SC revenue estimate cut; budget loss hits $350M

COLUMBIA, S.C. - The state's budget forecasting board said Wednesday it expects unemployment to hit 14 percent by spring in a dire forecast that prompted it to slash $230 million from the revenue estimate at the heart of a spending plan already rocked by cuts for public schools, colleges and health care programs.

That, paired with the Board of Economic Advisor's estimate paring last month, is expected to force across-the-board spending cuts of $350 million, with about half of that loss falling on public school budgets, board chairman John Rainey said.

The board had previously based estimates on South Carolina's economy losing 20,000 jobs in the fiscal year that began July 1 but later increased that to 50,000.

"To me, that would be wonderful if that was the case," board member Don Herriott said. Expectations now are for 150,000 people out of work.

In an unusual sign of just how bad things are, even the Board of Economic Advisors well-heeled members say they're seeing layoffs close to home.

Howell Clyborne, said in past recessions he may have known one person laid off. Now, "it is just tens and twenties of people that I know personally. I've never experienced anything like that," he said.

Herriott, who runs drug maker Roche Carolina Inc. in Florence, said he has "colleagues who are just waiting for approval by their corporate headquarters to execute layoffs and reductions in force. So the real question is how bad does it get and how fast does it get bad."

It's plenty bad already, said Frank Knapp, who runs a Columbia ad agency and is chief executive of the South Carolina Small Business Chamber of Commerce. At a board meeting Tuesday, everyone was talking about the economy. "Not every business sector is feeling it in the same way, but certainly retail is taking a big hit," Knapp said.

That shows up in sales tax collections, which from July to November were down nearly 11 percent from year-ago levels. No one expects that will improve with job losses on the horizon and people wary of spending.

"They are not spending money and it just spirals down. I just hope we are close to the bottom," Knapp said.

And it's now spreading to slower individual income tax withholdings. They were down 13 percent in November compared to year-ago levels and $44 million shy of already lowered projections.

The economic board's outlook is expected to immediately affect state jobs and programs.

The state budget oversight board already had planned to discuss needs to cut $103 million, or about 2 percent in spending. But Wednesday's reduction of 3.5 percent and other issues will likely force the Budget and Control Board to cut more than 6 percent as it keeps promises on homeowner property tax breaks. Sales taxes were supposed to cover those, but they aren't generating the cash needed.

The Budget and Control Board can only use across-the-board cuts to balance a budget that's shrunk from $7.1 billion to just more than $6 billion.

"I know what those cuts mean in terms of people's lives," Rainey said. He noted his brother, who chairs the South Carolina ETV board has laid off more than 40 people.

So far, most of the agency jobs cuts have hit the ranks of retirees who have returned to jobs, temporaries and workers who haven't finished probation periods. State personnel data shows only 98 people have been laid off since the fiscal year began in July. But the pace may be quickening. The state's overall payroll shrunk by 175 jobs in November and the first week of December to 65,548, the data shows.

The Legislature made a round of $488 million in targeted cuts in October and Gov. Mark Sanford, who chairs the budget oversight board, wants them to do the same with the shortfall at hand in January. But he knows, too, that he won't win that vote on the five member board and says agencies should expect across-the-board cuts.

"And I think it's a cop out," Sanford said in an interview Tuesday. "And I think it's a horrible mistake. And I think it's horrible policy. This presumes that every agency of government has equal value."