Sometimes losing is winning: South Carolina's budget stalemate could save taxpayers millions

As the saying goes in the 1992 classic White Men Can't Jump, "Sometimes when you win, you really lose. And sometimes when you lose, you really win." 

That may be the best way to describe South Carolina's ongoing budget debate. 

South Carolina's fiscal year began on July 1 without a budget in place, meaning the state is currently operating under a continuing resolution (CR). The last time the state found itself in this position was during the COVID-19 pandemic.

On its face, failing to pass a budget before the start of the fiscal year is a legislative failure. Passing a state budget is one of the General Assembly's most basic constitutional responsibilities. 

But what if that failure ultimately benefits taxpayers? 

If lawmakers cannot reach an agreement, the continuing resolution would remain in effect for the rest of the fiscal year. That would prevent about $1 billion in additional state spending from taking effect. Ironically, the legislature's inability to agree on a budget could produce one of the largest spending restraints South Carolina has seen in years. 

What is holding up the budget? 

The two major sticking points appear to be property tax relief and earmarks. 

The dispute over property taxes is not whether taxes should be reduced, but how the tax cuts should be funded. 

The Senates proposal as it sits relies on nonrecurring revenue, making the tax relief potentially unsustainable over the long term. House leaders have raised concerns that the funding relies on one-time dollars, which could eventually require lawmakers to revisit the tax cuts if revenues decline.  

However, the S.C. Board of Economic Advisors has identified additional recurring revenue that could address those concerns. Lawmakers could use those recurring dollars to fund the tax relief, eliminating questions about its long-term sustainability. 

The other major disagreement involves earmarks. 

Combined, House and Senate lawmakers requested approximately $467 million in earmarks, with roughly $315 million coming from the House and about $152 million from the Senate. 

Because the Senate requested substantially fewer earmarks, it appears senators want the House to significantly reduce its requests before a final agreement is reached. 

That presents House members with a difficult political calculation. 

It is an election year. Earmarks provide legislators with projects they can point to back home. But is it better to receive some earmarks and a completed budget, or no earmarks and no new spending at all? 

Winning by losing 

If budget negotiations collapse, which seems to be the case, taxpayers could emerge as the biggest winners. 

A continuing resolution would block about $1 billion in new spending, leaving those funds available for future budgets instead of expanding government this year. It would also prevent budget provisos from taking effect, including the proposed legislative pay raise. 

The second-best outcome 

If lawmakers do reach a budget agreement, it should include one simple reform: eliminating every earmark. 

The South Carolina Policy Council has long opposed earmark spending because it allows lawmakers to direct taxpayer dollars outside the normal competitive appropriations process. 

Equally concerning is the lack of transparency. 

Lawmakers publish a list of earmark requests, but those descriptions provide little meaningful information. Most identify only the county or municipality and a vague project title such as "Emergency Shelter." 

That does not necessarily mean the project lacks merit. It simply means taxpayers cannot determine who is receiving the money, what exactly it will fund, or whether conflicts of interest exist. 

Without that information, meaningful public oversight from citizens and policy groups is impossible. 

SCPC's investigative news outlet, The Nerve, filed Freedom of Information Act requests seeking the complete earmark applications. Those requests were denied because the documents are currently considered "working documents." 

Until lawmakers adopt meaningful transparency requirements, earmarks should not return. 

Final thoughts 

That brings us back to the quote from White Men Can't Jump. 

Sometimes when you lose, you really win. 

A budget stalemate is not ideal. The General Assembly should complete its work on time. But if the alternative is about $1 billion in new spending and hundreds of millions of dollars in opaque earmarks, taxpayers may come out ahead if negotiations continue to stall. 

If lawmakers do reach an agreement, they should eliminate earmarks, clarify the long-term funding for property tax relief, and reduce overall spending wherever possible. 

If I were writing the budget, I would roll spending back to pre-pandemic levels and carefully examine every remaining expenditure. Short of that, taxpayers should hope lawmakers at least avoid making an expensive compromise. 

The conference committee is scheduled to meet July 14. Follow the South Carolina Policy Council on X, @SCPolicyCouncil, for updates as negotiations continue.