Tuesday, July 26, 2011

South Dakota Leads And Follows In The Wrong Way

A new report shows that South Dakota made deep cuts to its budget despite having a greater percentage of its budget available in reserve funds than most other states.

The Center on Policy and Budget Priorities has analyzed 2011-2012 state budgets and determined that the cuts are deep and long lasting.
Of the 47 states with newly enacted budgets, 38 or more states are making deep, identifiable cuts in K-12 education, higher education, health care, or other key areas in their budgets for fiscal year 2012.
Further, CPBP has determined "the vast majority of states (37 of 44 states for which data are available) plan to spend less on services in 2012 than they spent in 2008 – in some cases, much less."

In the "this is not exactly news department," the study found
At least 23 states have made identifiable cuts in support for public schools. In many cases, these cuts undermine school finance systems that are intended to reduce disparities between high-wealth and low-wealth school districts, so the largest impacts may be felt in communities that are least able to compensate for the loss of funds from their own resources.
The report reminds South Dakotan that "South Dakota cut K-12 education by 6.4 percent, next year, an amount equal to $416 per student, and 8.8 percent in 2013."

Further, ". . . 25 states have made large, identifiable cuts in funding for state colleges and universities, with direct impacts on students."  Again, CPBP reminds us that South Dakota joined that trend.
South Dakota cut higher education (and most other agencies) by 10 percent. The Board of Regents voted to raise tuition by 6.9 percent, or $490 per student, on average. The tuition increase covers only part of the loss of state funding, and each university has to determine how it will make up for the remaining loss of funds.
Of course, everyone in South Dakota remembers that "South Dakota cut Medicaid funding by 6.6 percent. This includes an average provider rate cut of 7 percent, which may cause some doctors to stop taking new patients or to drop existing patients."  Whereas, a majority of states cut education, the report shows that fewer that half of the states cut health care.  According to CPBP, "[a]t least 20 states have made deep, identifiable cuts in health care that will reduce access to care for low-income children, seniors, families and people with disabilities."

South Dakota, however, was one of only "a handful of states [that] held onto substantial reserve funds they have drawn on to avoid some cuts to public services. Specifically, six states that faced shortfalls for fiscal year 2012 entered their budget deliberations this past spring with rainy day funds equaling about 5 percent of fiscal year 2011 spending."   South Dakota has reserves equal to 11% of the 2012 budget according to the report.

In short, South Dakota's governor and legislature cut deeper than they had to.  Further, as Bernie Hunhoff reminds readers in a Yankton Press & Dakotan letter, these leaders are attempting to give corporations a tax break.  Hunhoff writes,
Another wrong-headed policy is the notion that we should rebate some of the contractor’s excise tax (which otherwise goes to the general fund for schools and health care) to big corporations who plan projects of $5 million and above, at the discretion of the governor’s office. It would replace a current program that was revealed to be a boondoggle before being terminated by the legislature in 2010 because it cost too much.

The governor’s staff told the Press & Dakotan that 80 percent or more of the new rebates will go to wind and ethanol programs. They say that now because wind and ethanol has popular support, but nothing in the state law guarantees that and it’s unlikely to occur. TransCanada Pipeline, a major competitor to wind and ethanol, has been one of the beneficiaries in the past.

This newest tax give-away program might cost even more than the one we killed in 2010, and it comes at a time when the general fund is already strapped from the recession.
Hunhoff even offers a main street solution:
. . . let’s end the contractor’s excise altogether and then the state’s coffers will grow even more.

Let’s end the tax for farmers who build a machine shed or barn. Let’s end it for the family-owned car dealership under construction north of Yankton.     Let’s end it for the two women who tore down an old building on Howard’s main street and built a new coffee shop and eatery. Let’s rebate it for the entrepreneurs who restored the old bank building on Vermillion’s Main Street into a fine steakhouse.

Let’s end it for every businessman and farmer. But let’s not let government pick winners and losers. If big projects get a rebate, Main Street should qualify for the same. Everyone should be treated alike when it comes to taxation.

We all know that raising well-educated and healthy children is the best investment a government can make in economic development and the future. We’ve cut those priorities in recent years, and no community knows it better than Yankton, where we’re now seeking charitable contributions for extra-curriculars.

So if the administration wants to write rebate checks to big companies, it should find an appropriate funding source. Don’t take even more resources away from schools and our poorest families.
I don't know what the impact Hunhoff's proposal would have, but I doubt we'll get to debate its pros and cons, the CPBP report reminds us that South Dakota's legislative leaders and governor seem to want to lead only when it will hurt the average citizen and award corporations

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