South Carolina Enters New Fiscal Year Without a Budget as Lawmakers Turn to Continuing Resolution
July 1, 2026
South Carolina began its 2027 fiscal year on July 1 without a new state budget in place, marking a rare missed deadline as House and Senate negotiators remained divided over how to spend hundreds of millions of dollars. To keep government running, lawmakers are operating under a continuing resolution that holds agency funding at the prior year’s levels.
Government Stays Open
The stopgap measure means state government will not shut down. Agencies remain open, and state employees will continue to receive their paychecks. Sen. Tom Davis, R-Beaufort, one of three senators on the budget negotiating panel, contrasted the situation with federal gridlock, telling reporters it is unlike Washington, where the lack of a budget can trigger a shutdown and other consequences.
What Goes on Hold
The delay does carry a cost. Proposed pay increases for teachers, state employees and legislators cannot take effect until a full spending plan passes. Both chambers had agreed to a 2 percent cost-of-living raise for state workers and a $2,000 increase in state-provided teacher pay, which would raise the statewide minimum for first-year K-12 teachers to $50,500. Those raises, along with other new one-time spending, are on hold. If lawmakers ultimately approve the pay increases without a veto from the governor, employees would receive the raises retroactively to July 1.
Property Tax Relief Versus Earmarks
At the center of the stalemate is a dispute over property tax relief versus local project funding. Senate negotiators want to direct $248 million toward expanding the state’s Homestead Exemption for older homeowners. Under the Senate plan, homeowners 65 and older who have lived in South Carolina between five and nine years would see the first $75,000 of their home’s value exempted from property taxes. Those who have lived in the state for at least a decade would see $150,000 exempted. The current exemption, in place under a 1972 law, covers the first $50,000 for homeowners who are 65 and older, blind or permanently disabled.
To pay for that relief, senators want the House to scale back the $315 million in earmarks the chamber added to its plan in early May for local projects and nonprofits. Those earmarks are separate from the $130 million the Senate included for local governments. Davis said the choice between funding property tax relief and funding earmarks is an easy one for him.
What Is Already Settled
Not everything remains unsettled. Allocations that appear identically in both chambers’ plans are locked in and require no further negotiation. Those include a reduction in state income tax rates expected to lower state revenue by roughly $309 million in the coming year.
What Comes Next
House Ways and Means Chairman Bruce Bannister, R-Greenville, expressed optimism that the six-member conference committee will reach a compromise when it reconvenes July 14, saying the panel would have the matter worked out by that date. Even so, it remains unclear when the full Legislature would return to Columbia to vote on any agreement, particularly with many lawmakers away on scheduled summer vacations following the June primaries and runoffs.
Senate Majority Leader Shane Massey, R-Edgefield, attributed much of the delay to scheduling. Budget negotiations typically continue after the regular session ends, but this year a special session on congressional redistricting, followed by the June primary cycle, consumed weeks that would normally have gone toward the spending plan. The redistricting effort ultimately failed in the Senate in late May.
How This Compares
The last time South Carolina operated under a continuing resolution was 2024, when the stopgap lasted just two days before the governor issued his budget vetoes. A similar situation occurred in 2018, when temporary funding lasted four days. In 2020, lawmakers did not pass a budget at all as the COVID-19 pandemic cut the session short, and a continuing resolution held spending at prior-year levels for the entire fiscal year.
