Democrats and some Republicans proposed various limited sales tax increases. Raising it by two cents would net about $1 billion.

  • Property tax relief. There also are complicated plans to provide property tax relief while boosting and sales taxes and cutting exemptions. If any such proposal passed, the state would get millions in return.

  • Fines and fees. This year, traffic fines went up slightly and state parks started charging more fees. In the coming year, more fines, user fees, surcharges and extras will start to allow agencies to develop alternative revenue streams.

One thing is for sure: the coming legislative session is going to be incredibly different. It will be where the rubber of political philosophy meets the road of reality. For Republicans, it could be a Perfect Storm that whips the state into cutting government more to pump a philosophy of smaller government. For Democrats, the economic pressures may be so great that their GOP peers do the unexpected - - raise taxes.

Going postal

This week's cartoon by our Bill McLemore:


9/7: On taxes and voters

To the editor:

I doubt that any tax increases in Alabama will open the door to the same in South Carolina. The majority party that controls Columbia is too backward to be led by the likes of Alabama politicians or voters. Next year is an election year and politicians (of all stripes) are unlikely to raise taxes when they have to face the voters. The state's majority party is infected with the fatal Newt Gingrich malady that would rather let government close down or fail than be labeled "tax raiser." This is why we have an uncovered budget deficit from past years that gets covered up regularly like the pea under three walnut shells in a con game. And if put to a vote of the people (as in Alabama) well...nice try.

-- Francis X. Archibald, Hanahan, S.C.

9/7: On taxes and leadership

To the editor:

It doesn't take leadership to raise taxes. But, it does take leadership to reduce the size of government, offer quality services, with no tax increases.

-- Becky Fagg, chair, We The People of Lexington County, Lexington, S.C.


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