News - Local/State

Tuesday, May. 20, 2008

State budget writers believe they can avoid further cuts

COLUMBIA -- State budget writers likely won't have to make more cuts as they work out a final version of the $7 billion budget for fiscal 2009.

On Monday, economists said:

• The state's revenues have stabilized after months of declining tax collections.

• More state residents are working than during past economic slowdowns.

The Board of Economic Advisors had cut $180 million from the state budget last month, but members now don't think more cuts will be needed because state tax collections should meet their estimate for the fiscal year that starts July 1.

That was good news for state budget writers, who met Monday to try to work out a final compromise.

Among the major issues to be resolved are funding for land preservation, tourism marketing and other economic development.

BEA chairman John Rainey said employment figures have been stronger than expected, especially since many economists have said the nation is in an economic downturn.

Although the downturn is not officially a recession, Rainey said that in past recessions, the state would see twice the number of people applying for unemployment as it has the past month.

"I'm really surprised at this number," Rainey said. "It should have been shoving up."

During a poor economy, 10,000 to 12,000 S.C. residents would apply for unemployment each week, staff said, but fewer than 5,600 applied during the last two weeks of April.

Still, many sources of revenue such as sales tax and income taxes are down from last year. Some of that is due to the slowing economy, while some is due to tax cuts such as eliminating the sales tax on groceries approved during the last few years.

For example, the state is $89 million behind last year in sales-tax collections, according to the BEA. Of that, $88 million is due to cutting the sales tax on groceries.

Overall, the state is $50 million behind in revenue collections at the moment, but the BEA thinks that is due to more people filing income-tax returns early to take advantage of federal tax rebates.

The BEA will meet again in two weeks to make sure revenues meet estimates.

"Everybody is nervous, but I think we're OK," said Don Herriott, a member of the BEA.

House and Senate leaders were glad to hear the news.

Three House and three Senate members must work out the differences between their $7 billion spending plans.

Among the most contentious issues is diverting to the general fund an estimated $16 million to $18 million intended to buy and preserve land.

The money, given to the South Carolina Conservation Bank, comes from a portion of taxes collected during land sales. But the budget states that money will go to the general fund in any year in which more than half of state agencies' budgets are cut.

The Senate has suspended the rule, believing the Conservation Bank should receive the money, while the House has opposed the change.

House Ways and Means chairman Dan Cooper, R-Anderson, said the rule was a compromise to House members skeptical of the need to buy and preserve land.

"Some of us never wanted to go to it in the beginning," Cooper said, adding the agency said it would not ask for additional money in the budget.

But if the Conservation Bank receives no money next year, it would be the only agency whose budget was cut completely.

"They're dealing with some tough budget issues," said Marvin Davant, executive director of the Conservation Bank. "I would like not to have the agency essentially shut down."

Senate Finance chairman Hugh Leatherman, R-Florence, and Cooper think they could resolve the issue. Both hope to finish the budget today.

Gov. Mark Sanford and others have argued the state has a responsibility to protect undeveloped land. In addition, the real estate market and number of acres for sale means a unique chance to protect land.

The agency received 32 requests totaling 25,000 acres and $20 million this year, Davant said.

"Now's a good time to be a buyer," Davant said.

Reach O'Connor at (803) 771-8358.

AP-NY-05-19-08 2149EDT