Lawmakers have adopted final revenue numbers for the 2015 and 2016 budget. For fiscal year 2016 appropriators adopted revenue projections of just over 1.43 billion dollars. For fiscal year 2015 appropriators adopted adjusted revenues of 1.37 billion dollars in ongoing funding and another 35 million in one-time receipts. The grand total for 2015 is 1.4 billion dollars.
Members of the appropriations committee took a conservative approach for both the 2016 and 2015 budgets. One of the main reasons for caution is South Dakota’s heavy reliance on the agricultural industry. Senator Larry Tideman says last year the legislature adopted more aggressive projections but the recent downturn in agriculture has hurt incoming revenues for the state.
"I thought the ag economy was going to carry us through and the bottom fell out on those crop prices. That had a real negative impact on our sales and use tax and that we lost about 10 million dollars just on farm equipment sales coming in on sales and use tax," Tidemann.
Lawmakers on appropriations say recent layoffs by Titan Machinery and Raven Industries also indicate the ag economy isn’t going to turn around in the near future.
However, some appropriators believe that revenue projections adopted by the committee are too low. The adopted revenues are based on a projected growth in sales tax income of 3.8%. Representative Ray Ring is a former economics professor. He says historically sales tax has grown around 5% per year on average.
"The national economy is doing well and I think will continue to do well. We’re not looking at a recession down the road. And so I think the, particularly the FY 16 estimates are, are really much too conservative," says Ring.
Ring says the legislature has consistently underestimated sales tax revenue growth which leaves extra funding left at the end of the year. He says this extra funding is usually distributed as one-time dollars or put in reserve funds. Ring says this money could be used to increase teacher salaries or fund Medicaid and other important on-going expenses. Ring says lawmakers should aim for accuracy not conservatism when adopting revenue numbers.