Post-Covid surplus budgeting continues

As the S.C. General Assembly convened for its 2025 legislative session on Jan. 14, Gov. Henry McMaster continued the longstanding gubernatorial tradition of greeting lawmakers with an executive budget plan touting his spending priorities for the year ahead. This year sounded much the same — higher teacher pay, income tax cuts – but also included disaster relief for victims of Hurricane Helene.

But the continuation of a more recent budget tradition caught the eyes of some good government advocates — namely, the existence of yet another “surplus” of almost $2 billion in last year’s “unexpected revenues” for lawmakers to dole out in one-time expenditures as they construct the spending plan for 2025-26.

Critics say the emergence of large surpluses in the post-Covid era — ranging from a low of $1.6 billion in 2024 to almost $4 billion the year before — seem to be more the result of overly conservative budget projections than unexpected economic growth. As a result, they contend, the “found money” too often winds up financing short-term political priorities, rather than disciplined, long-term investments in areas like education and health care.

“The state has so many needs and this surplus isn’t genuine,” S.C. League of Women Voters Vice President Lynn Teague told Statehouse Report. “This is money that needs to be used [for critical programs].”

S.C. Education Association President Sherry East echoed Teague’s concerns about the process.

“You’ve got state workers, teachers, public employees, and they’re really hurting,” East said. “With more accuracy in the projections, [lawmakers] could make a long-term commitment to educators and firefighters and police officers in the budget.”

Nevertheless, East noted that teachers are “grateful” for lawmakers’ ongoing efforts to raise their pay, particularly in poor, rural counties — one of several funding commitments McMaster’s executive budget seeks to address in 2025.

Here are some highlights from the governor’s $13 billion spending plan.

Education

When McMaster became governor in 2017, he called on the legislature to raise the state’s minimum teacher salary from $30,000 to $50,000 by 2026. In his executive budget, he earmarks $200 million to reach that goal one year early, raising the floor from its current level of $47,000.

“South Carolina’s future prosperity requires that we continue the remarkable progress we have made in raising teacher pay,” McMaster wrote in a Jan. 13 letter to lawmakers.

In addition to raising teacher pay, other education spending priorities include:

$30 million in public tax dollars for a still-undefined private school voucher program – far less than the current S.C. Senate proposal of $130 million.
An additional $2.8 million for the state’s 4-year-old kindergarten program, allowing it to increase enrollment by 7%.
$21 million to add 177 new school resource officers, which would complete the goal of placing an SRO in every public school.
$30 million to maintain the now six-year freeze on tuition at state colleges and universities.
$95 million in lottery funds for SC WINS, a skills and training scholarship program at S.C. technical colleges.
$2 million for a systemic review of the state’s 33 institutions of higher education, in preparation for lower enrollments as the number of college-aged Americans declines.

Disaster relief

Last September, Hurricane Helene cut a path of destruction through the Palmetto State that left 49 dead, damaged 6,300 homes, destroyed 10 bridges and left more than a million residents without power for days. To help recoup some of the economic losses, McMaster’s budget allocates more than $200 million for disaster relief, including:

$150 million to create a state disaster recovery grant program for local governments, public utilities and nonprofits whose relief applications were either denied by the federal government or did not meet federal FEMA requirements.
$50 million to the S.C. Department of Transportation (SCDOT) for unreimbursed costs associated with the storm, including debris cleanup and repairs to roads and bridges.
$40 million to replenish the coffers of the state’s two principal disaster reserve funds, which were drawn down in the immediate aftermath of the storm.
A new budget provision requiring the Office of Regulatory Staff to study the economic and technical feasibility of undergrounding power lines, which many believe would reduce the incidence of widespread power outages during extreme weather events.

Law enforcement

In his letter to lawmakers, McMaster calls on the legislature to authorize major new spending on law enforcement, arguing that “to keep our citizens safe, we must maintain a robust law enforcement presence – and properly ‘fund the police.’” That spending includes:

$43 million in new appropriations for the state Department of Corrections to hire new officers, increase medical and mental health services, provide pay raises and cover the costs of deferred maintenance at all 21 state prisons.
$43 million to provide a $2,000 nonrefundable tax credit to all active-duty police officers, firefighters, first responders and emergency medical technicians.
$14.5 million to increase pay and hire additional law enforcement officers.
$500,000 for the S.C. Law Enforcement Division to step up enforcement of state laws against animal fighting.

Income tax cuts and more

Beyond these major areas, McMaster’s budget wish list includes a number of significant line-item expenditures, including a reduction in the state’s top income tax rate from 6.2% to 6% at a cost of $194 million. But GOP leaders in the legislature have said their goal is to get the rate down “below that of our neighbors,” which would appear to mean cutting it beneath North Carolina’s current rate of 4.5%. That’s an idea McMaster says he supports in principle, though neither he nor lawmakers have yet presented a plan to pay for it.

Other noteworthy line-items in McMaster’s budget include:

$112 million to cover increased costs in the state employee health care plan, along with a request for a study of ways to reduce program expenses in the future.
$100 million for the S.C. Department of Health and Human Services to help build a new neurological hospital operated by the University of South Carolina.
$100 million for SCDOT to repair and replace an undefined number of the state’s 9,000 bridges — more than 10% of which have been classified as structurally deficient.
$15.5 million for the Conservation Land Bank, the Department of Natural Resources, the Office of Resilience, and the Forestry Commission to identify and secure undeveloped land for permanent preservation.
$13.7 million to hire the additional personnel required to cut the state’s environmental review process down to 90 days or less.

McMaster concluded his budget message on an optimistic note.

“By thinking big, by being bold, and by making these transformative investments, I believe we will set our state on a course that will provide the opportunity for prosperity, success, and happiness for generations of South Carolinians,” he wrote.

The General Assembly is expected to formally begin the 2025-26 budget process in February.