PrintPrintComptroller General Richard Eckstrom issued his final accounting on Friday for the fiscal year that ended June 30. The state ended the year spending about $5.2 billion, compared with $5.5 billion that the General Assembly had budgeted for the 2009-2010 fiscal year.
By James T. Hammond
jhammond@scbiznews.com
Published Aug. 23, 2010
Although the state of South Carolina ended the year in the black, the feat was accomplished at great cost to programs and state employees and by spending rainy day accounts to shield agencies from deeper spending cuts.
State Comptroller General Richard Eckstrom issued his final accounting on Friday for the fiscal year that ended June 30. The state ended the year spending about $5.2 billion, compared with $5.5 billion that the General Assembly had budgeted for the 2009-2010 fiscal year.
The steep cuts in state spending broadly impacted the state, including closed rest stops and welcome centers on S.C. interstates, fewer teachers in public school classrooms and sharply higher tuition at public universities.
“Actual revenues trended down erratically for the year, and they were $310.1 million less than the revenue projections used to generate the FY10 General Fund budget,” Eckstrom wrote in his budget analysis.
The biggest hit came in the state’s three main sources of revenue: the sales, corporate income and personal income taxes.
Actual revenues from the three sources ended the year at $4.47 billion, compared with the $4.78 billion collected the previous year and the $4.79 billion anticipated in the budget. That amounted to a shortfall of more than $300 million.
The balanced budget was accomplished with the following actions:
| Measure Applied Capital Reserve Fund against revenue shortfall Cut agency budgets 4.04% Cut agency budgets 5% Total cuts and spent savings accounts | Date June 2009 September 2009 December 2009 | Savings $127,847,888 $200,452,112 $238,227,922 $566,527,922 |
Eckstrom said that, in a year of declining revenues, the state also incurred $40.2 million of unbudgeted spending through “open-ended” appropriations. “Even though this spending hadn’t been budgeted, it required funding,” he wrote.
The lion’s share of that spending was a $27 million deficit at the state Department of Corrections, additional spending that was authorized by the Budget and Control Board.
“Making matters even worse, a $98.2 million operating deficit from fiscal year 2009 was carried forward into fiscal year 2010 with the hope that FY10 revenues would be available to pay it off,” Eckstrom wrote.
The consequences of the lower-than-expected revenues, Eckstrom said, included $438.7 million in across-the-board cuts to agency budgets. The cuts were mandated by the five-member Budget and Control Board, which comprises the state comptroller, treasurer, governor, and the leaders of the House and Senate budget committees.
To avoid even deeper cuts, the executive board drew down $127.8 million from the Capital Reserve Fund.
“Through these and other drastic actions, the state avoided overspending and completed the year with a $71 million budgetary general fund surplus,” Eckstrom said. “The General Reserve, or rainy day, Fund had been fully depleted in FY09 to partially offset FY09’s operating deficit.”
The tumultuous budget year was atypical for the General Assembly, which is accustomed to having much larger surpluses to spend when they return in January, plus rainy day funds that remain unspent.
When lawmakers return in several months, they’ll find the cupboard bare and lingering concerns that the economy could experience a double dip, further shrinking state revenues for the coming year.
Estimates by state economic forecasters presented last week to the state Board of Economic Advisors showed that state revenues were up slightly in July, one month into the new fiscal year. But they expect a 2.5% decline in overall state revenues for the entire fiscal year.
Eckstrom noted that in order to begin restoring the General Reserve Fund, the 2009-2010 Appropriations Act provided for a payment of $63.9 million (1% of fiscal 2008 actual revenues), which was made July 1, 2009.
“In closing FY10, we restored an additional $46.9 million to the fund. The 2010-2011 Appropriations Act provided for a final payment of $55.4 million that was made July 1, 2010, thereby bringing the General Reserve Fund to FY11’s full funding requirement (3% of FY09 actual revenues of $5.5 billion),” Eckstrom said.
“The importance of having adequate reserve funds was made clear this year,” he added. “I commend the General Assembly for submitting a proposed constitutional amendment to the voters this November to increase the rainy day fund from 3% to 5% of General Fund revenues.”
Eckstrom said the current economic crisis has highlighted weaknesses in the state’s efforts in forecasting and tracking of revenue and in budgeting.
“More attention needs to be devoted to these areas so that the General Assembly will have a constant, comprehensive and reliable flow of data to make more informed decisions on short-term, as well as long-range, spending. A formal system for prioritizing all operating, as well as capital, expenditures needs to be developed to ensure that taxpayer dollars are spent wisely and effectively and not wasted on nonessentials.”
Eckstrom also warned of a looming crisis in funding of the state’s retirement system for state employees, which he said remains seriously underfunded.
“The state can no longer postpone dealing with its obligation to fund retirement benefits for public employees. The severe funding deficit that exists needs to be dealt with immediately rather than passing it along to future generations,” Eckstrom said.
Reach Jim Hammond at 864-235-5677, ext. 15.
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