Between the Lines

Between the Lines by David Lias District 17 Rep. B.J. Nesselhuf tried Saturday to explain his insistent refusal to consider any of Gov. Mike Rounds� proposals to help South Dakota balance its budget.

He tried, and failed.

Nesselhuf said he simply can�t understand why there is talk of increasing some state taxes, to the tune of about $22.8 million, when South Dakota is sitting on two reserve funds that total approximately $115 million.

�You could compare this to if I had a child and I started a college fund for him. By the time my child got to college, I had plenty of money there, but I went to my boss and said, ?I need more money to pay for my child�s college tuition, plus I want to continue to add money to the college fund.� That�s exactly what we�re doing here.

�We have $115 million in reserve. We want to raise taxes $23 million so that not only do we not have to touch the reserve, but we can continue to build it. I don�t understand the purpose of having a reserve if you don�t use it in times of crisis, which we�re in right now.�

Nesselhuf failed to mention the structural deficit that�s built into next year�s state budget � a $25 million structural deficit in fiscal year 2005.

He never mentioned the probability of increased funding for Medicaid, health insurance and school funding.

He never mentioned other important reasons for South Dakota to keep some cash on hand, including the possible settlement of the Lonetree case, the state�s long-running fight with South Dakota Disposal Systems over a baled garbage dump that was never built near Edgemont. According to the governor, that suit alone could cost the state up to $20 million.

There are other money traps out there. The state may be forced to pay attorney fees in a case over the corporate farm act.

We also need to kick in some money to help develop a proposed neutrino lab at Homestake Mine if an agreement is reached.

Nesselhuf never discussed these potential fiscal hazards. We know � there�s a lot of �maybes� and �ifs� in what just has been described.

That doesn�t make preparation on South Dakota�s part for any one of these pending issues less important, however.

Consider the realities Rounds is facing and add them to Nesselhuf�s analogy of sending a kid to college.

If South Dakota was Nesselhuf�s child getting ready to go off to USD in the real world of financial risks the state is facing, he or she could easily find that college fund wiped out by a host of unforeseen expenses.

It appears that Nesselhuf has taken an unwavering stance, with his toes neatly in place right along the Democratic Party line.

His message, quite simply, is his party�s message. No new taxes. Period.

That means offering no support to even the rather modest, common-sense approach introduced by Rounds.

That means no to an increase in cigarette taxes, despite the fact that surrounding states have discovered the double-edge benefits of such a proposal � added revenue and fewer smokers (and their medical problems that eventually affect all of us.)

It also means Nesselhuf has chosen to either disregard or ignore an important characteristic of South Dakota.

We can afford to pay a bit more in taxes, especially to help get our fiscal house in order.

The Tax Foundation, a non-profit advocacy group, adjusts national income and product account data collected by the U.S. Department of Commerce�s Bureau of Economic Analysis. One important comparison the foundation makes is of the total tax burden in each state (including federal taxes) to just the state/local tax burden. In both cases, taxes are measured as a percentage of income.

When federal taxes are included, their findings show that South Dakota imposes the seventh lowest tax burden of all 50 states.

Taking federal taxes out of the equation yields a decidedly different result.

When only state and local levies are considered, South Dakota becomes even more tax-friendly. We tie with Alabama, and Colorado as the fifth lowest taxing states of 2002.

Rounds� plan offers the best solution to South Dakota�s fiscal problems. It�s a way to deal with our current budget shortfall � that Nesselhuf deems a crisis � and still be prepared for the future.

If we did things Nesselhuf�s way and simply spent down our reserve to make ends meet, it would quickly dwindle from $115 million in fiscal year 2003, to $15 million in fiscal year 2005.

This calculation assumes no funding in fiscal year 2005 for K-12 education, medical services or employee compensation.

It assumes no further erosion of the state�s ongoing revenue base.

It assumes no obligations, emergencies or lawsuits would arise that require the use of reserves.

It would, in essence, leave South Dakota nearly tapped out. Instead of being a fruitful, productive state, we would find ourselves financially barren.

In that perspective, the Vermillion Democrat�s �crisis� in South Dakota that demands spending our reserve funds seems like a cakewalk.

Nesselhuf should do the right thing. He should follow District 17 Rep. Donna Schafer�s lead, and support the governor.

He would discover that such action would benefit us all in the next budget year.

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