This interview originally aired on In the Moment on SDPB Radio.
Many people have a rainy-day fund, including South Dakota. But what does a rainy day look like for the state?
Our Dakota Political Junkies discuss appropriations, budget surpluses and big projects. We also scrutinize how the state is paying for a new prison.
Plus, how do you measure the strength of a governor?
Jon Hunter, publisher emeritus of the Madison Daily Leader, and Mike Card, professor emeritus from the University of South Dakota, bring us their political analysis.
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Lori Walsh:
This very morning, the Interim Appropriations Committee met to evaluate the fiscal year. How did this fiscal year stack up? Our Dakota Political Junkies are with us for an update and with a few more political news headlines we have gathered from around the state.
Jon Hunter is publisher emeritus of the Madison Daily Leader. He's a member of the South Dakota Newspaper Hall of Fame. Welcome back. Thank you.
Jon Hunter:
Thanks, Lori.
Lori Walsh:
And Mike Card, political scientist and professor emeritus at the University of South Dakota. Dr. Card?
Mike Card:
I'm glad to be here. Thank you.
Lori Walsh:
Okay. Interim Appropriations Committee. Jon Hunter, let's start with you. Help people understand what this committee does and what they were doing just this morning.
Jon Hunter:
Great. South Dakota, the legislative session runs early in the year and they set a budget for the coming fiscal year, which in South Dakota starts July 1st and ends June 30th. Now, you see we're three weeks past the end of the fiscal year and so they get a report from the state staff, paid staff, that said, "Gee, how do we do on budget this year?" The news is great.
As journalists, we want to know more and be sometimes skeptical, but the truth is surpluses are better than deficits. A lot of other states have deficits and they have to scramble. South Dakota had a relatively small surplus, but it's almost always on the positive side. Part of the reason it was a relatively small surplus: They realized during this last session, the 2023 session, that there was going to be a bigger surplus and went ahead and made an adjustment for that and set aside some money for Department of Corrections.
All in all, I think it's good. South Dakota's in great financial shape, excess cash. Of course, the pandemic was a big part of that, too, and it really helped the regular budget, too, because you were able to spend some pandemic money on things that you might have spent regular state money on later. I wouldn't say anything was illegal, but you'd say, "Look, we were going to spend a lot of money on this anyway. The feds came in and did this."
I think we have to start out right by recognizing that the state has a good budget process and it's healthy and it's conservative. We could argue quickly that we should be spending more money on important things instead of having surpluses. But overall, I'd rather be in a surplus position than a deficit.
Lori Walsh:
All right. How much surplus is a good surplus? And Mike Card, do you have some history?
Jon Hunter:
He knows everything.
Lori Walsh:
Let's look at the percentages and what we have, because we get to choose. We have to balance the state budget every year. That's required by law. Is there a minimum surplus that we have to have or reserve fund?
Mike Card:
Well, there's actually a maximum surplus that we can have.
Lori Walsh:
Oh, didn't know that.
Mike Card:
Well, all of the unobligated funds at the end of the year go into our state's reserve funds. We have two of those. We have a number of other... Reserve funds isn't the right term there.
Jon Hunter:
Trust funds.
Mike Card:
Trust funds, where we can only spend the principle out of those. I think there's another feature that we have that, if the legislature during its session realizes that we're not going to have money to pay our bills through the rest of the year, they must impose a statewide property tax, which we haven't had since 1932 or thereabouts.
Lori Walsh:
Yay for the surplus.
Mike Card:
Yes. Yay for the surplus.
Mike Card:
I remember back in 1998 when Bill Janklow during snow emergencies said, "We have rainy day funds. If it's not raining now, when will it be raining?" I think that's the ultimate question. Are we using our rainy day funds for their stated purposes or are we using rainy day funds to park money that we didn't spend? If there is a nefarious purpose to it, which I don't know that there is, we'll put money in the rainy day funds so that we don't spend it.
Lori Walsh:
Sure.
Mike Card:
Which can be for good or ill purposes. The good purpose is so that we only spend one time money, things that are not a continuing revenue stream, and we budget for a continuing revenue stream as opposed to, "Ah, look, we have a windfall," such as we had this year with one of our sources of revenue, the one that deals with unclaimed property. Otherwise, when is it raining? That's just the ultimate question.
Lori Walsh:
When is it raining? Yeah. What did you want to add, Jon?
Jon Hunter:
Just following up on Mike, there was a time when the governor had the authority to spend some of those excess funds before the year was over. If you're coming up close to the end of the year, you saw a surplus, the governor could spend that, and Janklow did. Remember wiring the schools and providing laptops and those sorts of things? All of a sudden, he'd go to Gateway and buy $10 million worth of laptops at the end of the year. That can't be done anymore.
Lori Walsh:
All right. Percentage wise, what percentage is it?
Mike Card:
Well, of the money that's in the reserve fund, well, we have a $2.4 billion general fund budget and we had a surplus of about-
Jon Hunter:
100-plus.
Mike Card:
$100 million, roughly.
Lori Walsh:
Yeah.
Mike Card:
The amount of the surplus is pretty small.
Lori Walsh:
Okay. Prisons and rainy day funds, what do you want to say about that? Can we build a prison with a rainy day fund? I guess when we talk about, "What does a rainy day look like," does it look like a big project like that?
Mike Card:
Well, a special appropriation bill requires a two-thirds vote of each committee and each chamber of the legislature and to be signed by the governor to have a specific purpose of an appropriation. Otherwise, it's for the general operations of the state and its public institutions, but those obligations can run for four years. They can also be renewed for four years, but it requires a two-thirds vote for a special appropriations bill.
It would seem to me, to Mike Card, that we don't want to park that money in a trust fund, except in a reserve fund because the reserve funds, we know, are going to be there for a while and we may invest them in longer term investments in which we can gain more additional revenue in that sense. Otherwise, if we want to build a prison, we should appropriate the money for a prison.
Lori Walsh:
We should plan for it. Yeah. Jon?
Jon Hunter:
Yes. That special appropriation is the key element because big projects like this that are multi-year, the legislature specifically doesn't want to commit future legislators to their decisions. That's why they require the two-thirds here to say, "Hey, the prison thing is a perfect example." Yes, it's not a rainy day thing, but it is an obligation to state government that it's going to need to be funded, so they pass those with that purpose.
Lori Walsh:
I also want to go back to this idea of a surplus is better than a deficit. Obviously, they have to balance it, but it's better than being in big trouble. But a surplus is not just "don't spend anything and let's keep it all and let's park it all." Some things didn't get spent because there weren't enough people to spend them in some ways. Jon, what do you want to add about what didn't get spent that was allocated for spending?
Jon Hunter:
Right. And you bring up a great point, Lori, and that is not all surpluses are good. In this case, as you indicated, there were two main departments that contributed to most of that surplus: the Department of Social Services and Department of Health.
The big red flag that pops out of that is Yankton and the human services center there where they're understaffed. They did have a little lower caseload than they did and that can contribute to that, too, but they'd much rather have fully staffed and have safer working conditions and have better care for the patients there than to show up with some money that gets reverted back to the general fund that.
Yes, good sound budgeting and so forth pays off in surpluses, but they appropriate this money for a reason and good reasons, and it should have been spent if we could have.
Lori Walsh:
I want to get to this idea, talking about unemployment. Our unemployment rate is famously low. Gov. Kristi Noem is touting that as part of something she's proud of as her success story as a governor. The Great Reserve Fund that is ... She's saying that is a great thing. Businesses coming in, the Freedom Works Here campaign bringing lots of applications, and then of course there's an article in South Dakota News Watch that talks about her not having a consistent chief of staff and how that would impact lawmakers.
My big philosophical question is, how do you measure the success of a governor? Certainly, every governor is going to want to lead with the things they say they're successful. Opponents of that governor are going to lead with the places that they felt the governor fell short. But for the everyday people of South Dakota, how do we measure the success of our current governor?
Mike Card:
Well, a governor is really in a tough spot, because in the one sense, we'd like to never know what our governor is doing because everything is running smoothly. On the other hand, a governor may have political ambition. I'm speaking of extremes here. May have political ambitions elsewhere and want to show either for reelection purposes or for another office that they're accomplishing great things.
To some extent, it's a tough job. I think, to every extent, it's a tough job because you're trying to balance many things. But in terms of what we spend our money on and what we're trying to accomplish, how do we define wellbeing for the state? How do we define... And if you were not ready, willing, and able to make expenditures and change policies to correct some of those problems, then we focus on short term outcomes, like we got our unemployment rate down, we have a budget surplus.
Lori Walsh:
I was thinking, Jon, to that note, we just ran a history piece earlier this week about Gov. Dick Kneip resigning and leaving to become ambassador to Singapore and then Gov. Wallmon replacing him. The history piece is really looking at like, "These are the key things that we remember about Kneip and the key things we remember about Wollman," and that's what they're known for. And I thought, "Oh, flash forward 50 years, what are the key things that we'll remember about Daugaard? What are the key things we'll remember about Noem?"
History is a fickle thing, but someday people will have a piece and they'll pull out what her greatest accomplishments were and what they see her failures to be. What sticks to you so far that you see?
Jon Hunter:
Well, that's the fun part and it is fun to look back and see those because you gain perspective and can make other comparisons, but specifically to the question, ultimately... Mike Rounds could articulate this pretty well. What is the responsibility of government? There's an education component. There's a care for people who can't help themselves component. There's all these things. But a lot of economies, whether it's a lot of states or other jurisdictions do measure their success based on how the economy does in those areas.
Remember the Clinton-Bush campaign? "It's the economy, stupid." That turned out to be a big deal. So far, I think you can measure Gov. Noem's first four and a half years as saying it's been an economic success, whether that was due to the pandemic, whether it was due to previous administrations. Who knows what it was due to, but that will stick with her as a success, unless it tanks for the next three years.
Lori Walsh:
Right. We're not done yet by any means, but yeah.
Jon Hunter:
Right. But I think the economy has been strong and state government has had good fiscal responsibility, so I think so far that would stick.
Lori Walsh:
Everybody who is in public service during the pandemic is going to be held up against that measure. Who lived, who died, who lost work, what businesses closed, how did you fare? That's just going to be interesting to see in the future, how we measure that in retrospect when you've forgotten. I went back the other day and looked at some of the columns that I wrote during the height of the pandemic and they're so intensely sad. I thought, "Boy, I've almost forgotten how difficult that..." I mean, I had almost forgotten when the hog farmers couldn't get their hogs to market and they had to depopulate their herds.
I wrote about just the heartbreak of that overwhelming me at the time, and I was like, "Boy, I needed to read that I had written that to remember that it had happened." Now, the hog farmer has not ever forgotten, but for those who weren't living that close to it. I don't know what sticks 20 years from now.
Jon Hunter:
Well, do you remember the COVID maps that was the National Institute of Health or someone published? And they would've different colors for COVID cases and deaths. If you were a particularly dark color or something, you had more deaths per hundred thousand. I remember feeling sad about that, that you say our state, at times, had higher COVID rates than others. But two years, hence, I don't remember that very much. At least I've kind of put it back, but there was a lot of suffering during that pandemic that varied by state and not always because of politics, but because of demographics or something else.
Lori Walsh:
Well, we have lots more to talk about, but we're going to have to leave it here. I really want to go back to the whistleblower in a piece in The Brookings Register about public requests, records requests. Jon Hunter, you'll come back and talk to us about that.
Jon Hunter:
Can't wait.
Lori Walsh:
There's a lot that we left on the table today. More later. Jon Hunter, Mike Card, thanks for being here.
Jon Hunter:
Thanks, Lori.
Mike Card:
Thanks, Lori.
