South Carolina  lawmakers last Thursday approved a $7 billion budget for fiscal 2009 that cuts funding for most state agencies but provides small increases for public education, health care, and salary hikes for state employees.

Because revenues are expected to decline by as much as $180 million, lawmakers dipped into reserves and cut nonessential projects. Agency cuts between 2.5% and 5% included trims to the Department of Corrections budget, which was already running in the red this year.

State employees will receive a 1% raise and will not pay any new costs for health insurance.

The spending plan was sent to Gov. Mark Sanford, who has the power to veto expenditures.

Sanford has criticized lawmakers for refusing to properly fund the Department of Corrections, which has requested approval for up to a $4.3 million deficit.

The governor has also faulted the House for a bill making changes to the state’s retirement system that “promote a false image of stability when it comes to the woefully under funded system,” he said in a press release earlier this month.

Sanford said the House measure adds $2.6 billion to South Carolina’s long-term retirement debt and attempts to cover that shortfall “by simply changing the state’s assumed rate of return on retirement system investments — a smoke-and-mirrors move that does nothing to truly address the debt.”

The new assumed rate of return in the bill, Sanford said, would be 11% higher than the national median for public funds, 33% higher than Georgia’s retirement system, and 43% higher than North Carolina’s. 

“When all retirement benefits are figured in, South Carolina’s retirement system is underfunded by $20 billion and when traditionally granted cost of living adjustments are included, it jumps to $27 billion,” Sanford said.

The General Assembly’s session began Jan. 8 and is expected to run through June 5.

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