When fiscal 2022-23 ended on June 30, the state’s general fund had a balance of less than $58 million – a relatively paltry amount compared to the $1.2 billion surplus reported a year earlier.
But that doesn’t mean state government in South Carolina is poor. Far from it, in fact.
State agencies collectively carried over $4 billion in general funds into this fiscal year, which began July 1, ranging from $248 carried forward by the S.C. Secretary of State’s Office to more than $1.5 billion transferred by the S.C. Department of Commerce, according to the state comptroller general’s annual financial summary of the general fund – one of three main pots of money in the current $41 billion total state budget.
The $4 billion equates to about $750 for every man, woman and child in South Carolina.
Many eligible S.C. taxpayers by the end of 2022 received rebates of up to $800 after lawmakers earlier in the year designated $1 billion in state surplus funds for the payouts. But the 170-member Legislature in just one week in March this year overwhelmingly passed an amended resolution designating nearly $1.3 billion in surplus funds to Commerce to bring a Scout Motors electric-vehicle plant to South Carolina – initially identified only as “Project Connect.”
The Nerve in June revealed details of the massive taxpayer-funded gift to the recently created company of German-based Volkswagen, pointing out that the $1.29 billion appropriation out of actual and projected state surplus funds worked out to be about $240 for every S.C. resident.
A total of $74.6 million has been spent so far toward the Richland County project, according to a written agency response last week to The Nerve.
“Our state has experienced record economic development in what is a very transformative time for industry,” Commerce spokeswoman Kelly Coakley said, noting that nearly all of the $1.5 billion carried forward into this fiscal year is committed to specific projects, which, except for Scout Motors, were not identified.
“Economic development activities usually take time to execute,” Coakley said.
The latest annual general-fund report – the first one issued by Brian Gaines, who recently was appointed by Gov. Henry McMaster as the interim comptroller general following the resignation of Richard Eckstrom over a $3.5 billion accounting error – showed a $23.7 million year-end balance in the state’s “contingency” reserve fund, which is separate from the general fund, after subtracting out the $1 billion for taxpayer rebates and a $1.2 billion transfer to Commerce for the Scout Motors project.
The state last fiscal year collected $1.8 billion more in general fund revenues over estimated revenue, though even with a net additional $342 million in surplus funds, the general fund balance as of June 30 was $57.8 million after more than $2 billion in “supplemental” appropriations for this fiscal year, along with $86.2 million to be transferred to Commerce for the Scout Motors project, was subtracted, according to the comptroller general’s report.
Among other things, the general-fund revenue windfall at the end of last fiscal year was used by lawmakers to finance state budget earmarks totaling more than $700 million for this fiscal year – special funding requests by legislators for specific projects or programs that didn’t originate with written agency budget requests – though the Republican McMaster vetoed just a fraction of 1% of the overall amount, as The Nerve reported in June.
Expecting future healthy revenue growth, lawmakers last year approved lowering the top individual income-tax rate to 6.5% from 7% and gradually reducing the rate to 6% over five years, depending on available revenue. The South Carolina Policy Council – The Nerve’s parent organization – in April this year called on lawmakers to accelerate tax relief with surplus funds.
Last year, the Policy Council proposed a “sustainable” budget model that would annually cap general fund appropriations to inflation plus population growth, pointing out in its analysis that appropriations during the previous decade were collectively $7 billion more than what would have been allowed under the model.
This fiscal year’s total $41 billion state budget is made up of $13.8 billion in general funds, which are generated primarily by individual and corporate income taxes, and state sales taxes; $13.2 billion in federal funds; and nearly $14 billion in “other” funds, which include fees and fines, lottery proceeds, college tuition, state gasoline taxes, and a portion of the state sales tax earmarked for K-12 education.
The Nerve previously has reported about the overall billions in unspent “other” funds that state agencies carry over into the new fiscal year.
Under an annually renewed budget proviso, state agencies can transfer up to 10% of their unspent general funds from a given fiscal year into the next fiscal year. Other provisos allow certain agencies to carry over entire unspent amounts of specific funds.
Commerce, for example, is allowed to carry over any unspent money from its “closing” fund, which has been used in recent years to help large companies locate in South Carolina. In its written response last week to The Nerve, Commerce noted that the closing fund was included as part of $355.7 million in general funds carried forward into this fiscal year under a set of agency budget provisos dealing with specific funds.
And the 124-member House and 46-member Senate annually carry over millions in unspent general funds for the operation of their respective chambers – courtesy of a renewed budget proviso that allows them to do so. The House, for example, carried forward $17.1 million into this fiscal year, according to the comptroller general’s latest report, which represents 63% of that chamber’s $27.1 million total budget for this fiscal year.
What the little-known provisos allow state agencies to do is to spend more money during a fiscal year than what is represented to the public initially in approved budget documents.
The comptroller general’s latest report, for example, shows that lawmakers appropriated a total of $10.1 billion in general funds for state agencies in fiscal 2022-23, but overall “adjusted” appropriations, which included carryover funds and other budget "adjustments,” during the fiscal year were $15.8 billion, which allowed for actual expenditures of $11.7 billion.
The following state agencies had the 10 largest general-fund surpluses to start this fiscal year, according to the comptroller general’s report:
- Commerce: $1.5 billion
- Ports Authority: $499.4 million
- Higher Education*: $406.2 million
- Education**: $231.9 million
- Transportation: $187.2 million
- Department of Administration: $167.1 million
- Health and Human Services: $159.3 million
- Natural Resources: $74.8 million
- Aeronautics: $65.5 million
- Parks, Recreation and Tourism: $64.5 million
*Includes The Citadel, Coastal Carolina University, College of Charleston, Francis Marion University, Lander University, S.C. State University, Winthrop University, S.C. Technical College System, Commission on Higher Education and Higher Education Tuition Grants Commission.
**Includes the S.C. Department of Education, S.C. Governor’s School for the Arts and Humanities, and S.C. Governor’s School for Science and Mathematics.