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Daugaard: Revenue shortfall will be handled with less spending

Posted: Monday, Dec 12th, 2016

Governor Dennis Daugaard outlines his plan to overcome an unexpected downturn in tax revenue over the first half of the fiscal year Thursday morning at a Huron Chamber and Visitor’s Bureau event at the Huron Event Center. In the next photo, the Governor shares a moment with District 22 legislators Bob Glanzer, on the left, and Jim White, second from the right, as well as local businessman Doug Balvin, prior to Thursday’s Chamber event. PHOTOS BY ROGER LARSEN/PLAINSMAN

HURON – While the fiscal year 2018 budget being proposed by Gov. Dennis Daugaard reflects a shortfall in revenue, it is offset by less spending and one-time money.

“Right now, the year we’re in presently, revenue collections are running below projections, but happily expenses have also been lower as well,” he said in remarks to a Huron audience Thursday.

He is touring South Dakota and presenting a summary of the budget address he delivered to the Legislature earlier in the week.

“And although ongoing expense savings do not bridge the gap created by weak revenues, one-time revenues and one-time expense savings can provide that bridge,” he said.

Not only does his proposed budget meet state law by being balanced, no cuts are likely and the state should be able to return $2.4 million to reserves.

“Over these past years, we’ve worked together to adopt conservative revenue projections with a high probability of attainment,” Daugaard said.

“And with these surpluses we’ve improved our rainy day fund balances and invested in some one-time opportunities,” he said.

The governor said $117 million has been deposited in reserve funds in recent years. From those, the state has spent $57 million in disaster relief and to pay down debt.

Reserves have been maintained at or above 10 percent of the total budget since 2012, he said.

Among the states, the median rainy day fund is about 5 percent, he said.

“So we have a more conservative approach than many,” Daugaard said.

The state’s unemployment rate is just 3 percent, with the workforce continuing to grow. South Dakota also recovered much more quickly from the Great Recession than other states, he said.

But he points to several factors as reasons sales tax collections are slow.

“Since mid 2015, we’ve been seeing a noticeable slowdown in the growth of our taxable sales,” he said.

Culprits include weak commodity prices leading to less spending on agriculture equipment, low inflation, less tourism revenue, cautious consumers and rising online purchases.

“Online spending in the United States has grown by more than 12 percent each year for the past seven years,” Daugaard said.

Under federal law, online retailers are not required to collect and remit sales tax dollars to states unless they have a physical presence in those states.

However, 100 retailers are voluntarily remitting sales taxes and Daugaard is working to increase that.

As he did in his address to legislators, the governor took aim at Initiated Measure 22 and his decision not to include $5 million in the budget for so-called “democracy credits.”

IM 22, now tied up in a lawsuit, is designed to reform the state’s ethics and campaign finance programs.

The measure would appropriate $9 per registered voter, or about $5 million annually, beginning in July.

As part of his budget, Daugaard is proposing to use some of the $19.7 million in new revenue for 1 percent increases in education, healthcare providers and state employees.

But IM 22 would consume more than 25 percent of that, leaving those entities with just 0.6 percent in increases, he said.

“I believe it’s not responsible to use taxpayer money to fund political campaigns at the expense of education,” Daugaard said.

“I am certain the voters of South Dakota do not want that to happen,” he said.

IM 22 had 70 sections and 14,000 words, and he said if he stood before an audience and read it, it would take 90 minutes.

“It’s our obligation at the least to correct obvious errors that make it unworkable,” Daugaard said.

“Unfortunately in this case, that’s a big job,” he said. “This is easily the worst case of drafting I’ve seen in my 20 years of going to the state capital. It’s vague, over broad and uses undefined and inconsistent terms.”

But Democrats counter that not funding the public campaign finance provision just because the governor doesn’t like it is a bit dangerous.

Voters passed an initiative that has unintended consequences, Daugaard said.

“The voters didn’t intend to make a registered nurse at (Avera) McKennan Hospital a criminal because her husband is in the state Legislature,” he said.

“They didn’t intend to discourage school superintendents from hosting legislators and feeding them chicken wings,” he said.

“And they didn’t want us to cut funding for schools and nursing homes to pay for campaign commercials,” he said. “I truly believe that.”

Democrats also say there should be no problem finding $5 million in a general fund budget of $1.6 billion.

Meanwhile, Daugaard is proposing to spend the $22.7 million in one-time funds in 11 areas of the budget, from the fire suppression fund to the USD Law School, and from rural recruitment of healthcare workers to a correctional healthcare shortfall.

For the complete article see the 12-09-2016 issue.

Click here to purchase an electronic version of the 12-09-2016 paper.

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