Economy generates extra cash for budget writers

COLUMBIA, S.C. - A new projection showing state revenues should grow could be a gift for legislators and Gov. Mark Sanford

The state Board of Economic Advisors said Thursday that state revenues should increase by $466.9 million in the 2007 budget year, which begins next July.

Because legislators used one-time sources of money in the fiscal 2006 spending plan,only about $310 million of the new revenue isn't already accounted for in the next budget year.

The board also raised its revenue estimate for the current, 2006 fiscal year by more than $240 million. If the estimate holds true, the extra money will go into the fiscal 2007 budget.

A surge in income and sales tax collections between July and October is responsible for the revenue growth. Individual income tax collections soared 9.5 percent, bringing in $100.1 million more than earlier estimates. Sales tax collections were up 7.4 percent, or $22.4 million more than expected.

After years of struggling to balance the state budget after the 2001 recession, John Rainey, the economic board's chairman, had five words that cut to the bottom line: "Happy days are here again."

The confidence and brighter outlook come despite unemployment and other economic reports that show South Carolina with one of the nation's highest jobless rates and incomes that lag behind most of the nation.

Rainey and others say that data doesn't reflect what's really going on in the state's economy.

"We believe that the economy of South Carolina is sound," Rainey said.

It's timely and good news for Sanford.

Democrats have been thrashing the Republican governor on the economic numbers. Thursday's estimates "show once again that we're gaining strength with respect to our economy," Sanford said in a prepared statement.

Sanford took credit for that. "Small businesses across the state are beginning to realize the impact of our income tax cut, and we're seeing revenues increase as they grow and expand those businesses," he said.

Sanford spokesman Joel Sawyer said the governor campaigned on cutting small business taxes.

In an effort to attract wealthy executives and retirees to the state, Sanford persuaded the House to lower the state's individual income tax rate. But the Senate scuttled that, fearing its $1 billion price tag would hurt the state's Triple-A credit rating. Sanford then resisted plans that pared the proposal so it affected only small business owners. When he later signed the legislation, Sanford called it "a third of a loaf."

Sanford's staff now is writing his executive budget.

"Anything that's left over should be used to repay the state's past debt or provide relief for taxpayers," Sawyer said. Legislators raided trust and other accounts to balance budgets during lean years and repaying that could cost $200 million, Sawyer said.

House Ways and Means Committee Chairman Dan Cooper says there may not be much extra money when rising costs are considered.

For instance, about $109 million is needed to cover higher Medicaid expenses for the elderly, poor and disabled and more than $80 million is required to keep pace with a school funding formula, said Cooper, R-Piedmont.

All told, there are about $330 million in demands on the extra money, Cooper said.

"I don't think we should get overly zealous over it," Cooper said.