Column: Uncertainty Surrounds South Dakota Budget Plan
PIERRE – There is a good deal of uncertainty surrounding the South Dakota budget at the moment. Some of it is routine. As usual at this time of year, economists from the Governor’s office and the legislative Appropriations Committee are working together to estimate how much revenue the state will take in, and by extension how much is available to be spent. What is making their job atypical this time around is that no one knows how much to count on coming from Washington.
Here is the problem; South Dakota is a beneficiary state, meaning we pay less into the federal government, than we receive back from Washington, about $1.50 for every dollar paid in income taxes. This isn’t a new situation, it has been the case for many years and taking advantage of this windfall is written into state budget policy. Of the $4.1 billion to be spent in the Governor’s proposed budget, only $1.3 billion will come from the state’s tax revenues. The lion’s share of the rest is meant to come from federal money.
Right now though, predicting how much money will actually be making its way from Washington to Pierre is sheer guess work.
First there is the issue of the so-called sequester cuts. At least $85 billion of federal spending would be slashed for this year if they go on as planned, but how those cuts would play out is a decision that would be made by the heads of the various bureaucracies.
If some compromise is struck to avoid the sequester, it is anybody’s guess what that deal would include, which again makes it tough for Pierre to make plans.
Finally, if federal spending is cut at or around the level of that proposed by the sequester agreement, the economy is likely to dip as a result. Such a downturn would mean that state revenues expected from sales taxes and such would also decline, further limiting the funds Pierre has at its disposal.
Most visibly on the bubble now is correcting the shameful situation of need based scholarships for South Dakota residents. As it stands, we are the only state in the nation that does not find a way to provide for would be students from low income families, and as a result they are nine times less likely to get a degree than their better off peers. The Governor’s budget aims to take baby steps to remedy this, but will there be any funding for it?
Figuring out how much money will be available over the next fiscal year before that money has been collected is always an exercise of counting chickens before they hatch. However, this year it is complicated by the consequences of the “Cut, cut cut! No new taxes!” ideology finally coming home to roost.
The public interest of South Dakotans is being undercut by the state’s reliance on federal money and its politicians’ refusal to ask those who can afford to pay more to actually do so. Unfortunately, the same craven politics are playing out in the nation’s capital; leaving those needed federal funds in question. Maybe it is time to reconsider South Dakota’s tax policy and its dependence on Washington largesse.
The opinions expressed in this commentary are solely those of John Gossom and do not reflect Results Radio, Townsquare Media, its sponsors or subsidiaries.