South Carolina

State Budget Practice Report Cards and Budget Resource Guide

South Carolina’s grades for fiscal 2016 through 2018 illustrate how chronic underfunding of public employee retirement costs can overshadow the achievements of an otherwise solid budgetary process.

The state earned an A average in budget forecasting. Its consensus revenue estimates are developed by the Board of Economic Advisors, which consists of voting members appointed by the governor and by each legislative house, as well as the director of the revenue department, who serves in a nonvoting capacity. The state also provides a clear rationale for forecasts. The board releases a Three-Year General Fund Financial Outlook, which describes the assumptions used in revenue forecasts.

The state also averaged an A in budget maneuvers by avoiding one-time measures such as deferring recurring expenditures, accelerating revenues, shifting revenues to the general fund from special accounts, and using debt to cover recurring expenditures.

In contrast, South Carolina received a D average, the second-lowest grade possible, in legacy costs, a category in which it has historically not made required contributions to other public workers’ postemployment benefits (OPEB), such as health care. Since at least fiscal 2010, the state has not made more than 76 percent of the actuarially determined contribution (ADC) to its main OPEB vehicle, the South Carolina Retiree Health Insurance Trust Fund.

According to a 2015 report by the South Carolina Legislative Audit Council, public state pensions had been “significantly underfunded” for more than a decade and were likely to remain underfunded for at least the next thirty years. In fact, although South Carolina made its full ADC to pension plans in 2016 through 2018, its pension funded ratio was only 54.3 percent as of 2017, about 14 percentage points below the total for all states.

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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