South Carolina revenues up, but no one knows if it will last
COLUMBIA, S.C. (AP) — South Carolina economists decided Friday to make no changes to 3-month-old revenue estimates because COVID-19 is still causing so much uncertainty in the economy.
Revenues in South Carolina have grown nearly 5% since the fiscal year started in July, while official estimates predicted a 3.5% decline. That’s good news on its face, said state Revenue and Fiscal Affairs Office Executive Director Frank Rainwater.
But Rainwater said behind that number are a lot of questions. The chief one is how much of that surge in revenues is thanks to federal stimulus money.
Other unknowns include whether the lower-than-predicted unemployment rate is as rosy as it appears or will have to be adjusted, and whether people will continue to spend more than typically anticipated in a recession.
“We want to be cautious. We don’t want to be careless in this uncertain time,” Rainwater said at Friday’s meeting of the state Board of Economic Advisors.
That means the official prediction for South Carolina remains unchanged from three months ago: The annual budget is expected to grow by $36 million in the fiscal year that ends in June. The conservative estimate will help avoid any immediate budget cuts in agencies, Rainwater noted.
The prediction for the next budget year, which starts in July, remains at about $182 million, a figure lawmakers will use as they write South Carolina’s budget over the next few months.
The Board of Economic Advisors will next review its estimates in April.
Rainwater held the meeting on a Zoom call with his typical array of charts, breaking down categories of state revenue and trends in unemployment, tax refunds, personal income and other data points.
Instead of the straight lines economists are used to, there were sharp rises in money collected so far and dips in what is predicted.
“We’re on a see-saw or roller coaster pattern,” Rainwater said.
Corporate income taxes might have been the best example. They traditionally dip during a recession, so Rainwater’s agency predicted a 12% decrease. Instead, through January, corporate taxes were up 22%.
That might be because of a 7% increase in sales tax as people helped by federal stimulus money spend more than they typically do in a recession, Rainwater said.
But Rainwater repeatedly emphasized caution given that there is no certainty the upward trend will continue.
There are many other unknowns with COVID-19 that have a cascading effect on the economy. Will businesses continue to let employees work from home? If so, what does that mean for the local lunch counters around the corner from large office buildings? And what about hotels and convention centers that depended on big business meetings?
“We have so many moving factors right now,” Rainwater said.
Rainwater also urged the board to work as much certainty as possible into the estimates they present in two months, given that the General Assembly will be basing next year’s roughly $10 billion budget on those figures.
“April 8 will be a very involved meeting, one way or the other,” Rainwater said.
Board Chairman Edward Grimball thanked Rainwater for his caution.
“There are all kinds of things that might manifest over the next two months,” Grimball said.
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