Conservative approach on state budget pays off again By transferring nearly $6.2 million back into state government's budget reserve this summer, South Dakota is better prepared to weather the continuing challenges posed by the economic slowdown and the decision by voters two years ago to repeal the state inheritance tax, Gov. Bill Janklow said.
"This is good news for taxpayers who fund the services, and this is good news for people who use those services, such as the young people in our public schools. It means we have $6 million more in the bank than we expected to help hold down taxes and protect programs that are important to people's lives," Janklow said.
South Dakota state government ended its 2002 budget year on June 30 with a cash balance of $6,178,570. That was despite previous budget forecasts there would be zero cash balance because of tight revenue conditions. The nearly $6.2 million was shifted to the state's budget reserve, increasing it to $39.3 million.
Janklow said revenue collections grew about $3.4 million more than forecast for the 2002 budget year, while all three branches of state government � executive, judicial and legislative � combined to spend about $2.8 million less than expected.
"Out of necessity, we've taken a very conservative approach to spending these past eight years. The voters in 1994 clearly said they wanted tax relief and they wanted governments to rein in spending at all levels. We responded," Janklow said. "We reduced state government's work force by hundreds of positions, we reduced property taxes for homeowners and agriculture by $120 million and we deliberately played it safe by setting aside any extra money at the end of each year rather than blow it.
"Now we're in tight times economically, and because we took a conservative approach in the past, we have the funds set aside to get through these rough spots. The voters in 2000 told us again they wanted tax relief when they voted overwhelmingly to repeal the state inheritance tax. That left a $25 million hole in the state's budget, but we're working to grow out of it by using our reserves until the economy recovers," Janklow said.
Janklow cautioned that whenever someone suggests major increases in state spending, they need to show voters up front what tax they want to increase or other programs they want to cut. "It's easy to write an editorial calling for more spending, but you never see that same newspaper telling its readers what program they would cut or what taxes they would raise to pay for the higher spending. That's just intellectually dishonest to play that game," Janklow said.
In the budget year that ended June 30, state general fund receipts totaled $849,335,034. That was $3,382,334 more than estimated during the 2002 legislative session and $35,640,153 more than collected during the 2001 budget year.
Sales tax collections, which are the single-largest source of state general revenue, totaled $457,950,970. That was only $5,624,295 more than one year ago, an increase of 1.24 percent, but was $3,347,855 less than legislators forecast last winter.
On the other hand, contractor excise taxes and insurance company taxes came in better than expected.
Contractor excise tax collections totaled $52,737,997.
That was $629,340 above the Legislature's winter forecast and $2,588,317 more than last year, an increase of 5.16 percent.
Taxes paid by insurance companies for their activities in South Dakota totaled $46,239,092. That was $2,001,991 higher than the Legislature's winter forecast and $3,597,712 above last year's total, an increase of 8.4 percent.
The state budget reserve fund grows to $39,324,961 with the transfer of the $6.2 million, Janklow said. The budget reserve fund and the property tax reduction fund have been important sources of emergency revenue during the past year as legislators have worked to balance the 2002 and 2003 budgets against the economic slowdown and the inheritance tax repeal.
Legislators transferred $13.3 million total from the two rainy-day accounts for the 2002 budget, but the shortfall turned out to be only about $7.1 million because revenue came in better than expected and spending came in lower than budgeted. That meant $6.2 million could be transferred back into the budget reserve. "The bottom line is that the budget shortfall was only half as much as the Legislature and the budget office had predicted. If there's a silver lining, that's it," Janklow said.
The property-tax reduction fund ended the 2002 budget year with a balance of $76,284,743. Legislators earmarked $36.3 million from that fund to balance the current 2003 budget that began July 1. The fund is forecast to have a remaining balance of $39,964,046 at the end of the 2003 budget year next June 30.