S.C. Legislature - outlook for 2010 - Part 1

The S. C. Press Association is holding its annual legislative preview session today. I have been taking notes, and in a modified form of live blogging will be posting those throughout the day. This first is from Les Boles, state budget director. Again, these are raw notes, complete with some shorthand and abbreviations. If they are not clear, leave a comment, and I will try to clarify my notation for you. (part 2, part 3, part 4)

Les Boles, state budget director

Next two years "some of the most challenging" he has seen.
His office's Web page has lots of budget info, including three-year budget projections. www.budget.sc.gov

Summary of revenue shortfalls (there was also an accompanying handout)
SC economy started declining March 08

FY08-09
BEA (Board of Economic Advisors) shortfall predictions six times plus the 13-month additional year-end shortfall in 08-09 totaling 1.2 billion. When other shortfalls taken into account, total shortfall $1.3 billion.
BCB reductions totaled $1.1 billion. Shortfall $207.3 million. We used reserve accounts – that will be problem. So final year-end shortfall $98.2 million.

FY10
BEA reductions 450.7 million Add homestead exemption shortfall and it's $452.4 million.
BCB action so far reduced $566.5 million, or $114.1 million more than

Medicaid: Used to be 70/30 fed/state. Stimulus made it 79/21, freeing up some money, but that's going away.

Since we ended FY07, our revenue stream has dropped 24%
Rev. est. FY 10-11 zero growth.
Hope that in 18 months people get back to work and sales and individual income tax picks up.

"The next two fiscal years are going to be extremely challenging."

FY11 (Begins July 1, 2010)
Begin with $199.4 million in lower revenue. Total est budget gap $563.3 million (the $199 million plus $364 million in statewide funding issues such as replenishing general reserve fund, more money for homestead exemption (property taxes) etc.

Questions:
Any other time where estimates coming out of a recession growth essentially flat?
No. "Historically our revenues have jumped." BEA project flat for year to 18mos and slow after that, 1 to 2%/yr.

Where budget now in meeting state educational requirements – maintenance of effort
Did not meet. Got waiver. We meet all the Medicaid requirements.

18 month lag is normal but it's the limited growth after that that's unusual?
Yes.

Question about thrust of budget change proposals
We're trying to level off the peaks and valleys. That means putting more into reserve funds.

Mathematically did property tax reform exacerbate (Act 388) {NOTE: Act 388 was the property tax change enacted two years ago. It essentially eliminated property taxes for school operations on owner-occupied primary residences and raised the state sales tax, with that money to go back to the schools to make up the money lost from property taxes.}

Yes. The projections were valid at that time on projections. "The bottom dropped out on the economy and the sales tax." Thinks online sales also hurting - people not paying sales/use tax.

Homestead exemption, property tax relief for schools?
We're seeing need go up 2 to 4% while revenues decline.