Economists see bright future here

By Charles Sowell  

SEPTEMBER 20, 2010 6:59 a.m. (0)

Clemson’s Bruce Yandle sees fiscal year 2010 as when recovery takes hold with 2011 being brighter economically for South Carolina than this year and 2012 as better still in his latest forecast on the state and national economies.

Yandle said the state’s basic economic engine is manufacturing and those numbers add up in the green for South Carolina this year. Other sectors of the economy are undeniably trashed, like construction, and are likely to remain so until the massive debt hangover from the burst housing bubble is paid off or worn down.

The state should see a sharp recovery in the growth of total personal income in the year ahead, Yandle said, and since that growth will be in real income and not inflation adjusted money, it will be the “real deal.”

These numbers will matter most in growth of the state government’s general fund since the fund is measured in inflation adjusted money.

Because of this when inflation is up the state has more money to spend and when it is down the state has less, according to the way the state measures income.

Pointing out the flaw in this reasoning, Yandle said since the coming income growth will be in real, not inflation adjusted, money the state should show a surplus in this fiscal year.

Richard Eckstrom, the state’s comptroller general reported the state ended fiscal year 2009 in the black, but at a high cost in cutbacks to many programs, state worker numbers and in contingency accounts.

The contingency money was spent to prevent even deeper cuts in state services, Eckstrom noted.

For the year ending June 30 the state spent about $5.2 billion out of a budgeted $5.5 billion.

“Actual revenues trended down erratically for the year, and they were $310.1 million less than the revenue projections used to generate the FY10 General Fund Budget,” Eckstrom wrote in his year-end report.

Eckstrom said the state’s three main sources of revenue sales, corporate income and personal income taxes were $4.47 billion compared to the $4.78 billion actually collected in the previous year.

Income is predicted at $4.79 billion for fiscal year 2010 which amounts to a shortfall of more than $300 million from the year earlier and from last year’s budget.

Yandle said the state’s outlook is reflected in national prospects, but will lag because of South Carolina’s manufacturing concentration. As national industrial production improves, South Carolina’s performance will improve also.