As wages grow and with the pressures of inflation, state economists project South Carolina budget writers will have $1.3 billion more to spend next year than previously estimated.
The additional money is on top of the $4.6 billion of extra revenue lawmakers had to allocate when putting together a budget for the fiscal year that begins July 1.
The additional money potentially gives budget writers some added flexibility when trying to come to a budget agreement during the next few weeks. The House and Senate budget plans approved earlier this year are more than $1 billion apart.
With so much money available, lawmakers planned for a tax cut. But the House budget cuts about $600 million in taxes, while the Senate cuts about $1 billion. The Senate wants to include a $1 billion rebate.
The economy has been propped up by federal stimulus dollars, and state economists are expecting the economy to return to normal next year.
“It’s been a little frustrating because we’ve been saying that for two years trying to get through this pandemic and we’re past the pandemic but we have all these other challenges and we just want to remain cautious with the budget so promises aren’t over made in the appropriation process,” said Frank Rainwater, the executive director of the Revenue and Fiscal Affairs Office.
The additional estimated money comes as sales tax revenue came in higher than anticipated. However, income tax revenue has increased because businesses looking to hire and retain employees have increased wages, accounting for the biggest portion of the increased revenue estimates.
“Now we have the added pressure of wage growth and inflation that’s replacing some of that lost stimulus. How can you grow on top of double digits?” Rainwater said. “At some point it has to level out. It’s just hard to say when.”