COLUMBIA -- South Carolina's state budget continues to worsen, as high gas, food and other prices put a crimp in consumer spending and sales tax revenues.
But while the short-term news is bad, economists saw a silver lining: Employment and business tax collections are up. Consumers are not spending, but S.C. businesses are making money, said John Rainey, chairman of the state's Board of Economic Advisors.
"This thing is moving fast, and it's impossible to predict," Rainey said of the factors affecting the economy. "It's hard to understand."
The board Monday lowered its estimates of the state's expected revenue. The decision means $140 million will have to be cut from the state's $7 billion budget.
In addition, the state finished its budget year that ended June 30 about $100 million in the hole.
The shortfall -- the third time this year the board has lowered its revenue estimate -- means state agencies likely will have to prepare for cuts to their already-trimmed budgets.
The state also likely will spend $66 million from a $187 million reserve account to cover last year's spending, the first time South Carolina has had to dip into that fund since 2001.
In the budget year that ended June 30, the state collected $135 million less in sales tax than in the previous year, a 5.7 percent decline. In total, revenues were down $130.5 million from the previous year, when the state enjoyed a $1.5 billion surplus.
The slowing economy meant sales and income taxes combined fell $100 million short of estimates from last year.
Board members think high fuel prices were to blame.
"In my opinion, it's oil-driven," said board member Don Herriott. "Food prices are up. Everything is up. We just hope it stays sluggish and doesn't go into the toilet."
Monday's 2 percent budget cuts were not enough to trigger a special legislative session.
State lawmakers passed a resolution in June that would allow them to return to make budget decisions if the board cut its revenue forecast by 4 percent before the end of October.
The decision about how agencies react will be left to the State Budget and Control Board, which can order state agencies to set aside money to offset the shortfall.
"It serves as a reminder to all the state agencies to start preparing for cuts," said Joel Sawyer, Gov. Mark Sanford's spokesman. Sawyer said cuts could have been avoided by restraining the growth in past state budgets.
Rainey said the rapidly changing economy means state revenues could change month to month. The board will adjust estimates as needed, he said.