State ends fiscal year with surplus

By Jim Davenport

The Associated Press

COLUMBIA - South Carolina finished the 2006 fiscal year with a $171.5 million surplus, Comptroller General Richard Eckstrom said Tuesday.

The surplus would have been larger, but legislators spent $453 million of it in the budget for the current fiscal year, Eckstrom said.

It's the third consecutive year that state revenues have surpassed expectations. Last year, the state ended up with a $300 million surplus, and the year before it was $243 million.

The surpluses mean "a full recovery of the state's very poor financial condition that existed just four years ago," Eckstrom said.

In the 2001-2003 fiscal years, a recession and slow recovery meant revenues fell short of estimates and prompted a series of midyear budget cuts by the state Budget and Control Board.

Legislators scrambled to find money, raiding a variety of trust and reserve accounts, cutting agency budgets and raising fees and fines charged by various agencies and courts.

The surplus is "certainly another sign that we're moving in the right direction with respect to our economy," Gov. Mark Sanford's spokesman Joel Sawyer said. "It's a real testament to the financial turnaround the state has undergone since the governor has been in office."

Since then, legislators, Eckstrom, Sanford and state Treasurer Grady Patterson have pushed changes in the way the state puts together its budget and deals with financial problems. That includes repaying money raided from trust and reserve funds and properly accounting for deficits that had been on the state's books for years.

One of the changes approved this year requires any surplus to be used to cover costs tied to disasters declared by the president. The spending would need the unanimous approval of the state Budget and Control Board.

In January, legislators will decide how to spend money not needed for a disaster, said House Ways and Means Committee Chairman Dan Cooper, R-Piedmont.

His personal priorities are putting money into highway maintenance and repairing bridges and "possibly stepping up our replacement schedule of the school bus fleet." Replacing the buses has become even more important after a couple instances involving bus fires, including one a few miles from his home, Cooper said.

Sawyer says Sanford likes the concept for the new emergency fund, but said the surplus would be "best used to address either future liabilities" or returned to taxpayers, "where it can be used to stimulate the economy even further."

"We have cut taxes," Cooper said. That includes lowering the state's sales tax on groceries by 2 cents on the dollar and a two-day sales tax holiday after Thanksgiving.

Despite surpluses in fiscal 2004 and 2005, Standard and Poor's Ratings Services last year downgraded the state's AAA credit rating to AA-plus, saying the state's economy wasn't keeping pace with others and unemployment was too high. All told, the 2006 fiscal year's revenues were nearly $754 million ahead of initial projections, Eckstrom said. The bulk of that came from individual income tax collections, which were $393 million, or nearly 18 percent, above year-ago levels. "That's a huge, huge number," Eckstrom said.

Sales taxes were up $226 million, or nearly 10 percent.