Thursday, July 19, 2012

$50 Million Here Today, Gone Tomorrow?

Earlier this week, a task force chaired by Paul Volker and Richard Ravitch released a report about state budgets.  A couple of conclusions should make everyone a bit less giddy about South Dakota's surplus:
State budget practices make achieving fiscal stability and sustainability difficult:
While almost all states have constitutional or statutory balanced budget requirements, “revenue” and “expenditure” are not defined terms. The use of borrowed funds, off-budget agencies, and the proceeds of asset sales are not uncommon practices, often rendering balanced budgets illusory.
The lack of financial transparency makes it more difficult for the public to understand the critical nature of problems such as pensions and other payment obligations. Temporary “one-shot” measures to avoid or delay hard fiscal decisions mask these underlying problems.
Opaque and untimely reporting, coupled with nonexistent multiyear planning, severely hampers efforts to address these problems in a serious manner.
Perhaps, this surplus is the result of good fortune and fiscal responsibility.  Bob Mercer thinks that it is. However, these results are as curious as the budget crisis that was never mentioned during the 2010 gubernatorial campaign and then revealed during Governor Daugaard's budget address to the 2011 legislative session.

That skepticism aside, the report concludes that all of the states will face problems in the future:
Since 2008, . . . state funding of K-12 education has declined as a share of state spending while Medicaid spending has increased in share. There have also been significant cuts in state funding of public higher education. Relatively uncontrollable Medicaid spending and rising obligations to contribute to pension funding crowd out spending for education and will continue to do so until these problems are brought under control. Continuing cuts in state funding have put access to
education and the quality of instruction and student performance at serious risk.
America’s aging infrastructure faces growing capital needs, most of which are funded by state and local governments. However, these critical needs suffer from low budgetary priority. Like education spending, essential infrastructure spending is now crowded out by more immediate spending pressures, pushing essential investments off to the future and increasing the risks to public health and safety and economic growth.
I doubt South Dakota's population is immune to the aging process or that its poorest citizens will reverse the Medicaid trend here.  I also doubt that South Dakota has fewer infrastructure needs relative to other states.

Slightly Related: I usually leave the Dakota War College questions to The Madville Times, but is there any explanation as to why the Bill Clay post that contained this statement has disappeared?
Does anyone wonder why exactly some would be pushing for a 1 cent sales tax increase when our state is coming up with $50 million budget surplus? Your thoughts are as good as mine. Somebody must like to spend money. . . .
The recent budget surplus indicates that amount is obviously not ”necessary,” Since our state is sitting on $50 million extra. Education and health care providers just need better lobbyists. Why would I as as citizen vote to pay another penny in sales tax when our state is flush with cash?

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