Big Budget, Bigger Impacts: South Carolina State House Recap May 28, 2025

The South Carolina State House may have wrapped its regular session earlier this month, but things were far from quiet in Columbia this week. Lawmakers returned under the Sine Die resolution with one major task at hand: finalizing the state’s $14.5 billion general fund budget for FY25–26.

Budget Passed and Legislative Pay Raise Made Waves

The House (88–25) and Senate (37–5) both passed the budget compromise with bipartisan backing. This $14.5 billion plan is part of a much larger $41 billion total budget that includes federal and other funds, but the general fund fueled by income and sales tax is what lawmakers focus on most closely.

One item sparking significant attention: an increase to legislators’ in-district expense allowance, from $1,000 to $2,500 per month, the first adjustment since 1995. This results in an additional $18,000 annually per legislator, raising the in-district compensation from $12,000 to $30,000. Supporters argue the increase reflects the growing costs of constituent services and weekly travel, especially as the base legislative salary has remained at $10,400 since 1990. Critics, however, raised concerns about the timing and the lack of transparency in how the increase was approved.

Governor McMaster has already indicated he is unlikely to veto the increase in in-district compensation, acknowledging the rising expenses associated with legislative duties.

Key Budget Takeaways

• Teacher Pay: The minimum starting salary for public school teachers is increasing by $1,500, now at $48,500, continuing efforts to attract and retain top talent in the classroom.

• State Employee Raises: A baseline 2% raise was approved for all full-time employees across state agencies, aiming to boost retention and morale.

• Income Tax Relief: Approximately $290 million is allocated to reduce the top state income tax rate from 6.2% to 6%.

• Infrastructure Investment: $200 million for the repair and maintenance of aging bridges across the state.

• Disaster Response: $35 million is set aside for Hurricane Helene cleanup and recovery efforts related to Hurricane Helene.

Revenue Surprise from the BEA

South Carolina’s Board of Economic Advisors reported higher-than-expected tax revenues, yielding an additional $377 million in recurring funds and $669 million in one-time funds.  Demonstrating fiscal prudence, legislators opted to leave $500 million unspent to buffer against potential economic uncertainties.

Major Tort Reform Becomes Law

One of the biggest headlines outside the budget was the signing of a long-debated tort reform bill. Originally aimed at helping bars and restaurants manage skyrocketing insurance costs, the final version grew into one of the most sweeping civil liability reforms South Carolina has seen in years.

Key provisions include:

·  Insurance Requirements: Businesses can reduce their required liquor liability insurance coverage by up to $500,000 by implementing specific safety measures, such as ceasing alcohol service by midnight, requiring all servers complete approved training within 60 days of employment, maintaining alcohol sales below 40% of total sales, or utilizing digital ID scanners for patrons entering between midnight and 4 a.m. 

·  Mandatory Server Training: Establishes a mandatory alcohol server training program, requiring servers to complete a certified course recognized by the South Carolina Department of Revenue.

·  Liability Provisions: The legislation updates how fault is assigned in civil lawsuits involving alcohol-related incidents, aiming to balance protections for businesses while ensuring victims receive appropriate compensation. 

What’s Next?

Governor McMaster has until midnight Tuesday to exercise his line-item veto authority.

Beyond that, summer will usher in budget implementation, regulatory follow-through, and plenty of off-season planning ahead of the 2026 session. If you have questions about how the budget or any other recent policy changes might impact your business or organization, let’s talk. We’re already helping clients think strategically about implementation and planning for the long game.