ATLANTA -- South Carolina, facing fiscal crisis, has announced it will draw down almost all of its remaining rainy-day fund to deal with a $90 million addition to the state's budget gap for fiscal 1991 -- which now stands at $222 million.
The state's $94 million General Reserve Fund will be tapped to meet the additional shortfall, Jesse Coles, executive director of South Carolina's Budget and Control Board, said yesterday. The control board is a five-member group headed by Gov. Carroll Campbell that oversees fiscal matters in the state.
The latest estimate of this year's gap is the third revenue revision since the General Assembly adopted its $3.59 billion budget June 1. In November, the state had an $82 million deficit; in February, it jumped by $50 million, to $132 million; and just last week, it grew by $90 million, to $222 million.
Mr. Coles noted South Carolina has already used up its other rainy-day reserve fund, the $62.7 million Capital Reserve, by plugging the increase in the 1991 deficit announced in February.
"When you get close to the end of the fiscal year, your flexibility is limited, so we did what we had to do in order to maintain a balanced budget," Mr. Coles said. "The problems are the result of lagging corporate tax collections," he continued. "We hope the situation improves."
Mr. Coles said the control board was authorized to make further cuts this fiscal year if the budget gap continues to widen between now and July 1, the beginning of fiscal 1992. He said the legislature, before adjourning Thursday evening, agreed to a 3.3%, or $115 million, across-the-board spending cut to help balance the fiscal 1992 budget.
In addition, he said, the state had decided to freeze all hiring and not enter into any new contracts.
But as of July 1, Mr. Coles said the state would replenish the full $67.4 million drawn from the capital reserve fund in February. Funds were appropriated for this purpose in the fiscal 1992 budget.
In addition, the state's Board of Economic Advisers said the estimated fiscal 1992 revenues would be $100 million less than had been expected in February.
George Leung, managing director of state ratings at Moody's Investors Service, said that while his agency was the state's quick action in meeting the fiscal crisis.
"While the state evidently has fiscal problems, they have dealt with those problems promptly," he said. "We are also pleased that South Carolina will reinstate its capital reserve fund July 1."
Parr Young, a senior vice president at Standard & Poor's Corp., said his agency "is looking closely at South Carolina," but is maintaining its triple-A rating with a negative outlook. "The state has a long history of using its reserves and we are not worried about that use, as long as the reserves are in line with the deficits."
The Board of Economic Advisers announced on Tuesday that, based on May tax collections, revenues for the fiscal 1991 would be only $3.37 billion, $222 million below the $3.59 billion appropriated last spring.
The Budget and Control Board had dealth with the $132 million shortfall announced in February by slicing $56.3 million in spending, including $30.8 million in pay raises. The remainder of the deficit was closed by drawing down the $62.7 million capital reserve fund and withholding $13.2 million in aid to local governments.
South Carolina's $790 million of general obligation debt is rated triple-A by both Moody's and Standard & Poor's Corp.