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By Bryce Fiedler and Vance Ginn, Ph.D.
In January, the South Carolina Policy Council published The 2024 SC Sustainable Budget (SCSB) – an ambitious new project with the goal of keeping state government spending under control. Specifically, it urges legislators to keep annual recurring general funds appropriations from rising faster than state population growth plus inflation, which will help South Carolina pass accelerated tax relief and allow citizens to prosper. The recommended limit for the upcoming budget (FY23-24) is $11.2 billion.
The House has since passed its first draft of the budget, while the Senate is getting ready to debate and pass its version of the budget the week of April 17. The combined conference budget is expected to pass and be sent to the governor in the final week of the regular session (May 9-11).
With billions of taxpayer dollars at stake and an important budget week on the horizon, we wanted to compare the two proposals with our recommended limit and give South Carolinians a closer look at the spending plans.
Proposed recurring general fund budget[1] for FY24
House: $11.4 billion
Senate*: $11.5 billion
*This figure is based on the budget adopted by the Senate Finance Committee and may change after the full Senate passes its version of the budget the week of April 17.
The proposed House and Senate budgets exceed our recommended limit of $11.2 billion and spend most of the state’s anticipated new recurring revenue, which is currently estimated to be around $1.2 billion. Of the new revenue, just $96 million is being used for income tax relief, which would take the top personal rate from 6.5% to 6.4%.
The reduction is part of a larger tax relief measure passed in 2022, which initially lowered the top rate from 7% to 6.5%, and makes additional yearly .1% reductions until the rate hits 6% (pending available revenue). However, it is clear a more substantial tax cut can be afforded in the current year, as the proposed reduction would use just 8% of newly available revenue. In his January executive budget, Gov. McMaster himself recommended using additional funds to speed up income tax relief, which he should continue to fight for.
As it stands, much of the new revenue is being used to increase state agency budgets. Below are several examples of agencies that would receive notable budget increases and other noteworthy spending categories. Please note, these only reflect recurring budget increases.
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PROPOSED AGENCY BUDGET INCREASES
Department of Health and Human Services
Current budget: $1,835,143,803
House proposed budget: $2,058,580,576
12.2% budget increase
Senate Finance proposed budget: $2,056,180,577
12% budget increase
Department of Health and Environmental Control
Current budget: $158,387,395
House proposed budget: $175,152,960
10.6% budget increase
Senate Finance proposed budget $176,535,026
11.5% budget increase
Department of Administration
Current budget: $75,280,521
House and Senate Finance proposed budget: $99,550,521
32.2% budget increase
Department of Natural Resources
Current budget: $55,421,454
House proposed budget: $62,259,748
12.3% budget increase
Senate Finance proposed budget: $70,717,034
27.6% budget increase
University of South Carolina
Current budget: $195,601,180
House proposed budget: $216,109,835
10.5% budget increase
Senate Finance proposed budget: $231,301,180
18.3% budget increase
Clemson
Current budget: $120,448,728
House proposed budget: $133,482,328
10.8% budget increase
Senate Finance proposed budget: $145,982,328
21.2% budget increase
Tuition mitigation
This additional funding is to keep state colleges, universities and technical schools from increasing tuition and fees charged to in-state undergraduate students. This policy, while beneficial to current students, does not address the underlying issues driving up college tuition and will not encourage financial responsibility in the long term.
House: $84,043,145
Senate Finance: $94,792,353
(Combined amount for all schools)
Employee benefits
This is not highlighted to suggest that state employees don’t deserve competitive pay and benefits. However, it is important to show the cost of government growth in real dollars. New departments, agencies and programs mean new personnel, all of whom are supported by taxpayers.
House proposed benefits increase
- State health plan: $121,522,000
- Retirement contribution increase: $40,176,566
- Base pay increase: $124,476,528
- Total: $286,175,094
Senate Finance proposed benefits increase
- State health plan: $121,522,000
- Retirement contribution increase: $40,176,566
- Base pay increase: $155,653,029
- Total: $317,351,595
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State government has seen an unhealthy rate of growth in recent years, as evidenced by our sustainable budget report, which found a rapid rise in state spending over the last decade. This has imposed a heavy burden on taxpayers and will make future tax cuts more difficult if not corrected. Accordingly, we recommend the Legislature pass a final FY24 budget that is below our recommended $11.2 billion limit and uses a greater share of surplus revenue for accelerated tax relief.
[1] “Recurring general fund budget” means the yearly appropriations paid for with state tax revenue and does not include one-time (nonrecurring) appropriations. General funds (tax revenue) is one of three revenue categories that make up the state budget, the other two being other funds (fines and fees) and federal funds (federal tax revenue).