ATLANTA -- South Carolina officials said the state logged a record $273.5 million general fund budget surplus in the 1994 fiscal year, contending that this should soon lead Standard & Poor's Corp. to restore the state's AAA rating.
Fiscal 1994, which ended in June 30, was the second year in a row that South Carolina has had a budget surplus, Donald Lovett, senior associate comptroller general, said Tuesday. Given the improvement, Lovett said Standard & Poor's should give "serious consideration" to upgrading the state's general obligation bonds from AA-plus when the state presents its comprehensive annual report at yearend.
In January 1993, the rating agency lowered the state's longtime AAA rating, citing a weakened financial position over the previous four years. At the time, Standard & Poor's pointed to a 1992 fiscal yearend accumulated deficit of $255 million, when calculated according to generally accepted accounting principles.
Moody's Investors Service has continued to rate the state's GOs at Aaa. Fitch Investors Service recently assessed the debt at AAA.
Since the Standard & Poor's downgrade, South Carolina has recovered from the effects of the national recession and enjoyed a much-improved fiscal climate, Lovett said.
In fiscal 1993, he said, the state had an operating surplus of $116 million, and lowered its GAAP-based deficit to $94 million. The state has also updated its revenue forecasting methods, and shifted responsibility for budget preparation to the governor.
"We have an excellent chance of eliminating the GAAP-based deficit -- and with that gone I see no reason why we should not get [the AAA rating] back," Lovett said.
Lovett's boss, Comptroller General Earle Morris, also pushed for an upgrade from Standard & Poor's.
"I am hopeful that the last two consecutive years of good operating results for the general fund will persuade Standard & Poor's to revise the state's current AA-plus bond rating upward to AAA," Morris said in a statement.
The comptroller's office calculated the $273.5 million surplus using financial figures available as of Aug. 19, and is limited to the portion of the state's operations involving the budgetary general fund, Lovett said. The comptroller's office will issue a comprehensive annual financial report -- including audited GAAP-based data -- by Dec. 31, he said.
The state official attributed the 1994 budget surplus mostly to higher-than-expected revenue from a variety of tax sources, including sales and use taxes and corporate income taxes. Sales and use taxes, for example, were $1.35 billion -- $96.5 million above the $1.25 billion originally estimated. Corporate income taxes came in at $198.8 million, $59.4 million more than the estimate of $139.4 million.
Standard & Poor's director Richard J. Marino said that while he views the comptroller's 1994 budget figures as part of the state's current positive trend, the rating agency will withhold consideration of a possible GO upgrade until after the state releases its comprehensive annual financial report.
Marino said the rating agency would first like to see elimination of the GAAP-based deficit as well as completion of another budget cycle under the state's newly imposed fiscal reforms.
Lovett said that lawmakers have already earmarked all but $22.4 million of the $273.5 million surplus for use in fiscal 1995.
He said that $146.2 million has been appropriated for spending, $66.8 million has been set aside for the state' capital reserve fund, and $9.9 million for the general fund reserve. In addition, $19.1 million will be used to cover deficits, primarily in the department of social services and corrections, and $9.1 will go to a number of education programs.
With the recent additions to the general reserve fund, it is now at its fully funded level of $110.2 million, according to Lovett. He noted that the fund had been completely depleted at the end of the 1992 fiscal year.
In his statement, Morris recommended that of the remaining $22.4 million, $2 million be used to fund a performance audit of state government, and $100,000 be used to study property tax laws. The remaining $20.3 million, Morris said, should be returned in the form of property tax rebates to the state's 46 counties, with each county's share based on its population in April 1990.