South Carolina’s budget basics

According to the National Association of State Budget Officers (NASBO), South Carolina’s total expenditures in fiscal year (FY) 2020 were $26.9 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, South Carolina’s combined state and local direct general expenditures were $44.3 billion in FY 2018 (the most recent year census data were available), or $8,716 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.

South Carolina’s largest spending areas per capita were elementary and secondary education ($1,859) and health and hospitals ($1,644). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

South Carolina’s combined state and local general revenues were $44.7 billion in FY 2018, or $8,786 per capita. National per capita general revenues were $10,071. South Carolina uses all major state and local taxes. South Carolina’s largest sources of per capita revenue were charges ($2,444), such as state university tuition and highway tolls, and federal transfers ($1,976).

South Carolina’s politics

Governor Henry McMaster, a Republican, was elected in 2018 with 54 percent of the vote. The next gubernatorial election is in 2022.

Republicans control both the House of Representatives (81 Republicans to 43 Democrats) and Senate (30 Republicans to 16 Democrats). Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in South Carolina. All South Carolina House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve four-year terms, and their seats are on the ballot in 2024.

South Carolina’s budget institutions, rules, and constraints

South Carolina uses an annual budget. The legislature must pass a balanced budget and it is prohibited from carrying a deficit over into the following year. South Carolina further limits spending with a budget rule based on personal income growth. The rule requires a special vote to override the limit. South Carolina also limits authorized debt and debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

South Carolina’s recent fiscal debates

• South Carolina teachers protested twice in 2019 over salaries, class sizes, and the state’s overall public education spending. The protests resulted in the legislature approving a 4 percent increase in teacher pay during the 2019 legislative session. However, although lawmakers increased education spending, they could not agree on a larger overhaul of the state’s education funding system. Teacher advocates, legislators, and the governor all agree another teacher pay increase and more education funding will be on the 2020 legislative session’s agenda.
  
• South Carolina made several changes to its income tax in response to the Tax Cuts and Jobs Act of 2017 (TCJA). South Carolina’s uses federal taxable income as the starting point for its tax, which meant the TCJA’s changes to the federal standard deduction, personal exemption, and itemized deductions (among other rules) would flow through to its tax code—changes that could have increased state taxes for many South Carolina families—unless South Carolina made its own changes. In 2018, South Carolina passed a law that accepted most of the TCJA’s changes and then added a new state dependent exemption (the exemption is larger for families with children younger than age 6); the new exemption protected most South Carolina families from a state tax increase. South Carolina notably did not conform with the TCJA’s 20 percent pass-through deduction.
  
• South Carolina is one of 14 states that have not accepted funds for expanding Medicaid eligibility created by the Affordable Care Act. The Urban Institute estimates that if South Carolina had accepted Medicaid expansion, it would have received 26 percent more federal Medicaid funds ($1.3 billion) and increased its state spending on Medicaid 6.8 percent ($111 million). Urban estimates that savings from Medicaid expansion (e.g., lower spending on uncompensated care) would, like with other states, fully or largely offset South Carolina’s additional direct state spending. South Carolina is the first state to add work requirements for Medicaid enrollees without expanding the program. Federal courts have blocked some states that expanded Medicaid from implementing work requirements for enrollees.

South Carolina’s current budget

Governor McMaster released his FY 2021 budget proposal in January 2020. The proposed budget included $9.4 billion in general fund spending, an 8 percent increase over FY 2020.

However, Governor McMaster discarded his proposal and instead signed a continuing resolution in May 2020 that extended spending levels from FY 2020 into FY 2021. The state Senate passed a roughly $9 billion budget for FY 2021 in September 2020, but the governor did not sign it. Instead, the state maintained FY 2020 spending levels for all of FY 2021. In his FY 2022 budget proposal, Governor McMaster estimates the state will ultimately spend $8.8 billion in general funds during FY 2021.

Governor McMaster released his FY 2022 proposed budget and gave his State of the State address in January 2021. The governor proposes spending roughly $8.9 billion in FY 2022, higher than the state’s actual spending in FY 2021 but below his prepandemic proposed FY 2021 spending. In his speech, the governor called for $250 million in one-time tax rebates and annual reductions in the state’s income tax rates. These income tax rate cuts are forecast to reduce revenue by $161 million in FY 2022 and $860 million annually when fully phased in.

For more on South Carolina’s budget, see

• the South Carolina Department of Administration,
  
• the South Carolina Revenue and Fiscal Affairs Office, and
  
• the South Carolina Comptroller General.

South Carolina’s economic trends

South Carolina’s per capita income (per the Bureau of Economic Analysis) was $47,502 in 2020, ranking 44th among the states. It was below both the national average of $59,729 and the Southeast regional average of $51,796. The state’s median household income (five-year estimate) was $53,199 in 2019, ranking 42nd among the states and below the national average of $62,843. South Carolina’s poverty rate was 15.2 percent in 2019 (five-year estimate), above the national rate of 13.4 percent.

Although South Carolina’s averages tell a story about the entire state, South Carolina is composed of diverse localities. For example, the city of Anderson’s median household income was $33,351, and its poverty rate was 22.4 percent; the city of Mount Pleasant’s median household income was $103,232, and its poverty rate was 4.6 percent.

South Carolina’s unemployment rate has historically been above the national average, but in recent years it has more closely tracked the US rate. (See how COVID-19 is affecting state employment and earnings data.)

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In South Carolina, the average unemployment rate in 2020 was 5.2 percent for white residents, 9.1 percent for Black residents, and 6.1 percent for Latino residents.