South Carolina State Budget Analysis

South Carolina State Budget Analysis

The state of South Carolina extends from the Atlantic Ocean, westward to the Blue Ridge Mountains, covering approximately 30,000 square miles. The state is bordered by the North Carolina and the Georgia states. The state has a population of approximately 4.5 million citizens. It has a diverse and a strong economic, which include manufacturing, healthcare, trade, agriculture, leisure and hospitality. Businesses around the world have migrated to the state of South Carolina to take advantage of the well skilled labor force. Furthermore, it has excellent facilities and substantial tax incentives that ensure the economy of the state thrives.

The department of revenue in the South Carolina is the one that oversees the collection and appropriation of revenues to various expenditure programs. The state usually obtains its revenue from individual income taxes, excise taxes, retail sale taxes and from the federal aid package from the central government. The Federal aid usually supports various projects and programs in the South Carolina state (South Carolina, 2008).

The South Carolina’s annual appropriations act usually includes legally adopted budgets for the Budgetary General Fund and the Total Funds.  The initial budget appears in the annual appropriations act. The State Budget and Control Board, which is normally comprised of five executives and legislative officials, may order the spending cuts, especially when the revenue collections fail to reach the estimated levels. In this case, the departments and agencies may request of the appropriation among the programs, especially when the transfer request exceed 20% of the program budget. The legislature of the South Carolina State requires the state to adopt a balanced budget annually, based on the revenue projections provided by the Board of Economic Advisors (BEA). This ensures that the budget is established within its limits and guarantees sufficiency and stability, which is in accordance to the principles of a high quality revenue system. The South Carolina  law requires that the Board of Economic Advisory need to meet at least quarterly in order to review the actual revenue collections in comparison to its earlier projections, and it adjusts the projection, when it is deemed necessary. This is necessary, as it reduces the possibility of having budgetary shortages in the State of South Carolina (South Carolina, 2011).

The State’s Budget and Control Board is usually responsible for taking appropriate actions to keep the budget on balance, especially when the Board of Economic Advisory reduces the revenue projections. In a situation where the Board anticipates a year ending deficit as a result of the reduction of the projections by the BEA, it reduces the amount set aside in the annual appropriations act for the 2% capital reserve fund (South Carolina, 2011). Nevertheless, when the deficit is greater than 2% Capital Reserve Fund, the Board reduces most appropriations evenly across the board. This flexibility of the budget ensures that, the appropriation of fund across the agency can be changed, when there is a deviation on the revenue projections.

The State Budgetary General Fund revenues have continued to be unpredictable. In the fiscal year of 2010, the actual revenues were $310.106 million, which was much below the projection that was used to generate the common fund budget for the fiscal year 2010. In regard to this decline, the Budget Control Board ordered two midyear agency spending cuts and drawing down of the capital reserve fund. As a result, the state ended the year with a positive General Fund balance of $246.167 million, which comprised surplus of $71.001 million on the same fiscal year. This leads to legislature approval of agency carryover appropriation of $64.283 million, and the reserve fund balance of $110.883 million (South Carolina, 2008).

The South Carolina Budget Control Board voted for the budget on the year 2011.  This budget, worth $6 billion, was approved by the legislature on the same year. Although it increased insurance premiums for the employees and the state by 4.5%, it was essential to ensure that the system was sound and had enough fund, required to meet the health needs of all employees. The budget also provided for the spending raise plan per state’s student up to $1,880 from its previous value of $1,615. Although the budget did not meet the required amount of $2,720, outlined by the state school funding formula, it was a significant improvement for the state (South Carolina, 2012).

In the 2012 fiscal year budget, 5 billion that involved a $0.5 growth in the states cigarettes tax was approved. This is supposed to bring approximately $88 million for special funds for the health needs of the South Carolina state. The $0.5 raise in the cigarette tax is aimed to gather approximately $ 129 million revenue that will be directed to the Department of Health and Environmental Control smoking termination program, and the Medicaid trust fund. This is excellent news to the State of South Carolina, because these funds will be used to counterweight the effects that are brought about by smoking. Although there has been a budget cut in the education sector of South Carolina in attempts to counteract the effects of recession, it could be argued that this cutback is positive, as it will force the school bodies in the state to be more analytical.  This will make the school administrators think outside the box in terms of how efficiently their money is spent in the education system. The result will be improved teaching methods that are more environmentally friendly and cost efficient (South Carolina, 2008).

Major categories of expenditure in the 2012-2013 budget of South Carolina

In the 2012-2013, a $ 6.6 billion budget allocation was approved by the senate. Among the capital expenditure that was outlined in this budget was the health care system, which received $ 1.2 billion. This was 26 % of the total budget. This money was to be used for employee health insurance schemes, the commerce department was also a significant expenditure sector, which was allocated $10 million, and another key disbursement was the Mitchellville project that received $ 200,000. Education was also a significant expenditure, which received a 30 % of the total budgetary allocation in the year fiscal 2012.

 The expenditure plans in learning elevated the states per student expenses up to $ 1,800 from its current $ 1,615 (South Carolina, 2010). Other sectors that received significant allocation are protection sector and transport sector. This outlay can be said to be in line with the principle of high quality revenue system, which requires there to be a scheme that lessen its involvement in expenditure decisions and makes such association clear. Having such in mind will help policy makers to be certain that these measures help them in achieving any goal (South Carolina, 1988).

Scope and approach of South Carolina budget

The South Carolina government scope and approach of the budget can be said to be expansive. The $ 6.6 billion passed by the senate is an expansive budget. Over the years, there has been an increase in the expenditure system (South Carolina, 2010).

Weakness of the 2012 budget

After the immense decline that started in 2007, South Carolina had a collapse in its state revenue and it has not fully recovered. Just like in many other states, the most profound weakness of the 2012 budget is the increased cuts in the allocation (South Carolina, 2012).  These incisions are projected to drag on the national economy and, thus, frightening many private and public sector jobs. This has translated to the state using reserve funds and more revenue through tax collection. These cuts will negatively affect sectors such as education. Another weakness of the 2012 budget is its inability to increase the employment rate. Unemployment remains at 8 % and this is expected to remain the same throughout the fiscal year of 2013 (South Carolina, 2012).

The budget for the fiscal year 2012 has proposed a deep cut in the education sector, health care and other important public services. This has been done in attempt to curb the effects of the economic recessions that hit the State of the South Carolina. These budgetary incisions on the most important public sectors may delay the state’s economic recovery. Furthermore, it may undermine the efforts to create jobs in the state.

This state has failed to utilize the important tools in their budgeting toolkit. This includes utilizing reserves and raising new revenue to replace the revenue lost during the economic recession. The idea of reducing the corporate taxes is usually an ineffective strategy for improving economic growth, especially when the state is recuperating from the effects of economic recession. The strategy is even likely to do more harm than good (South Carolina, 2012).

To meet some of this shortfall, the state has also imposed some cuts on sectors like human services and the health care. Another weakness of the budget is that some taxes have been increased to cater for some of the cuts in the budget. This tax increase will have unhelpful impact on the economy in that it will take away demand from the economy by dropping the total money people have to spend. Finally, this shortfall in the budget will drop the Gross Domestic Product and, thus, negatively affect the South Carolina economy (South Carolina, 2012).

Strategic priorities being emphasized in the budgetary allocation

Just like in any nation or state being faced by new challenges every single day, South Carolina has its own challenges and this has made the state identify and emphasize on these strategic priorities and setting funds in its budgetary allocation. Some of the identified strategic priorities include: education, health care, salary increase for public workers and increasing the number of law enforcement officers to enhance security.

In the fiscal years of 2012-2013 the South Carolina senate approved a $6.6 billion spending plan for the state. In this proposal budget, 80 new employees at the state law enforcement division would be added, among these will be judges who will help in reducing the caseload in courts, 20 conservation officers would be added to the department of natural resources. Another priority in the budget allocation is that of a pay rise for the public servants. In this proposal there will be also a 2% raise for teachers, 5% for state law enforcement officers and an additional 3% to other state employees. There will also be an increase in the employees’ health insurance premiums by a 4.5% (South Carolina, 2012).  Despite some legislators believing that this budgetary provision should be used to restore cuts formerly made to state agencies funding, the South Carolina Board of Financial Advisors feels that this is not a priority (South Carolina, 2010).

Overall state of the budget in South Carolina

The senate has passed a $ 6.6 budget for 2012-2013 in South Carolina. The current state of the budget can be analyzed in terms of annual change in appropriations by fund type and in relation to the previous budgetary allocation. In the fiscal years 2012-2013, the total amount allocated is $5,700,202,236. This is a 3.47% increase from the previous 2011-2012 fiscal years. The federal appropriations amount to 3.8%. This is a 4.28% increase from the previous financial year. Also there has been a tax reform (South Carolina, 2012). In the governor’s Haley tax restructuring; there is a phase out of the corporate income tax over a four-year period, merge six entity income tax cohort into three, while cutting the rates and there is also a proposal to amend the constitution to establish property tax by statute.

South Carolina State’s long-term fiscal outlook

It is necessary for any particular state to have some long term financial plans. This is necessary, as it helps in identifying significant areas, which have or are projected to have an impact on the economic condition of a state. This often calls for the setting of specific objectives and goals, which help in development of the relevant projects. In his speech, the South Carolina acting governor, Nikki Haley, said that some of the priorities that should be emphasized in any future budget are: clearness and genuineness in budgeting, state, living inside its own means, using recurring dollars for persistent needs, increasing the states reserves and conveying significant tax to South Carolinians. This is in line with the principle of a high quality revenue system, which states calls for a system that is accountable to tax payers (South Carolina, 2010).

The South Carolina law requires that an agency, receiving more than 1% of the total General Fund appropriations, needs to provide an estimation of their General fund expenditure for the next three fiscal years (South Carolina, 2010). The state Budget Office combines these expenditure estimates made to create a three year financial plan. These three year financial plans usually assist the state in assessing strategically its future financial assurances. This plan is usually updated annually, according to the provision of the law.

The South Carolina state‘s long-term financial plan usually include a five year capital improvement plan, which actually requires financing to be available prior to the construction on any capital improvement projects.