'Flat Budget' Proposal From Governor Amid Weak Revenue Collections

Dec 6, 2017

SD Governor Dennis Daugaard. Photo by Lee Strubinger

In The Moment ... December 6, 2017 Show 234 Hour 2 

SDPB's Lee Strubinger covered Governor Dennis Daugaard's FY19 Budget Address in Pierre. He provides a recap on today's show.

South Dakota state government will have to tighten its belt once again as they head into the 2018 legislative session.

On Tuesday, Governor Dennis Daugaard outlined his vision to fund state government through the rest of his time in office. This upcoming session is his last as governor.

The budget address is a speech the governor is constitutionally required to give. It’s an update on the state and regional economy as well as a look at projections and trends. Ultimately, though, it’s a chance for the governor to say, "Here’s how I think we should balance the budget, and in doings so, how the government should be funded."

Then come the legislators.

They convene for 40 working days, which some legislators think is not long enough. That's when appropriations committees in both the House and Senate get down to work. They dive into all the various state agencies and their funding.

Appropriations committees take a look at agency wish lists, compare them to revenue projections, and craft a budget based on what those agencies need to operated and how they can fund them.

Which is easier said than done…

The governor is recommending a cautious budget this year. He's also proposing some adjustments to the current fiscal year budget.

Let’s start there.

Just as fiscal year 2017 was a challenging year for law makers, so is fiscal year 2018. Each fiscal year starts in July.

When lawmakers convened last year, revenue kept coming in at lower than projected. The fiscal year 17 budget got adjusted several times before lawmakers went home for the year.

Before the end of the current fiscal year, the governor expects a 33.7 million dollar budget shortfall.

The governor says several things have contributed to that shortfall.

Credit Jenifer Jones / SDPB

Revenue collections are down. He says that's due to a sluggish Ag economy, it's hard for the state to collect taxes on internet sales and the cost of healthcare is going up. For many, that increase in cost means less disposable income to spend elsewhere.

Those weak collections and some emergency costs, which dinged the state by about $3 million, all add up to about a $34 million shortfall.

The governor wants to do several things to shore up that revenue shortfall. He wants to dip into the budget reserve for one-time $7.2 million and tap into other funds to generate enough to cover around one half of that shortfall.

Then he wants to reduce state expenses by $16 million from various agencies to cover for the other half.

The governor is calling for another tight budget this coming fiscal year. He wants about a $32 million increase in spending, however he wants those dollars to cover a few things that have increased in cost over the last year.

Daugaard is asking the legislature to put an additional $16 million into state aid for education, which is seeing enrollment growth, and also another million for maintenance and repair costs.

He’s not proposing a pay increase for state employees. He says the state can’t afford pay increases this year.

There’s a sense of frustration among lawmakers, especially because of weak revenue collections.

Senator Ryan Maher is the assistant majority leader. He’s a Republican who represents northwestern South Dakota.

He says the budget is pretty much a zero based budget because the farm income just isn’t there. He says he’s even seeing a hit in his own business..

"South Dakota is a farm state. When the farm economy isn't doing very well, everybody else isn't going to do very well. This all reflects back to state government and our sales tax revenue," Maher says. With the increase, especially in being a rural state and access to online shopping, more and more people are turning to online shopping, which in turn decreases sales tax revenue."

I also spoke to Representative Tim Rounds. His district encompasses part of Pierre, so he’s got a lot of state workers in his district. He says they’re going on their 2nd year now with out a pay raise.

"What it all comes boiled down to is the dollars. We were hoping to have more dollars this year," Rounds says. "I'm looking at our Medicaid providers, our community support providers, it would be great if we could find them a raise like we did for the educators a couple years ago. Our state employees are going two years without a raise. Plus, their insurance is going to go up.

"Do we have programs out there that we can take a good look at and cut and use some of that money? I don't know, the low hanging fruit has already been picked."

Rounds says raising taxes is off the table, especially since the legislature raised both the sale tax and gas tax recently.

With not much money to spend, lawmakers still have several issue they'll be taking up in January. There’s still a lingering non-meandering waters issue that lawmakers met in special session to hash out. Those rules were set in place, but they sunset in 2018.

Other lawmakers say they’re going to be focused on social bills, like permitless concealed carry and possibly even some legislation that deals with social issue in the education system.

The governor says he's going to focus on workforce development.

As chair of the Western Governor’s Association, his main focus with that group has been on workforce development. With little money to spend, he says going to have to find interesting ways to address that issue.

"If you've got ideas that cost money, those ideas you have to set aside. I don't have any particular ideas that demand money," Daugaard says. "Many of the things in the workforce world I'm hoping we can fund with existing funds, or they might be policy things that don't cost money."

We will find out more about Daugaard’s legislative priorities when he opens up the legislative session during his state of the state address on January 9.