SC Legislative Update
By Ben Homeyer
Funding update for SC
The South Carolina Board of Economic Advisors (BEA) issued updated forecasts for the current fiscal year, FY 2023-24 (FY 24), and following year, FY 2024-25 (FY 25), at its meeting Thursday, November 16, 2023.
For FY 24, the BEA increased its estimate by $426.8 million to $12.89 billion. The new forecast represents a decline of 1.6 percent from the prior fiscal year’s actual revenue largely due to the rate reductions to individual income tax and withholdings. Despite the declining growth, however, the forecast is an improvement from the previously projected decrease of 4.9 percent as the outlook for sales tax and individual income tax withholdings is better. Positive growth in sales tax revenue is now expected, which previously had been forecasted to decline. Improved sales tax expectations combined with stronger projected income growth contributed to the majority of the increase from the prior forecast.
For FY 25, the BEA increased its forecast to $13.21 billion, reflecting expected growth of 2.6 percent, or $328.7 million, over the revised FY 24 forecast. Growth in the major revenue categories is expected to remain below historical averages. In addition to challenges from higher borrowing costs and changing consumer behavior, concerns about the global economy with wars in Ukraine and the Middle East are a significant factor in the expectations for a slowdown in economic growth.
With these updated estimates, the budget outlook for next session remains positive, though surpluses will be substantially less than in recent years. Final revenues for FY 2022-23 finished close to expectations, and the state has a cash surplus of $57.9 million available to spend. The revised estimate for FY 24 results in an expected budgetary surplus of $448.1 million for this fiscal year. With the FY 24 Capital Reserve of $390.1 million available currently, the General Assembly has $896.1 million in one-time funds available to appropriate for non-recurring purposes.
So what does all this mean. The state is still doing really well and things like bridge projects, road projects, economic development projects, and other projects and programs that benefit from state dollars are in pretty good shape to be funded.
Net New Recurring General Fund Revenue – FY 2024-25
(Less Tax Relief Trust Fund, General Reserve Fund, and Capital Reserve
Fund contributions and incremental income tax rate reduction)
FY 2022-23 Contingency Reserve Fund (prior year surplus) $57.9 million
FY 2023-24 Capital Reserve Fund $390.1
Projected FY 2023-24 General Fund Surplus $448.1
Total Non-Recurring Revenue $896.1
Estimated Additional Revenue for Appropriation $1,569.2 billion