COLUMBIA, S.C. - Gov. Mark Sanford told state agencies Monday they should plan to set aside 4 percent of their budgets as state revenues fall further behind expectations.
Since July, the state's Board of Economic Advisors has slashed $724 million from its revenue projections as consumer spending has slowed amid worries of a souring economy, a gas price shock and a Wall Street meltdown.
That includes a $103 million, or 2 percent reduction, on Nov. 7 that came only a couple of weeks after legislators returned to Columbia to cut $488 million from state spending, slashing deeply into college and health care program spending.
Even though gas prices are at two-year lows, state unemployment in October was at a 25-year high of 8 percent and budget forecasters have warned income tax collections could soften, making matters worse.
"Given these rather unique circumstances, and the continued deceleration of the national economy, further revenue drops are almost certain to come, " Sanford said in a two-page letter Monday. "And as such, a four percent general funds sequestration would be prudent."
"With an uncertain outlook for state economies nationwide, asking our state agencies to prepare for more cuts is a good idea," said House Speaker Bobby Harrell, R-Charleston. "If the conditions we have been seeing across the country continue, we should be preparing for additional cuts to our state budget. This kind of preparation is something we urge all other agencies to do."
Sanford can order his 15 Cabinet agencies to set aside money and slow spending. But they represent only about a quarter of the state's general fund spending.
He can only ask other agencies and colleges to do the same, including the Education Department. The public schools agency's more than $2 billion is about a third of the state's general fund budget.
Instead, most of the control of state spending is in the hands of the Legislature and a five-member state Budget and Control Board Sanford chairs.
Sanford called on legislators to make targeted cuts like those in October when they return in January.
But the budget board meets on Dec. 11 and could decide to make across-the-board cuts over Sanford's objections. That's the path the board chose in August as they voted 3-2 over Sanford's objections to cut all agency spending by 3 percent.
Sanford doesn't want that type of cut again. Still, Sanford acknowledged in his letter that waiting until January could cause more harm to agencies that would have less time to cope with reductions.
"It is very easy politically for the Budget and Control Board to take a series of 1 or 2 percent budget across-the-board cuts," Sanford spokesman Joel Sawyer said. "In the aggregate, that is a whole lot of money to cut from state government."
South Carolina hardly is alone.
In California, there's an $11 billion shortfall and Florida's heading off a $2 billion deficit; in Illinois it's $1.4 billion. Neighboring North Carolina's shortfall is at least $320 million and Connecticut's is about $300 million.
"It's a developing story," said Arturo Perez, an analyst with the National Conference of State Legislatures, as his group readies a report on the health of state finances.
Perez has seen ranges of cuts from a couple percent to double-digit slashing as states see declining sales and personal income tax collections - two-thirds of the typical state's budget.
The only states faring generally better have been those with coal, oil or natural gas severance taxes, including Alaska, Montana and West Virginia. But falling energy prices likely will affect those budgets, too, Perez said.