News
Rainy day fund likely to be used - Income tax collections have fallen dramatically
Friday, June 12, 2009
By JIM DAVENPORT
Associated Press
COLUMBIA — The state likely will empty its rainy day account after high unemployment rates shot another hole through the state's budget forecasts Thursday.
The Board of Economic Advisors agreed Thursday to cut $92 million from their revenue forecast with less than three weeks remaining in a fiscal year that has seen the state's budget shrink by more than $1.3 billion to about $5.7 billion.
"I know it's June. And I know it's halfway through June. But in my view we have an obligation to not avoid reality but to recognize it," board chairman John Rainey said.
That leaves the Legislature and a state budget oversight board little time to wring cash out of agency budgets. "I don't know how they handle it. We're in a time now where you have to play the hand that's dealt you. And these are the numbers that are dealt you," Rainey said.
State tax collections have fallen this year with the recession and as tax breaks on groceries and homes took hold.
Individual income tax collections have plunged by $475.8 million, or 16 percent, between July, as the fiscal year began, and May. That decline is driven largely by unemployment that's rocketed to 11.5 percent by April, a record for the state and the nation's third highest. The board expects it will top out at least 14 percent this year and improve gradually next year.
That's a more pessimistic outlook than the board had in March, when it expected unemployment would peak this summer. The delayed turnaround prompted the board to cut $120 million from the revenue forecast for the budget year that begins July 1.
Gov. Mark Sanford called on legislators to respond to reductions with targeted spending reductions. Sanford spokesman Joel Sawyer said that could begin as early as next week when the Legislature returns to deal with vetoes.
He also said legislators need to pass spending-cap legislation that would help the state avoid future shortfalls.
With the budget year ending June 30, there's little the Legislature can do since the state already has spent nearly all the cash it has this year.
