Outlook gloomy for S.C. finances
Action expected to trigger more spending cuts
The state’s top economic forecaster used the gloomiest words and a sober tone Friday to describe South Carolina’s financial outlook.
The Board of Economic Advisors is expected to lower the state’s revenue forecast by at least 4 percent, a threshold that would trigger a special session for the Legislature to cut government spending.
Any cut by the board would be in addition to a 2 percent reduction that’s already been made, meaning a total of at least a 6 percent adjustment off the budget the Legislature passed in June.
And the situation isn’t expected to get better any time soon.
“Everyone is on notice: no good news coming,” board Chairman John Rainey said. “Government is going to get smaller.”
The board is scheduled to meet again Oct. 8, after the close of the fiscal year’s first quarter, to assess the damage and set a new revenue forecast.
“These numbers have fallen off the cliff,” Rainey said.
– Revenue is off by $48.2 million for the first two months of the fiscal year. That includes drops of more than $23 million less in sales tax, nearly $12 million in individual income taxes and about $2.5 million in corporate income taxes.
– Consumer sentiment has plummeted and is worse now than right after the Sept. 11, 2001, terrorist attacks and Hurricane Katrina in 2005.
– A total of 50,000 people fill the unemployment rolls, wiping out a normal year’s worth of job growth.
– Housing permits fell 25 percent compared with this time last year, a valuable source of government money.
– Food stamp use jumped 16 percent, seen as an early indicator of trouble because it is one of the easiest social welfare programs to sign up for.
“The numbers speak for themselves without the doomsday-sayers,” Rainey said.
Reason for optimism does exist, though, he said. Comparing the economic outlook today with that of downturns in 1987, the early ’90s or 2000s, he said things are better now because South Carolina’s economy is more diverse and people have higher wages.
“You can make yourself sick by worrying about being sick,” Rainey said.
To put the gravity of the situation in perspective, Wall Street is screaming for a national bailout, South Carolina’s unemployment is higher than it has been in 15 years at 7.6 percent and average Americans are relying on their credit cards to make it through the hard times.
That all sets the stage for the Legislature’s return. Whether that will happen before Election Day is not clear.
Senate President Pro Tem Glenn McConnell and House Speaker Bobby Harrell, both Charleston Republicans, said Friday they would discuss when to call the Legislature back after the economic advisors’ meeting next month. A special session is expected to last about two weeks.
Conversations between the state’s lead budget writers and Gov. Mark Sanford’s office are beginning. Sanford, McConnell and Harrell all agree that it would be prudent to have a compromise in place before the Legislature returns.
The state’s reserve funds were tapped earlier this year to accommodate the 2 percent cut ordered by the Board of Economic Advisors. Meanwhile, state agencies were told to lose another 3 percent from their budgets to help address what looked like a worsening situation.
“These are difficult times and it doesn’t look likely they’ll get a lot better quickly,” Rainey said.
By Yvonne Wenger
The Post and Courier
September 27, 2008
