FY27 Budget breakdown: The Good, the Bad and the Ugly

Tuesday, Aug. 11, the House and Senate are expected to reconvene to vote on the FY27 state budget. 

Last week, we examined the constitutional and procedural concerns surrounding this year's budget process.  

This week, we examine what is actually in the budget, highlighting both its strengths and its shortcomings, with some additional concerns about the process specifically relating to transparency.

According to the FY27 Summary Control Document (SCD), the state's budget totals $44,404,959,459, consisting of: 

The SCD also identifies $378,612,834 in funds that have yet to be appropriated. Of that amount, $377,741,635 consists of nonrecurring revenue. It is likely that the vast majority of these unappropriated funds will ultimately finance legislative earmarks in a separate piece of legislation. 

Although roughly 100 earmarks appear throughout the budget, each currently carries a placeholder appropriation of $1 rather than its actual funding amount. That final earmark spending figure will total approximately $309 million. 

The Good 

Let's begin with what this budget gets right. 

Tax Relief 

The largest positive is the continued effort to reduce South Carolina's tax burden and make the state more competitive. The budget appropriates $308.7 million for income tax relief as a result of H.4216 passed earlier this year, on top of the previously scheduled $16.2 million to overall reduce the state's top marginal income tax rate from 6 percent to 5.21 percent. 

The proposal also includes: 

Education 

The budget provides $90.5 million for teacher salary increases. 

Transportation 

The Department of Transportation (DOT) receives: 

for a combined investment of $189.6 million. 

Another $12.5 million is appropriated to the Road Buyback Program to assist counties assuming ownership of roads removed from the state highway system. 

In total the DOT will be receiving just shy of $2.54 billion to invest in projects across South Carolina.  

The Bad 

Responsible Budget Framework 

Using SCPC's Responsible Budget framework, a $13.25 billion FY26 recurring base, adjusted for 1.79 percent population growth and 2.62 percent inflation, produces a recommended FY27 recurring budget of approximately $13.83 billion. This calculation uses the initial agency base budget combined with recurring appropriations. 

Earlier in the budget process, SCPC commended lawmakers for proposing a budget that remained below this responsible spending limit. The final conference report, however, increased recurring spending to approximately $13.99 billion, roughly $160 million above the Responsible Budget benchmark. 

Although the difference represents a relatively small percentage of the overall budget, it reflects the larger issue; maintaining spending discipline is difficult as budget negotiations break down and priorities accumulate. 

Tuition mitigation 

Tuition mitigation has become one of the state's most persistent examples of well-intentioned but counterproductive spending. Since FY2020, lawmakers have appropriated taxpayer dollars to offset tuition increases at public colleges and universities. 

Rather than addressing the underlying drivers of rising tuition, the policy shifts more costs onto taxpayers while reducing incentives for universities to control spending. 

The FY27 budget provides $29.1 million in new tuition mitigation funding across South Carolina’s public colleges and universities. 

SCPC recently examined this issue in greater detail, explaining why tuition mitigation ultimately shifts costs from students to taxpayers while reducing incentives for universities to control spending. 

SNAP Administration 

Changes to federal SNAP requirements under the One Big Beautiful Bill Act (OBBB) impose new financial penalties on states with high payment error rates. Under the new framework, states that fail to reduce their error rates may be required to finance a portion of SNAP benefit costs rather than simply administer the disbursement of federal funds. 

South Carolina is currently above the federal error rate threshold, meaning the state faces increased financial exposure if improvements are not made. 

In response, the FY27 budget appropriates $34 million in General Fund dollars to the Department of Social Services accompanied by the addition of 30 new state employees. 

While reducing payment errors should be a priority, lawmakers should first determine whether existing resources, improved management, or technology upgrades can address the problem before creating additional permanent government positions and allocating tens of millions of dollars. 

Growth of State Government 

South Carolina's continued growth is a positive sign for the state, but that growth has also resulted in an expanding government workforce. 

Across all three funding sources, the FY27 budget adds 1,018 new state employees. 

Every new government position carries a recurring cost beyond the initial budget year. As state government continues to grow, lawmakers should ensure workforce expansion is driven by demonstrated needs rather than simply increased spending capacity. 

The Ugly 

The most troubling aspect of the FY27 budget is not a particular line item, but the process used to produce it. 

Rather than releasing a complete budget for lawmakers and taxpayers to examine before a final vote, conference committee members have instead chosen to separate the earmark allocations from the broader appropriations bill. 

SCPC has consistently argued that earmarks should either be subject to a transparent public process or eliminated altogether. Legislators should not have what essentially amounts to unilateral authority to direct hundreds millions of taxpayer dollars to favored projects or organizations without meaningful public accountability. If lawmakers are unwilling to establish a transparent process that identifies every recipient and allows adequate public review, then the practice needs to end. 

According to members of the conference committee, a separate review committee will determine the final dollar amounts for approximately $309 million in earmarks before placing those figures into subsequent new standalone legislation. However, at the time of publication, the committee's membership, meeting schedule, and deliberations remain unknown to the public. 

Yet the House and Senate are expected to vote on the General Appropriations Bill on Aug. 11. 

Unless this committee is sporadically scheduled and deliberated, lawmakers would be approving a budget while a significant portion of spending decisions remain unresolved.  

By voting for the General Appropriations Bill, legislators are affirming that it represents the state's spending plan for the fiscal year. If those dollars remain unallocated at the time of passage, they should remain unallocated.  

Any remaining unallocated funds should either be considered during the normal budget process or returned to taxpayers rather than appropriated through a separate process after the budget has already passed. 

Members of the General Assembly have an obligation to stand by the budget they approve. The appropriations process should not become a series of do-overs in which major spending decisions are deferred until after the budget has already been enacted. 

More troubling still, this process has no obvious limiting principle. 

If legislative leaders can remove approximately $309 million in earmarks from the General Appropriations Bill, pass the budget, and later appropriate those funds through standalone legislation, what prevents a future legislature from doing the same with any other section of the budget? 

The General Appropriations Bill is intended to be the comprehensive spending plan for South Carolina. Creating a process that allows major appropriations decisions to be postponed until after the budget has already been approved weakens legislative accountability, reduces transparency, and erodes the constitutional framework governing the state's appropriations process. 

Regardless of one's views on earmarks themselves, that is a process that should concern every taxpayer. 

Members of the General Assembly should reject the notion that voting on an incomplete budget is simply part of the process. 

Legislators have both the authority and the responsibility to know precisely how taxpayer dollars will be spent before casting a vote. Placeholder appropriations and unresolved spending decisions prevent legislators from fully evaluating the budget before they are asked to approve it. 

Taxpayers deserve a transparent budgeting process, and legislators deserve the ability to vote on a complete spending plan. 

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.