This interview originally aired on "In the Moment" on SDPB Radio.
Our Dakota Political Junkies provide a summary and analysis of the governor's annual state budget address. During the speech, Gov. Kristi Noem laid out her priorities ahead of the legislative session.
This year, she highlighted the importance of reading — specifically through the study of phonics. She warned legislators to budget conservatively. And she highlighted the importance of everything from infrastructure to teacher salaries.
We bring you the highlights and an in-depth look at what her address could signal about the upcoming session.
Mike Card is a political scientist and professor emeritus at the University of South Dakota. Jon Hunter is publisher emeritus of the Madison Daily Leader and a member of the South Dakota Newspaper Hall of Fame.
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The following transcript was auto-generated.
Lori Walsh:
Before the break, we offered you a recap of Gov. Kristi Noem's annual budget address, delivered live in front of the South Dakota State Senate and House of Representatives. You can watch that full coverage online at sdpb.net.
Now, each week on Wednesdays, "In the Moment" brings you political analysis with a rotating panel of experienced journalists, political scientists and former lawmakers. Today, we're going to dive deep into the budget address for analysis on the process, the context and even the subtext.
But keep in mind, what we heard from Gov. Kristi Noem was really a rough outline of the budget. There is much that we don't know, and of course, lawmakers will have a big say during this legislative session. We'll continue to bring that coverage as it unfolds.
For today, Mike Card is a political scientist and professor emeritus at the University of South Dakota in Vermilion. Jon Hunter is publisher emeritus of the Madison Daily Leader. He was inducted into the South Dakota Newspaper Hall of Fame in 2022. And these two Dakota Political Junkies joined me in the Sioux Falls studio yesterday right after the budget address to talk about what we had heard and about South Dakota's economic and political outlook for next session.
Jon Hunter and Mike Card, welcome back. Thanks for being here.
Jon Hunter:
Thanks, Lori.
Mike Card:
Glad to be here.
Lori Walsh:
How many budget addresses have you been a part of?
Jon Hunter:
State budget or family budget? Family budget, a lot more.
Lori Walsh:
State budget, how many years?
Jon Hunter:
Oh, gosh. I'm sure I've listened to 25 or so.
Mike Card:
Same here.
Lori Walsh:
Yeah, a lot of experience in the room.
Jon Hunter:
And you've listened to a lot also.
Lori Walsh:
This is my eighth legislative session, not 25. I learn something every year, and every year, I realize there's a whole lot I don't know. So I want to talk a little bit about process and how this works. But first, overall impressions of the presentation and the event. Anything, the breaking of the gavel sort of things that jumped out to you?
Jon, we'll start with you, from just how this was brought to the people.
Jon Hunter:
It's of course a requirement. The Constitution requires that to be done. I thought it was modestly brief. Gov. Noem focused on things that I think were important to her and talked about areas where we would increase funding and initiatives that she wanted. But it was not the two-hour slide deck show that some previous governors have done, so it seems modest in length. But I think it was able to focus on the things that she thought were important.
Lori Walsh:
All right, about 35 minutes of her talking, roughly.
Mike Card, any thoughts about the presentation and kind of how it's brought to the people?
Mike Card:
I think Rep. Mortenson on South Dakota Public Television mentioned it quite succinctly. It's a meat and potatoes budget. We're going forward. There are areas where we hope to add new money. And otherwise, as Jon noted, it's the priorities of the governor. And the governor proposes, and the legislature starting in January will start to dispose.
Lori Walsh:
Yeah, here we go. Okay, the breaking of the gavel, if you did not see it, Larry Rhoden, lieutenant governor, hit the gavel onto the whatever the thing is that you hit. I'm sure there's a nomenclature.
Jon Hunter:
There is, and I don't know what it is either.
Lori Walsh:
And he broke the handle of the gavel right before it was time for the prayer to kick things off.
Mike Card:
For the second year in a row.
Lori Walsh:
For the second year in a row. It's a moment. It's almost going to be a prank now. Right?
Jon Hunter:
Yeah. He didn't do it in anger, it just broke.
Lori Walsh:
No, it just snapped in his hand. All right, so let's talk a little bit about what — because as you said, the governor, this governor does not provide a slide deck with an hour-long explanation of what everything means.
So what are some of the key things that South Dakotans need to know about this process, starting with we have to balance the budget? But it's not a balancing the budget like you balance, as you said, Jon, your family budget around the kitchen table.
Jon Hunter:
So the process, the legislature will get underway, as Mike said, in January. And they will start that process of listening to people, making decisions, eventually appropriating. So this budget is merely the governor's wishes for what she wants the legislature to do. The legislature has its own authority to do that. Eventually, they would pass a budget and it needs to be signed by the governor. The governor can veto it and not sign it. And they'd have to go back and get the thing done. But clearly, especially I think in a common party circumstance like we have now, the starting point is really the governor's budget. So they will consider I think all the things that she proposed. Yes, it is the 134th or whatever it is consecutive budget, balanced budget.
But remember, where that is defined in the same paragraph that requires her to make this thing on the second Tuesday, or the first Tuesday after the first Monday, is that all things that we spend this year have to be paid for either by revenue that we get this year or previous savings. So we have a savings account, budget reserves, and there's some trust funds that could be tapped as well. But those, you can add that. And we are using some things in this year's budget from the savings account, and most notably I think the men's prison outside of Sioux Falls will be used in that. But yes, technically it's a balanced budget. But this year's revenues do not have to equal this year's expenses.
Lori Walsh:
Mike, we don't even know what the revenues are quite yet. Talk about projections, ideas and how this will change over time.
Mike Card:
Okay. Basically, the Legislative Research Council and the Bureau of Finance and Management is projecting what the revenue is based on mostly our sales tax is 61% to 65% of our budget, roughly 20% coming from video lottery and a couple other sources, the contractor's excise tax and the like. So roughly 80% of our budget comes from those taxes for the general fund. Those are for the support of state institutions and the programs that they have, so existing state institutions. So we start from there, like many of us do, is similar to a home budget in that we have this much money to spend. What are our priorities for how we spend it? And there are some things we just have to continue, some of our federal match, some of our programs that aid the local governments, and some of our state programs, we just simply have to keep doing.
Lori Walsh:
Yeah, right.
Okay, she even said, "We want to have a family conversation about the budget." And she says this, "I want us to have a quick family discussion," right before she issues her first warning, if you will, to the state legislature where she says, "Hey, last year, I signed the budget," even though there were tens of millions of dollars that weren't in the budget recommendation that she had. This is according to the governor, "I signed it, but this year will be different."
So that is a warning or a threat to lawmakers that even though you're the ones who get to decide, I am saying upfront, "You will listen to me, upon threat of me not signing. I might not sign off on this. I might not say yes."
Empty threat? That's kind of a strange way to begin the partnership, Mike.
Mike Card:
Well, I mean, if we go back to the past legislative session, it isn't clear that it was ever a partnership, that the legislature has its own independent authority under our Constitution to determine how to appropriate the monies that it is taking from the people and obtaining from other governments. So the legislature has the only authority to allocate money and all expenditures have to be approved by the legislature, whether it's general funds, tax dollars or whether it's federal money or other money, such as user fees. If it's not appropriated by that, the state auditor is not supposed to approve any checks that the treasurer writes.
Lori Walsh:
All right. Is this the way to begin, Jon? Does this give us a hint that this session is really a continuation of last session and that this governor and this body of lawmakers don't necessarily prioritize coming to it in a compromising fashion? Lines can be drawn. It's not confrontational, but lines can be drawn.
Jon Hunter:
Agreed. And I think that's what this is setting the stage for, is that there will be disagreements. And I think both sides recognize that upfront. The legislature will do what it needs to do. The governor's warning and/or threat here, you asked if it was an empty thing. And I think the warning is more powerful than the actual not signing. Remember, at the end of last session, she said, "I may not sign this."
Lori Walsh:
Right.
Jon Hunter:
But she did. And then there are things that happen if she chooses not to sign it. The legislature can go back and make modifications that would gain a signature. Or I believe, Mike, they can override that and essentially pass it on their own if they get a big enough majority.
Lori Walsh:
We were talking about last year, and I think we asked Will Mortenson, "Do you have enough votes?" And he was tactful and didn't want to talk about it, but you got the impression that they did. They were ready to override it if it needed to be done.
Jon Hunter:
I remember your conversation with Will on that. And so it could be like a federal government where you can have a shutdown, where it gets to July 1st and so forth. Now the legislature's supposed to stay in session until they get that thing done, so I can't imagine them staying there for three months.
Mike Card:
Well, in 1927, Gov. Bulow vetoed the state budget and then called them into special session the last week of June to actually pass a budget.
Lori Walsh:
I did not know that.
Jon Hunter:
I'm going to put it on my calendar.
Lori Walsh:
There's precedent from 1927. All right, there's another warning that she lays out, which is talking about salary increases for what's commonly known as the big three, which is educators, health care providers and state employees. And she specifically is talking to school districts, where she says, "We have been giving ... Since I have been governor, we have increased state funding for K through 12 schools by 26.3%. But actual average teacher salaries have lagged far behind." She said then with a warning, "Why should we continue to send money to school administrators and school boards when they do not pass it along to teachers?"
Mike, what is she getting at here?
Mike Card:
Well, she's saying that she would like the money to go directly to teachers, but under state law, it's the school board who sets the salaries of the staff and determines how to use the money in their jurisdiction. Some of the money is from our local property taxes that we pay. Some of the money comes from state aid to education, which is partly based again on how much property tax is collected within the jurisdiction. It's an independent organization, unless the legislature wants to engage in preemption of the power of the local school board.
Lori Walsh:
But the tacit threat is you're not going to get these increases. Jon, those are very traditional, the big three are called the big three because it's the same across the board. Is she saying here, "Hey, we could give 4% to state employees and 2% to teachers because you're not giving it to them"? That would be probably unheard of.
Jon Hunter:
No, it would be heard of. In fact, last year I think the numbers were seven, seven and five, that they were 5% to the health care providers, so yes, it can be broken up.
Lori Walsh:
But it wasn't punitive.
Jon Hunter:
No, no. My first instinct, Lori, is I don't like them grouped together because it's oversimplifying something that's very complex. And I think they all deserve their own hearing and their own justification. On the other hand, I did appreciate when she said, look, don't try to ... everybody deserves an inflationary increase because they all have inflation in their thing, so try not to break these up. So I did think that was worthwhile because it could be tempting to have some sort of punitive thing or something else.
But remembering that, I think it's a legitimate concern. South Dakotans, I think in most polls, have been supportive of increasing teacher pay in South Dakota. And if the state is going to increase state aid to education, I think the will of the people would be to, yes, the teachers would gain the bulk of that, and it wouldn't go to buildings or textbooks or gasoline or whatever the other expenses are.
Lori Walsh:
Support staff.
Jon Hunter:
Right, right. So 80% or so of school district budgets are for people, and not all of them faculty, of course, but I would hope. Now what I would've appreciated in this speech, however, is when she said, "We increased this thing 26 point something, but teacher pay only went up," silence. It just said not as much. I wish I would've heard a number, 21%, 10%, whatever that number was. How far are we lagging? Is it really close or is it way off? I would've appreciated a number.
Lori Walsh:
Yeah. All right, a third warning a little bit later on in the speech is still part of the 4% for providers, where she's kind of laying out she thinks nursing homes should get 4%, community service providers should get 4%. Developmental disability providers should get 4%. "And by the way, some of you might want to do other things, including a tuition freeze at our state universities. Instead of this, this year, I think that we should do differently. We should do what I have proposed." That tuition freeze, Mike Card, catches your ear. And in fact, I think it's Tim Reed, I believe.
Mike Card:
It was Rep. Reed that noted that it also includes vocational technical colleges.
Lori Walsh:
Sure.
Mike Card:
They're trying to keep the tuition down again so that students can go to school in South Dakota because over 40% of the students who go to school in state stay in the state in which they go to school. So if we can students to stay here to go to school, they're more likely to stay here to join the workforce in South Dakota.
Lori Walsh:
Right, so that's Rep. Tim Reed. He was talking to Jackie Hendry with SDPB after the speech and said, "Yeah, we're hoping for that tuition freeze. That is still one of our priorities to get continued." You both come from college towns, Vermilion and Madison. A tuition freeze to get those kids into state schools is a high priority for a lot of those lawmakers.
Mike Card:
Well, because we also know that if they go to school out of state, they're likely to stay in the state in which they go to school, or to go to other states. And so if we want to build our workforce with our students who are college educated and technical educated, as well as we hope that everybody can find a life in South Dakota. That wasn't mentioned exactly either. But to do that, you need to educate them here. And what can we do to educate them here except keep the cost of higher education as low as possible?
Lori Walsh:
A couple promises that jumped out to me, and one is the success of the Freedom Works Here initiative. We can expect the South Dakota economy will continue to thrive given the success of that. This is again a continuation of this, this ad campaign that's been a little controversial.
Jon, are you surprised to hear her throw in Freedom Works Here and say, "It's working. And I expect that because I did this, our economy will grow"?
Jon Hunter:
No, I don't think it would be a surprise. She has been an unabashed promoter of that idea, that her commercials are bringing people to South Dakota and that they will continue to do so. So your question was: Is it a surprise that she would mention that? No. Is it the reason our economy is growing? Probably not. But I think the assumptions that are used to say that South Dakota's economy will continue to grow are sound, and that comes through the Bureau of Finance and Management.
Can I sneak back briefly to the nursing home reimbursements?
Lori Walsh:
Please.
Jon Hunter:
That is a much more complicated issue than kind of the 4% that would be to state employees and other aid to education. Remember, there was a summer study this year, summer session, in your words.
Lori Walsh:
Well, that's wrong. It's not a summer session.
Jon Hunter:
Sorry.
Lori Walsh:
Don't put it back in my head because if I misspeak, now you're putting the word in my head.
Jon Hunter:
You just got that fixed.
Lori Walsh:
True, I just fixed that. Summer study.
Jon Hunter:
Summer study on nursing home and long-term care kind of things. And I've read the report. It's extensive. There are lots of things. I was very impressed. So many things that I did not think about there that I think that a 4% number does not even touch the surface of what I think will be proposed in this legislative session to helping fix the long-term care issue in South Dakota, which is nursing homes closing for lack of money and lack of staff and so on. So I think that will be embraced by the legislature, the summer study and there'll be a dozen bills or more about that. And that'll help South Dakota if they're implemented well.
Lori Walsh:
Right. I want to go back to something that we haven't talked about yet, which is this idea of phonics, the science of reading, which is a catchphrase. She leans so hard into this with the word science, in fact, that it's been proven. You can't help zeroing in on saying, "There must be something there, there."
Mike Card:
That's a nice rhetorical device, if we talk about science and facts, it doesn't lead to the conclusion that every child learns slightly differently. This may affect a majority of students, but it would've been nice, as Jon noted, while we were listening, to see a citation on that. Well, I think we should leave that up to the education experts. And whether that's through the secretary of education or through other education bodies, we're pretty fortunate to have five schools of education in South Dakota. They should be making a recommendation as to what the best devices for teaching reading are. She's right in the sense that if we don't get students to learn to read as early as possible, they will not do very well later on in life.
Lori Walsh:
I just want to highlight some of the language for listeners, reading from her prepared remarks. "Research tells us there is a better way to teach kids how to read. We are going to trust the science, the science of reading." Then she talks about the Department of Education's statewide literacy initiative based on the science of reading. That's capitalized, so that's a catchphrase that's marketed, is the Science of Reading. It includes an emphasis on phonics, which is the proven best way to teach kids how to read. And then she's proposing $6 million in one time funding. She goes on to call it a proven model once again. So any good journalist, Jon, is going to say, "Well, okay. There's a whole lot of proven science leaning on the facts. We better check to make sure that is backed up by research."
You're going to hear a lot about that during the legislative session. Aren't we?
Jon Hunter:
Yes. And those are the wrong words, let's just say that. There's not any one proven right way. First of all, many people learn in many different ways. And there might be circumstances where phonics works, and there's other methods too. So yes, the whole science and 100% proof, and they guarantee it and so forth, is just not correct. It would've been better had she said, "We believe the Department of Education and its secretary and myself and others believe this is the best way to do it, and that's what we should do." I would've preferred that kind of language.
By the way, I'm glad you quoted Gertrude Stein a few minutes ago when you said, "There is no there, there."
Lori Walsh:
All right. What else do you want to pull out of this? I've kind of set the agenda here with a few things I wanted to talk about, but other things that you think were in this speech that we're going to be talking about January, February, March.
Mike Card:
Well, we haven't talked about county government revenues and what impact that's going to have on our budget either in terms of shifting funds or transferring funds from the state to the local government, granting county governments taxing authority or whatever. We still have a jail problem. The prison problem, addressing the prison issue may address some of the jail problem. But other county government issues are also underfunded. We have bridges that are failing. We have just all sorts of financial problems because county governments must do what the state tells them to do, whereas municipalities can do what the state allows them to do. So county governments are really stuck. They have to perform certain functions. And they're basically limited to a few revenue sources, the primary one being property taxes and wheel taxes and a few other funds that they can use to balance their budgets because they have to balance their budgets too.
Lori Walsh:
Another summer study, wasn't it? Yes. Okay.
Jon Hunter:
Yes.
Mike Card:
That was the other summer study.
Lori Walsh:
Okay. I haven't looked at that report yet. Do we have an idea of what the results of that study were and the kind of legislation we might see coming forward?
Jon Hunter:
Well, the most logical was if you think of most county courthouses, they perform a lot of state services, and that's including the treasurer and the auditor and the voting. And there's all sorts of services. And I think there's a real inclination that the states should reimburse the counties for more of that activity, which would matter more to smaller counties, where more of their budget goes to that. The second part of course is going to be in corrections, as Mike was saying, because a big part of a county's budget is sheriff and jails and those sorts of things. And so if the design and programming of the new penitentiary and the women's prison in Rapid City can help take pressure off county and regional jails and law enforcement, that would be great for their finances.
Lori Walsh:
What else do you want to pull out from this, Jon Hunter, that you think is really significant for us to talk about?
Jon Hunter:
I think what's worth thinking is how close those revenue forecasts will be to actual forecasts when you come to the middle of February. So we're right now, late this year, this is late '23, sales tax revenues have been declining. And so is that a blip and they're going to go back up? Which is what our early forecast of what sales tax revenue would do in fiscal '25. But we're going to have a couple more forecasts before the legislature has to pass that final bill. So if we become less confident of sales tax revenues and it starts to squeeze. Where's that going to affect the appropriations?
Lori Walsh:
All right. Okay. The Medicaid expansion is another thing that she calls out and basically said, "The voters decided that South Dakota public health will include Medicaid expansion." And she circles back to some of those early predictions, which were, hey, it's not going to be expensive at first, but then there will be a big bill due. We don't have time to unpack everything about Medicaid expansion right now and how it's been rolling out. However, do you anticipate a big jump in the future?
Jon Hunter:
Well, her budget suggested more funding for this year, for fiscal '25. And so I appreciated that. It wasn't deniability and it wasn't, we shouldn't be doing this. It said, "Here, the voters have spoken and we are going to do this." But whether it goes up in fiscal '26 and '27 wasn't for today's discussion.
Lori Walsh:
Sure.
Mike Card:
And part of the original plan was, we were going to take the federal money and invest it so that when we ran out of the match money from the federal government or when it started to decease, we would have the funds. And it's not clear that we invested the money to have it grow and earn interest along the way, so that we could have the funds to continue this on for at least five years or thereabouts.
Lori Walsh:
Sure, okay. Speaking of federal money, she begins the speech, within a very short period of time, she's talking about the impact of burdensome regulations from the Biden administration. Inflation has risen. People are still adjusting to the increased prices of everyday goods. And that is the only mention of President Biden in the entire speech, which was a surprise to me because in the past, she's really talked about fiscal conservative policies in preparation for what she saw as the disaster that was coming from the Biden administration. This time, she mentions him and then maybe five times, she mentions federal dollars and how we're going to leverage them, which I thought was an interesting look at that awareness of how the state budget is really boosted and burdened in some ways by federal dollars and deciding where they go. What stood out to you with some of the, hey, this is what federal money needs to come into play as we have this conversation? You see what I'm asking here, Jon?
Jon Hunter:
Yes.
Lori Walsh:
I didn't ask it very well.
Jon Hunter:
No, I thought you asked it fine.
Lori Walsh:
You'll help me out.
Jon Hunter:
I thought it was a straightforward approach and I appreciated that, where it wasn't spending a lot of time campaigning against President Biden, and it was acknowledging of what money came to us, not all of it, but at least acknowledging that came, and that there's still a little bit yet to go, and let's use that wisely. And then we won't have it anymore. So I thought it was a fairly honest assessment of where we stand. The big part there that never really gets mentioned is highway funds, which are kind of all federal stuff. It's really a misnomer too because tax is collected on gasoline in your state, sent to Washington, then they decide to send it back to you, usually with a hammer on things like 21-year-old drinking and so forth.
But that's a big number, I mean, the highway department budget is a big number for the state of South Dakota. And it wasn't mentioned anywhere in the speech other than some infrastructure things, which we could use some of this money for. But I don't know if that's going up or down. There's some thought of, as gasoline is less used because of electric vehicles or whatever, that is going to be an unreliable source of funding for highways, but I didn't hear any mention of that today.
Lori Walsh:
What else was not mentioned today that you would like to have heard more about, or that you're not necessarily she should've put it in the speech, but that you know we're going to be talking about in the future, but it didn't necessarily come up today?
Mike Card:
Well, I don't know how far it's going to go, but certainly the issue that many school districts are facing with low-income children or parents not being able to afford school lunches and the amount of debt that the school districts are carrying. The Democratic Party representatives have noted that it's about $40 million if we wanted to fund our kids' education through making sure that they are well-fed because one thing we do know for a fact is that a hungry child doesn't learn very well. And all you need to do is look at a Snickers bar commercial and you can have some evidence of that.
Lori Walsh:
We have hangry kids in the classroom.
Mike Card:
Well, if you're hungry, your stomach is growling, you don't have the energy. I mean, there's just all sorts of evidence that suggest if you're hungry, and now we're going to have some of our lowest paid staff have to tell kids, "You can't eat, or you can't have a snack."
Lori Walsh:
I don't know that they'll do it. I just can't imagine, having worked in a school before, I just cannot imagine. Fire me, I'm giving the kid food. You know what I'm saying? That's putting a lot of pressure on somebody to deny, somebody who has chosen a job where they feed children, is going to have to tell children, "I cannot feed you." I'm not so sure that doesn't create a human resources problem.
Jon Hunter:
I think there are so many great people at that level in South Dakota. And I know in some circumstances they would take money out of their own pocket to feed children. That's just a guarantee. There are so many people who are concerned about young people and disadvantaged. I understand the big picture political kinds of things, but there are so many good school staff workers who would certainly sacrifice their own in order to help children.
Mike Card:
Well, and we have a lot of people who are using food banks and the like in South Dakota to obtain sufficient calories to continue on, so it's a big problem. She did cite the increase in personal income, but we also have seen news stories where that's not how we base our legislators' salaries because our median income dropped by $10,000 in the state. So part of that is pandemic money is no longer available to people, but that means that people have fewer dollars to spend, especially those at the lower income thresholds.
Lori Walsh:
Yeah. Reynold Nesiba, minority leader, said, "Let's feed the kids." You could tell he's going to say that again. That was something he wanted to close his interview with Lee Strubinger. Let's feed the kids.
He criticized the governor for not having a single reference to tribes in her State of the Budget, and they want 5%, the Democratic Party does, for the big three, not four, so that gives us a little bit of a preview of what state Democrats might bring to the table. And that is where we will leave it because we've got a whole session to talk about all of these things. Jon Hunter and Mike Card, thank you so much for being here. We really appreciate your time.
Jon Hunter:
Thanks, Lori.
Mike Card:
Thanks, Lori. Good to see you.
