COLOMBIA, SC (AP) – South Carolina economists on Friday decided not to make changes to three-month revenue estimates because COVID-19 is still causing a lot of uncertainty in the economy.
South Carolina revenues have grown by almost 5% since the fiscal year beginning in July, while official estimates predicted a decline of 3.5%. That’s good news at first glance, said Frank Rainwater, executive director of state revenue and tax affairs.
But Rainwater said that there are many questions behind this number. The main one is how much of this increase in revenue is due to federal stimulus money.
Other unknowns include whether the lower-than-expected unemployment rate is as optimistic as it appears or will need to be adjusted, and whether people will continue to spend more than is normally expected in a recession.
“We want to be cautious. We don’t want to be careless in this uncertain time, ”said Rainwater at Friday’s meeting of the state’s Council of Economic Advisers.
This means that the official forecast for South Carolina remains unchanged from three months ago: the annual budget is expected to grow by $ 36 million in the fiscal year ending in June. The conservative estimate will help prevent any immediate cut in the agencies’ budgets, noted Rainwater.
The forecast for the next budget year, which begins in July, remains at around $ 182 million, a figure that lawmakers will use when drafting South Carolina’s budget in the coming months.
The Council of Economic Advisers will review its estimates in April.
Rainwater held the meeting via a Zoom conference call with its typical set of graphs, dividing categories of state revenue and unemployment trends, tax refunds, personal income and other data.
Instead of the straight lines that economists are used to, there have been sharp increases in the money raised so far and declines in what is forecast.
“We are in a see-saw or roller coaster pattern,” said Rainwater.
The corporate income tax may have been the best example. They traditionally fall during a recession, so Rainwater predicted a 12% reduction. Instead, through January, corporate taxes increased by 22%.
This may be due to a 7% increase in sales tax, as people helped by federal stimulus money spend more than they normally spend in a recession, Rainwater said.
But Rainwater has repeatedly emphasized caution, as there is no certainty that the upward trend will continue.
There are many other unknowns with COVID-19 that have a ripple effect on the economy. Will companies continue to allow employees to work from home? If so, what does this mean for local cafeterias on the corner of large office buildings? What about hotels and convention centers that depended on large business meetings?
“We have so many moving factors now,” said Rainwater.
Rainwater also urged the board to work as hard as possible on the estimates it will present in two months, as the General Assembly will base next year’s budget of about $ 10 billion on those figures.
“April 8 will be a very engaging meeting, in one way or another,” said Rainwater.
Council chairman Edward Grimball thanked Rainwater for his caution.
“There are all kinds of things that can manifest in the next two months,” said Grimball.
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