News
More state jobs at risk
Friday, Jul 17, 2009
Latest drop in revenue estimates could trigger more spending cuts in state government agencies
By RODDIE BURRIS
State agencies likely will be told to slice 4 percent more off their budgets next month — a move almost certain to trigger new job cuts, economic forecasters said Thursday.
Income tax collections in June dropped by 15 percent over last year’s, according to the state Board of Economic Advisors. Consequently, the board lowered its revenue estimate for the month by 3.5 percent, a move that shows how the state’s persistent unemployment problem is continuing to affect the economy.
The Budget and Control Board, which oversees state revenue and must act on the new estimate, said it will consider a 4 percent, $200 million across-the-board cut for state agencies to meet the lowered revenue projections when it meets Aug. 13.
Over the course of the recession, which economists say began in December 2007, state revenue has fallen to a projected $5.7 billion in 2009 from $7.2 billion in 2007.
State agencies have had to slash $1.4 billion from their budgets, with public schools among the hardest hit. State-supported colleges, health care and prisons also have had to cope with less money, and forecasters said they see no end in sight.
“These are people cuts now,” John Rainey, Board of Economic Advisors chairman, said of the latest projections. “This is a gut-wrenching recession, and it’s not over yet.”
The drop in income tax collections is a direct result of sustained job loss in the state, the board’s economists said. South Carolina had the nation’s third-highest unemployment rate as of Thursday, 12.1 percent. New unemployment figures will be released today.
Rainey said he expects a modest increase in unemployment but expects it to remain below 12.5 percent.
Some 270,000 workers remain unemployed in South Carolina, and initial unemployment benefit claims rose an additonal 10,000 last week.
The state loses about 4,500 jobs per month, the economists said. The continued job losses represent a roughly 5 percent loss of the state’s overall economy, the forecasters said.
On Wednesday, the state Consumer Affairs Department cut 50 percent of its employees ahead of these new economic forecasts, as the agency reeled from deficits.
But virtually no one is spared from the recession. In the state’s $5.7 billion budget, education and health care account for more than 50 percent of total state expenditures.
“This is going to be more pain,” predicted state education department spokesman Jim Foster. He said in school districts across the state, typically 80 percent to 90 percent of spending covers personnel.
“Some of them have reserve funds that help blunt the impact, but many of them have used up what reserves they had,” Foster said.
School districts faced a $500 million shortfall last year but got some relief from $185 million in federal stimulus money this year, which helped soften the blow. Still, 1,900 education jobs were cut, Foster said.
An additional 3.5 percent cut in state revenue would mean $74 million less for schools, Foster said.
There were a few bright spots in the economic forecast, but even the good news had a down side.
South Carolina consumers are no longer running up high balances on credit cards, which showed a 10 percent drop over last month.
However, much of the economy depends on consumer spending.
Reach Burris at (803) 771-8398 or via email at rburris@thestate.com.
