Staff reports | The state of South Carolina is sitting on a big old pot of money thanks to COVID-19.
“The money has piled up because we didn’t have a budget this year,” said one Senate insider, reflecting on how the illness essentially shut down the annual spring legislative process.
Without an approved 2020-21 budget, state spending remained at 2019 levels. With no new budget, there were no approvals for new one-time spending projects. Recurring expenses approved last year continued to be funded, but proposed recurring increases, such as a boost to per student educational costs or use of new “non-recurring” dollars for things like $100 million in security improvements for the state Department of Corrections, were put on hold. So that inaction also meant contingency reserves from two previous budget years — monies generally spent in new budgets — were parked in state accounts.
This bucket from reserves is not insignificant. The pot is now worth $775 million, an amount that can buy a whole lot of widgets for state government. And it’s part of an even bigger pot that lawmakers will have to spend starting in July. According to a Nov. 10 preliminary forecast for the state’s 2021-22 fiscal year, lawmakers should have about $1.2 billion in new revenue to spend over and above what regularly comes in. New revenue includes:
- $182.2 million in new recurring General Fund tax revenue that doesn’t include a tax relief trust fund;
- $103.5 million in leftover reserves from 2018-19;
- $671.5 million in unspent reserves from 2019-20;
- $176.1 million from a capital reserve fund for 2020-21 (which generally will be rolled back into a new capital reserve fund);
- $36.3 million from a projected General Fund surplus for 2020-21. This amount, however, was adjusted down by almost $50 million because of impacts of the coronavirus pandemic.
The economic news, however, is not all rosy. The pandemic smacked more than just state government. A new report shows the state’s tourism economy lost $5.2 billion in revenues — a 43 percent drop from the previous year.
And while the $1.2 billion pot of state tax money will be helpful for lawmakers to spend next year on improvements to education, corrections, roads, health care and other priorities, the pandemic whacked a huge chunk of money from revenue collections. According to the state Board of Economic Advisors (BEA), the state lost about $800 million in anticipated tax collections this year, which means coffers will be about 3.5 percent less than what the state took in during the 2019-20 fiscal year.
“With the forecast, revenue collections through October for the current fiscal year are running approximately $176.4 million above expectations. But, the BEA cautioned the current trend is not likely to continue. The BEA advised the uncertainty about COVID- 19, the diminishing impact of previous federal stimulus funds, a slowing of the economy, and a poor tax filing season anticipated in April are significant concerns for the rest of the fiscal year.”
On a brighter note, the BEA said the state’s economy appears to be resilient.
“South Carolina is positioned to recover quicker from the effects of the COVID-19 pandemic than the rest of the nation,” according to the statement. “To date, South Carolina has recovered 70 percent of its COVID-19-related job losses, but the remaining jobs are expected to return slowly. For its forecast, the BEA anticipates a return to February 2020 pre-pandemic employment in February 2022 and assumes slower than historical growth through the remainder of FY 2021-22.
“The BEA also expects wages and proprietor’s income to grow, but at slower than historical rates. In addition, the BEA does not anticipate any new federal stimulus.”
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