Key Issues Shaping South Carolina’s $14.5 Billion Budget Debate

South Carolina lawmakers are in the thick of a contentious and closely watched budget season, as the state prepares to finalize its $14.5 billion spending plan for the 2025 fiscal year. From teacher pay raises and income tax cuts to infrastructure upgrades and state reserve funds, the budget debate has become a reflection of both the state’s growing economic ambitions and deep political divides.

While revenues have remained strong thanks to federal stimulus windfalls and consistent population growth, competing priorities between the House, Senate, and Governor’s Office have made the process complex. At the heart of the debate are fundamental questions: How much should be returned to taxpayers? How much should be invested in education and workforce development? And how does South Carolina prepare for long-term stability amid inflation and economic uncertainty?

Here are the key issues shaping the $14.5 billion budget debate:

1. Teacher Pay and Education Funding

Perhaps no issue has generated more attention than education funding—especially teacher salaries. South Carolina has been losing teachers at a troubling rate, with many citing low pay and classroom conditions as top reasons for leaving.

Gov. Henry McMaster has proposed raising the minimum teacher salary from $42,500 to $47,000, a bold $4,500 increase that would significantly boost starting pay and help South Carolina remain competitive with neighboring states like Georgia and North Carolina. The House budget includes the raise, but the Senate has been more cautious, proposing a smaller increase to $45,000 while also investing more in rural school infrastructure.

Republicans and Democrats alike agree that addressing teacher shortages is critical, but they differ on how to balance raises with other priorities like school safety, early childhood education, and literacy initiatives. Democrats argue that the state’s $14.5 billion budget can—and should—do more to uplift struggling school districts, particularly in low-income and rural counties.

Republican lawmakers, while supportive of targeted increases, are wary of setting spending benchmarks that may not be sustainable in leaner years.

2. Income Tax Reform and Cuts

Tax cuts have become a cornerstone of Republican-led budget proposals in South Carolina. Building on recent efforts to reduce the state’s top marginal income tax rate from 7% to 6.5%, House Republicans are pushing to continue the tax-cut phase-in, aiming for an eventual rate of 6% over the next several years.

Supporters argue that cutting taxes will spur economic growth, attract businesses, and put more money in residents’ pockets. Gov. McMaster has backed this strategy, saying the state’s healthy surplus—bolstered by conservative fiscal management—justifies continued cuts.

But critics warn that aggressive tax cuts could reduce the state’s ability to respond to future downturns and could disproportionately benefit wealthier residents. Democrats have pushed for a more balanced approach: offering targeted tax relief to low- and middle-income earners while investing in public services like Medicaid expansion and affordable housing.

One sticking point is how to offset revenue losses. While the state’s economy is growing, some analysts say overcommitting to tax reductions could limit future flexibility—especially with the looming end of federal pandemic-era funds.

3. Infrastructure and Roads

South Carolina’s aging roads and bridges are once again in the spotlight. Despite years of investment, many of the state’s highways remain in poor condition. Lawmakers on both sides agree that more must be done to improve transportation infrastructure, especially as the state sees rapid population growth in metro areas like Charleston, Columbia, and Greenville.

The Senate’s version of the budget includes $200 million in new funding for the South Carolina Department of Transportation (SCDOT), with a focus on rural road resurfacing and congestion mitigation in urban corridors. The House supports a similar investment but is pushing for more accountability in how funds are allocated.

Gov. McMaster has emphasized the importance of infrastructure upgrades in attracting new employers and reducing commute times, especially as major employers like BMW, Volvo, and Scout Motors expand operations in the state.

In addition to roads, broadband access is another infrastructure priority. Some lawmakers want to carve out $100 million for broadband expansion in underserved areas, arguing that reliable internet is now essential for education, telehealth, and economic development.

4. State Reserves and Rainy-Day Funds

While there is broad agreement on the need for fiscal responsibility, the debate over how much money to set aside for reserves continues to divide lawmakers.

South Carolina law requires a general reserve fund equal to 7% of general fund revenue, but some budget writers want to exceed that minimum—proposing to add an extra $200 million to the rainy-day account to prepare for a potential economic slowdown.

Supporters argue that the COVID-19 pandemic exposed the importance of having strong reserves, allowing the state to avoid massive cuts during downturns. However, others believe the state’s strong current revenues should be used more proactively rather than stockpiled.

Senate Finance Chairman Harvey Peeler has called for a “balanced and cautious” approach: “We must prepare for the worst, even while we invest in the best,” he said during a recent committee hearing. House members, while generally supportive, are more interested in using surplus funds for immediate needs like teacher raises and infrastructure.

5. Healthcare and Mental Health Services

South Carolina has long struggled with healthcare access, especially in rural areas. Mental health services are underfunded, and the state continues to face some of the worst maternal and infant health outcomes in the nation.

Democrats are pressing for a significant boost in funding for Medicaid expansion, rural health clinics, and behavioral health programs. They point to the alarming rise in suicides and overdose deaths as evidence that South Carolina needs to do more.

The House budget includes a modest increase in mental health funding and a pay raise for frontline healthcare workers in state-run facilities, but it stops short of the sweeping reforms some advocates have called for.

One major area of contention is whether to expand Medicaid eligibility under the Affordable Care Act. South Carolina is one of only 10 states that has refused to do so, and while Gov. McMaster and most Republican lawmakers remain opposed, there is growing pressure from healthcare providers and rural hospitals that are struggling to stay afloat.

6. State Employee Raises and Workforce Development

South Carolina faces worker shortages across state agencies, and leaders agree that raises are needed to improve recruitment and retention. The House has proposed a 3% across-the-board raise for state employees, while the Senate is considering a more targeted approach, offering up to 5% raises for high-need positions in law enforcement, corrections, and social services.

The state is also looking to invest in workforce development initiatives—especially technical colleges and job training programs tied to high-growth industries like manufacturing, logistics, and health sciences.

The governor has called for an additional $78 million to expand scholarships for two-year technical colleges, part of a broader effort to create a more skilled workforce without adding debt. Business groups, including the South Carolina Chamber of Commerce, have praised the move, saying it aligns with employer needs.

But some lawmakers argue that more transparency is needed in how workforce dollars are spent and want clearer metrics to measure program success.

7. Affordable Housing and Homelessness

South Carolina’s housing crisis is becoming harder to ignore. Rising home prices and stagnant wages have made affordable housing scarce in cities and rural areas alike. In Charleston, Columbia, and Greenville, rents have surged more than 25% over the past five years, and homelessness has increased noticeably since the pandemic.

Advocates are calling on the legislature to allocate at least $75 million toward affordable housing development and support for homeless shelters. Some have proposed creating a state housing trust fund to streamline investment in mixed-income developments, rental assistance, and first-time homebuyer programs.

While there is bipartisan concern about housing affordability, actual funding commitments in the House and Senate budgets remain modest. Critics say that without major state intervention, the crisis will continue to spiral—particularly for veterans, seniors, and low-income families.

8. Public Safety and Corrections

South Carolina’s prison system has faced mounting scrutiny in recent years due to staff shortages, rising violence, and outdated facilities. The Department of Corrections is seeking tens of millions in additional funding to boost staff pay, improve security systems, and renovate aging infrastructure.

Gov. McMaster has proposed $30 million to support corrections reform and public safety upgrades, including new security technology, body cameras, and improved mental health services for inmates. Lawmakers are also considering new investments in law enforcement training, school resource officers, and community policing grants.

However, criminal justice reform advocates argue that more needs to be done to reduce incarceration rates and support reentry programs. They have criticized the budget’s emphasis on enforcement over rehabilitation and prevention.

9. Higher Education and Tuition Control

As student debt remains a top concern nationally, South Carolina lawmakers are under pressure to limit tuition hikes and increase funding for colleges and universities. The state’s flagship institutions—like the University of South Carolina and Clemson—have requested additional operating funds to avoid tuition increases and expand academic offerings.

The House budget includes $70 million in new higher education funding, including $25 million for need-based scholarships and $10 million to support rural campuses. The Senate has proposed a similar amount but is tying some of the funding to performance metrics, including graduation rates and post-college employment.

Gov. McMaster has also proposed freezing in-state tuition for another year, a policy that has been in place since 2019 with bipartisan support.

10. Culture War Spending Battles

No modern state budget debate would be complete without ideological flashpoints. In South Carolina, issues like diversity, equity, and inclusion (DEI) programs, library content, and transgender healthcare have crept into the fiscal conversation.

Some conservative lawmakers have pushed to ban public funding for DEI initiatives at public universities, while others want to restrict funding for state libraries that provide books they claim are “inappropriate” for children.

On the other side, Democrats say these attacks are distractions from real fiscal priorities and could violate free speech and academic freedom protections. The final budget is likely to include some culture war compromises, but advocates on both sides are watching closely.

Balancing Growth and Responsibility

South Carolina’s $14.5 billion budget debate is more than a fiscal negotiation—it’s a referendum on the state’s future priorities. With strong revenues and continued growth, the state has a rare opportunity to invest in transformational change.

But with that opportunity comes risk. Overcommitting to tax cuts, underinvesting in healthcare and education, or neglecting long-term planning could leave the state vulnerable in the years ahead.

As the House, Senate, and Governor’s Office continue to hammer out final details, the public—and South Carolina’s future—hangs in the balance.