ATLANTA - In an effort to end South Carolina's recurring operating deficits and protect its imperiled triple-A credit rating, legislative leaders last week proposed a bill that would impose stringent budgetary guidelines.
The bill, which has been drafted by four members of the House of Representatives, would cap spending for an upcoming fiscal year at the level of revenues collected in the previous calendar year, plus an amount of revenues pegged at half the state's expected percentage rate of growth.
The measure would also prohibit lawmakers from using surplus revenues unless they have been appropriated by the legislative session following the end of the fiscal year in which the surplus occurred.
If approved, the bill's provisions would not apply until the 1995 fiscal year.
"We feel that this proposal will allow us to see our appropriation decisions carried out in the form of services to our state citizens rather than raising their expectations and later having to take away promises we already made." said Rep. Marion Carnell, D-Ware Shoals, one of the sponsors.
The other sponsors are House Ways and Means Chairman William Boan, D-Heath Springs; Patrick Harris, D-Anderson; and John Felder, D-Saint Matthews.
Under the current system, the state's Board of Economic Advisers projects state revenues for the upcoming year by applying the full rate of estimated economic growth to revenues gathered the previous fiscal year. South Carolina's fiscal year ends June 30.
The existing method, however, has led to serious problems, as the advisers have consistently overestimated the state revenues in the face of unexpectedly persistent economic sluggishness.
In fiscal 1990, 1991, and 1992, the state posted operating deficits of $82.9 million, $173.7 million, and $54 million, respectively, as sales and corporate-income tax revenues remained depressed.
Responding to these recurrent imbalances, Standard & Poor's Corp. in March placed the state's AAA-rated general obligation debt on its CreditWatch with negative implications. Standard & Poor's noted that the "mounting fiscal pressures" could lead it to downgrade the state's GOs to the AA category.
Since the start of the 1993 fiscal year, South Carolina has again been forced to deal with revenue shortfalls. Disappointing collections so far have forced the state to cut its appropriations by $245.2 million, including $136.4 million in recurring spending and $108.8 million in nonrecurring spending. The state ended its 1992 fiscal year with only $8 million in its budgetary general fund.
Steven Murphy, a Standard & Poor's director, said Friday that the rating agency's CreditWatch remains in effect and declined specific comment on the proposed bill.
"Before we can evaluate this bill, I would have to see what is actually submitted to the legislature," he said. He also said the agency is waiting for the final audit of fiscal 1992, which is expected in January.
At Moody's Investors Service, George Leung, managing director of state ratings, said he was encouraged by the proposal.
"If passed, it would make provision for avoiding a yearend deficit stronger, and that's a plus," he said. Moody's rates the state's $853 million of outstanding general obligation debt Aaa.
A legislative aide to Boan said the the bill will be introduced shortly after the legislature convenes in early January. The aide said support for the bill appears to be strong in the House.
An aide in the Senate described support for the legislation in that chamber as "Iess certain."