Pierre Reports: Funding top issue

Senator Nygaard sends greetings from Pierre!  Feb. 17 marked the 24th day of this session of the Legislature.  We are over half way done and continue to work hard to find the best solutions for balancing the budget. This includes closely examining all proposed cuts, particularly those to education and Medicaid, and searching for ways to soften the proposed cuts.

The committees are going through numerous bills as cross-over day approaches.  Cross-over day comes on Feb. 23, and marks the deadline when bills must move from their house of origin to the other house (Senate to House or House to Senate).

On Thursday, Feb. 17, the Joint Appropriations Committee met with the Department of Social Services (DSS).  Many of the DSS employees, along with representatives from respective institutions, were on hand for the budget hearing. The DSS is allocated the second largest amount of the state's general funds (second only to education).

 The DSS is 32.5 percent of the state�s general fund budget. The governor�s recommended budget for the DSS is $364,325,077 in general funds. This is a $22,654,302 increase in funding. The DSS also receives $631,723,553 in federal funding which is a $48,720,788 decrease in federal funding. The other funds appropriated for the DSS are $9,050,460 which is a $1,967,735 decrease. Overall funding for the DSS is $1,005,099,090.

FMAP or Federal Medical Assistance Percentage determines what the state vs. federal payment will be to Medicaid. In the state of South Dakota, every percentage change to the FMAP has a $6.5 to $7 million general fund impact. The FMAP percentage is set by the federal government. This year the state match is going from 34.91 percent to 40.34 percent. This means for every $1 spent, in FY11, approximately 35 cents was paid for by the state, with 65 cents coming from the Fed. For Fiscal Year 2012 the rate is going up to 40.34 percent or 40 cents per dollar cost for the state. The FMAP is based on how well a state�s economy is doing per capita. The better the state�s GDP the more the state must put in.

The Office of the Secretary is recommending a budget of $26,630,783 in overall funds.  This includes $7,327,250 in general funds, federal funds of $19,287,312 and $16,221 in other funds. This is an increase of $66,891 in total funds from FY 2011.

 The Division of Economic Assistance (EA) is appropriated $87,590,491 of the DSS budget with $66,878,400 in federal funds, and $20,399,384 in general funds. This is an overall cut of $5,337,775.

Medical Services alone take up the largest amount of overall funds at $539,478,701. In the DSS budget proposal, there will be an increase of $25,278,292 in general funds, with $19,266,815 decrease in federal funds, and no change in other funds for a total increase of $6,011,477.

The Division of Adult Services and Aging (ASA) has a budget of $171,116,637 with $68,738,412 for general funds, federal funds of $100,895,357, and $1,482,868 in other funds. This is a total reduction of $21,072,504.

Division of Child Support (DCS) assists those families who need help to collect child support. The DCS is budgeted for a total of $7,200,056 with $1,795,724 coming from general funds, federal funding at $2,980,702 and $2,423,630 in other funds. This is a total reduction in funds of $391,647.

Division of Child Protection Services (CPS) has a budget of $58,267,713. This includes a $26,521,070 of general funding with federal funds of $30,531,206 and $1,215,437 in other funds. This includes a total cut of $1,552,360.

The Division of Child Care Services (CCS) is appropriated $20,338,108 with $3,345,727 coming from general funds, federal funding at $16,252,562 and other funds at $739,819. There is a total reduction of funds of $2,010,026.

Human Services Center (HSC) receives $40,897,615 with $29,423,446 being general funds, federal funds at $10,890,167, and other funds at $584,002. This is a $744,698 reduction.

The Division of Mental Health (DMH)  is appropriated $28,274,496 with $15,735,835 in general funds, federal funds of 11,490,949, and other funds of $1,047,712. This includes a $1,656,663 reduction.

Division of Alcohol & Drug (DADA)  receives $24,912,861 in total funds with $9,924,855 in general funds, federal funds of $14,439,071, and other funds of $548,935. This is a reduction of $1,346,501.

 The Appropriations Committee heard from many different opponents of the recommended budget throughout the hearing today, however there were only a few who came forward to testify with solutions as to how to help deal with the budget reductions.

Our structural deficit is a spending issue not a revenue issue. We are spending more than our revenues amount to. State government is taking the necessary steps to control spending.  The state agencies are  taking salary cuts, state employees are not receiving a salary increase, expenses are being reduced, etc.  Education is the largest recipient of state taxpayer dollars and K-12 is the most vocal for increased taxes.  We are working to lessen the 10 percent cut in their area and I trust that there will be efforts to reduce administrator salaries, reduce administration expenses,  improve efficiency, etc.

We are in a state environment of decreased state revenue, mandated federal Medicaid and increasing healthcare costs to the state together with a slow national economic recovery.  So before everyone rushes to increase the state sales tax dedicated to K-12 education, there are some facts and information that are important to the debate which impact state and education tax revenue.

Over the years our South Dakota Legislature has granted  over 170 sales tax exemptions. A current eight page list compiled by the Department of Revenue and Regulation estimates over $526,000,000 sales tax revenue in 2010 was lost to these exemptions.

A Feb. 15, 2011 report by the SD Chamber of Commerce & Industry lists the percentage by category of industries as to where the state receives sales tax revenue:  Retail, 53.02 percent; Trans and Public Utilities, 16.6 percent; Services, 16.2 percent; Wholesale Trade, 6.9 percent; Manufacturing, 3.6 percent; Financial Services, 2 percent; Agriculture, 1.2 percent.

A 2003 LRC Memo (for which there may be more recent numbers) also outlines by percentage the total statewide property taxes that were levied on each classification of property:  The three major categories are; Owner-occupied Property, 36.4 percent; Other Property, 31.5 percent; Agricultural Property, 24.6 percent.

I hope this information helps you to better understand how complex the relationship is between government and all the things we want in life.  To quote from the famous Red Green, ��we are all in this together!�  Lets keep working together to make democracy work here in South Dakota.

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