Will Stimulus Money Help SC State Budget Until Economy Recovers?

Columbia, SC—When Governor Mark Sanford was fighting against taking $700 million dollars in federal stimulus money… he said, when it’s gone in two years…the state will have a huge budget hole.

Lawmakers argued that the state economy will have improved in two years…so more money will be coming in.

State Representative Dan Cooper is chairman of the House committee that writes the state budget.

State Representative Dan Cooper, (R) Piedmont: “What’s the plan for if the economy has not recovered in two years, and then the stimulus money is gone? Well, I’ve been telling agencies all along that they need to be prepared for that and have a plan in place for the cuts that will come for that.“ 

His counterpart…Senate Finance Committee chairman Hugh Leatherman… has the same idea.

State Senator Hugh Leatherman, (R) Florence: “My plan is do what I always do, and that’s cut whatever cuts got to be done to live within our means.“

But, they both think the state economy will improve in the next two years.

Robert Kittle, reporting: “But, things are not improving, so far. The current budget year ends in just two weeks, but the Board of Economic Advisors just had to lower the state’s revenue estimates by $92 million. They also had to lower next year’s estimate by $120 million.“

USC Economics Department Chairman Doctor John McDermott says one of the state’s problems…is that the state swapped property taxes for a higher sales tax.

Dr. John McDermott, USC Economics Department Chairman: “So, when sales fell off and economic activity fell off, we had a definite, huge slump right away. The flipside of this is when economic activity picks up, then the sales tax will be one of the first to revive, we hope.“

Dr. McDermott thinks the state economy will start improving by the end of the year.

The Board of Economic Advisors is also predicting that the unemployment rate in the state will keep going up…and could get as high as 15 percent. Right now, it’s at 11.5 percent. The state is having to borrow money to pay unemployment benefits.

We asked those lawmakers what the state should do if unemployment keeps going up…raise the unemployment benefits tax on businesses… or lower benefits?

Senator Leatherman said he wouldn’t think about that until he sees what the needs are.

Representative Cooper said he doesn’t know…but next year’s budget assumed an unemployment rate as high as 14 percent.