Conference committee budget breakdown: Increased revenue forecast results in a staggering $15.1B general fund

Update 6/3/2025: Governor McMaster issued his veto message on June 3, containing 11 line-item vetoes totaling just over $1 million. Each veto targets a specific budget proviso. 

On Wednesday, May 28, lawmakers in both the House and Senate voted to adopt the conference committee report for the fiscal year 2026 budget. 

Just a week prior, during the conference committee’s negotiations, the S.C. Board of Economic Advisors announced an unexpected $1 billion increase in projected revenue for fiscal year 2025–26: $337 million in recurring funds and $669 million in one-time dollars. 

The House first passed a budget with a $14.5 billion general fund. The Senate amended it with a $14.4 billion version, and the House responded with a $14.6 billion second draft. The final version agreed upon in conference tops $15.1 billion in general funds, a stunning expansion that raises serious concerns about fiscal restraint. 

The Governor now has an opportunity to utilize the power of the line-item veto and encourage fiscal responsibility. The silver lining: Lawmakers chose to spend only about half of the additional revenue this year. 

These figures include the capital reserve fund. 

Comparing the budgets 

House First Draft 

• General funds (state tax revenue): $14.5 billion  

• Other funds (fines and fees): $14.6 billion  

• Federal funds (federal tax revenue): $14 billion  

• Total: $43.1 billion 

Senate First Draft 

• General funds (state tax revenue): $14.4 billion  

• Other funds (fines and fees): $13.4 billion  

• Federal funds (federal tax revenue): $12.5 billion  

• Total: $40.3 billion 

House Second Draft 

• General funds (state tax revenue): $14.6 billion  

• Other funds (fines and fees): $14 billion  

• Federal funds (federal tax revenue): $14.6 billion  

• Total: $43.2 billion 

Conference Committee Report 

• General funds (state tax revenue): $15.1 billion  

• Other funds (fines and fees): $13.4 billion  

• Federal funds (federal tax revenue): $12.5 billion  

• Total: $41 billion 

These figures include the capital reserve fund. 

Instead of exploring creative ways to return the unexpected $1 billion to taxpayers like issuing property tax credits or putting it towards future tax reform, lawmakers instead directed half of it to increase government spending. 

As economist Milton Friedman once said: “Keep your eye on one thing and one thing only: how much government is spending. Because that's the true tax.”  

Whether lawmakers acknowledge it or not, excessive spending delays bold, permanent tax relief. 

Sources: House First Draft SCD, Senate Amendments SCD, House Second Draft SCD, Conference Committee Report SCD.  

How the budget process should work 

The state budget process begins in the House, which passes an initial version. The Senate then amends it and returns it. The House can agree or offer further amendments. Typically, the two chambers are unable to reach agreement, and a six-member conference committee (three from each body) is appointed to reconcile the differences. 

In most years, the conference committee compares each line item from the House and Senate versions and settles on one or the other. This process usually creates an expected spending “range” for each agency’s final appropriation. 

Where did the additional money go?  

This year, that spending range was rendered nearly meaningless by the surprise announcement of an additional $1 billion in revenue. Instead of keeping spending within the parameters set by the original drafts, lawmakers used the additional revenue to further expand agency budgets. 

SCPC independently reviewed all four versions of the budget: the House’s first draft, the Senate’s amended version, the House’s second version, and the final conference committee report. 

We initially assumed that (given the new revenue forecast) lawmakers simply opted for whichever chamber had the higher line item in each case, to avoid having to really make any hardline negotiations, but the reality was worse. 

In at least 17 cases, the final conference budget allocates more state dollars to agencies, departments, or colleges than any of the previous three drafts. In contrast, only two agencies ended up with a lower allocation in the final budget than in any earlier version. 

The rest either received the higher of the two draft amounts, or the House version and Senate version both had the same amount budgeted. 

This is not fiscal discipline. 

Why it matters 

These spending increases mean further delay in delivering transformative tax reform for constituents and businesses alike. 

It’s worth noting that both chambers had already drafted and passed their budgets before the new revenue forecast was announced. While those versions still exceeded SCPC’s recommended spending cap, based on population growth and inflation, they at least provided a more transparent framework. 

If agencies were expected to operate effectively under the earlier drafts, it’s reasonable to ask: why do they now require millions more? The only change was the discovery of new revenue and with that came a willingness to spend more simply because more was available. Every dollar appropriated above those earlier baselines represents discretionary spending that could have gone back to taxpayers. 

To be clear, this isn’t a critique of the agencies receiving those funds. Several do very important work. But it is the responsibility of the conference committee to weigh priorities and act as careful stewards of taxpayer dollars. This year, they missed that opportunity. 

That said, a bipartisan group of lawmakers in both chambers took a stand. 25 House members and five Senators voted against the final budget. Their reasons varied. Some opposed the legislative pay raise proviso, and many objected to the overall size of the budget. These members deserve recognition. 

SCPC urges Governor Henry McMaster to use his line-item veto power decisively. Doing so would preserve additional reserves that could be dedicated to meaningful tax reform in the coming year. A leaner budget would give lawmakers another opportunity to demonstrate true fiscal discipline and create the fiscal space needed to deliver the kind of bold, permanent tax relief South Carolina needs in the second half of the legislative session. 

Lawmakers may have missed the chance to return surplus dollars to the people who earned them, but with conviction, the governor can still help get the state back on course. 

This report may be republished in whole or in part, provided that proper credit is given to the author(s) and the South Carolina Policy Council.