There are a few bits of good news in South Carolina’s economy as the COVID-19 pandemic stretches into more months, but economists told the officials responsible for predicting how much the state will collect in taxes and fees they can’t guarantee the economy has turned the corner.
The South Carolina Board of Economic Advisors met Thursday to listen to experts share data from tax collections, unemployment, traffic counts, COVID-19 infection rates, the amount of time people are spending at home and several other diverse measurements.
They will meet next month to give a revised prediction on how much money South Carolina can expect to have to spend this budget year.
The board last made an educated guess at the end of August that South Carolina would collect about $86 million more in taxes and fees in the 2020-2021 budget year than the previous fiscal year. Before the pandemic, the extra revenue was estimated about $800 million.
South Carolina lawmakers, unsure about the future and trying to avoid any big cuts in state agencies, copied the previous year’s $9 billion budget. Minor changes made by the Senate in September to the spending plan including hazard bonuses for lower paid state workers and small teacher raises weren’t taken up by the House because of worries the economy could get worse.
There is enough uncertainty that state Revenue and Fiscal Affairs Office Executive Director Frank Rainwater plans to present two scenarios in November. One involved things remaining mostly the same with COVID-19 and a second one where maybe there is a widely available vaccine for the disease or maybe people and businesses just get tired of precautions and go back to living like they did at the start of 2020.
Both scenarios don’t include additional federal stimulus money, which Rainwater said was still a role in South Carolina collecting about $125 million more in taxes than the state expected from July through September.
“We figure it’s a bit more cautious to assume it won’t be there,” said Rainwater, whose agency is responsible for predicting how much money lawmakers will have to spend.
Manufacturing and most other sectors of the South Carolina economy survived the COVID-19 economic shutdown without an extreme number of job losses. But hospitality — including hotels and restaurants — was wrecked. Tourism is one of South Carolina’s main economic drivers.
At least 20% of the state’s hospitality jobs are gone, according to unemployment figures. And it might get worse. The weather is about to make outside dining less appealing and owners don’t know if people will want to go back inside. Also, the small tourism boost from family travel during a quiet time at the end of the year might not materialize if people are scared of big family gatherings.
And the biggest unknown is what will happen with COVID-19. Virus infection rates are increasing fast in Europe and American college campuses are seeing periodic outbreaks, said Mark Vitner, Managing Director and Senior Economist for Wells Fargo Securities.
All this is happening before the cold and flu season starts, which are viruses that have similar symptoms as COVID-19 and could cause large numbers of people to stay home.
“We’re going to have to deal with this cold and flu season. It will put a lot of stress in the first quarter,” Vitner said.
But in the future, COVID-19 could have one unexpected bright spot for South Carolina. The pandemic has shown large companies they don’t need headquarters in office towers in large cities to work, especially with the close quarters of elevators and public transportation.
Those companies might encourage employees to move to cities the size of Greenville or Charleston, said Laura Dawson Ullrich, regional economist for the Federal Reserve Bank of Richmond, Virginia.
“There are a lot of places in South Carolina who would look attractive to this. They are large enough to have the amenities,” she said.