WASHINGTON — South Carolina Gov. Mark Sanford’s proposed fiscal 2011 budget, submitted Thursday to lawmakers, would cut general fund spending by 5.3% but not raise taxes.
The budget would allocate $213 million for general obligation debt service for the fiscal year beginning July 1, up from $190 million in the current fiscal year. It would cut general fund spending for education, health services, and higher education. But spending on government services, public safety, natural resources, and economic development would increase.
A spokesperson for the state treasurer’s office declined to comment on the proposed increase in debt service. Several public finance attorneys in the state said they had not reviewed the proposal and could not comment on it.
The governor released his budget proposal just before the General Assembly convenes on Jan. 12.
Sanford, whose term ends next January, criticized federal stimulus dollars on Thursday for temporarily propping up state spending. The American Recovery and Reinvestment Act provided the state with a total of $2.8 billion, but ARRA funding will stop next year.
South Carolina must balance a $462 million budget deficit for the remainder of fiscal 2010, according to Sanford. Total revenue is expected to drop by $560.9 million in fiscal 2011 and to continue falling through fiscal 2013. The state budget office estimates that sales and income tax revenues will increase 2% annually.
As in past budgets, Sanford proposed creating an optional 3.65% flat income tax. Income earners who would not make enough to hit the 3.65% rate on the graduated scale could continue to pay taxes in a lower bracket. The budget would offset the expected tax cut with a 30-cent increase to the cigarette tax and a $3 per-ton landfill dumping fee.
The budget also proposes eliminating the state’s corporate income tax in 10 years, another ongoing theme. The elimination of the tax would be offset by scrapping all tax exemptions otherwise offered by the state over the next 10 years.
Sanford last year battled the legislature, including members of his own party, and the Obama administration over $700 million of federal funds the governor wanted to use to pay off $579 million of GO bonds or the state’s pension obligations. He accepted the money from the ARRA-created fiscal stabilization fund hours before a deadline was set to expire.