By David Lias
District 17 Sen. Tom Jones told constituents at a legislative Cracker Barrel meeting Saturday that the state Legislature will likely approve a $1.3 billion budget for 2014 by today (Friday).
“The $1.3 billion is general fund money – it’s our revenue, our sales taxes. If you take the entire number, which we don’t have a lot of control over, it’s about $4.1 billion that the state of South Dakota will be working with,” he said.
The numbers come easily to Jones, who serves on the Senate’s Appropriation Committee.
Rep. Ray Ring told the Vermillion audience that he believes the single most significant accomplishment of this year’s legislative session will be criminal justice reform. “After that, I’d have to say that I don’t think it’s been a particularly productive or rewarding session. I’m trying to stay positive.”
Ring said he is disappointed that the House Transportation Committee, on which he and Rep. Nancy Rasmussen sit, killed legislation that would have further regulated teen driving in the state.
“We’re still trying to get Medicaid expansion, and I realize there is a week left, but I haven’t seen too much movement on that, unless there is something happening with the leadership,” Ring said.
Ring said he is disturbed by the lack of support for education at all levels in the Legislature, particularly for K-12 education.
“And, we’re shifting more and more of education funding to the property tax in various ways,” he said.
Building South Dakota
Discussion turned to Building South Dakota, an economic development incentive plan that had just been introduced in Pierre two days before Saturday’s meeting. South Dakota currently has no incentive plan because a previous program that refunded construction taxes for large industrial projects was allowed to expire on Dec. 31. A replacement plan suggested by Gov. Dennis Daugaard was rejected by voters in the November election.
Republicans and Democrats have worked for the past two months to find a compromise to help level the playing field with other states that do a better job recruiting large projects.
South Dakota charges not only a 4 percent sales tax on construction projects, but also a 2 percent contractors’ excise tax on gross receipts. Few other states have a contractors’ excise tax, so construction is cheaper elsewhere.
The new plan introduced at a bipartisan news conference last week would refund part or all of the state sales tax paid by projects of more than $20 million that would not located in South Dakota without such an incentive.
The contractors’ excise tax collected on those projects would be placed in the Building South Dakota Fund so the state can reinvest in future projects. The new fund would also get a portion of unclaimed property that the state receives from abandoned bank accounts.
The plan also incorporates a strong educational element, working with the state’s technical centers on training and helping K-12 schools bear the cost of English language training when a project draws workers from other cultures.
Thirty percent of the Building South Dakota Fund would be dedicated to workforce education. Of the remaining money, 25 percent would go to the South Dakota Housing Opportunity Fund, 25 percent to infrastructure and transportation, 15 percent to local development efforts, 5 percent to the state’s REDI fund.
“What’s happened this year is the leadership of both parties have come up with a plan that states we realize economic development is necessary for South Dakota,” Jones said. As of Saturday, legislators were somewhat unfamiliar with all of the details of the proposed legislation.
“The main thing that I think we’re trying to make sure doesn’t happen is that these funds for this are not taken from the general fund,” Jones said.
Legislative leaders, remembering that voters rejected the governor’s funding plan for economic development, are showing that they are listening to citizens, he said.
“I think this is a good time to trust our leaders,” Jones said, “and I’ll probably support what they feel is a good bill.”
Ring noted that the proposed plan will include an injection of unclaimed property funds. “The leadership of both parties have been discussing this, and we’ve been getting reports in the Democratic caucus on the progress of the bill … it won’t take money from the general fund, and they are going to try to limit refunds and assistance to companies that otherwise would not have come to South Dakota.”
“If I’m correct, the contractor’s excise tax is the third largest tax base in South Dakota, so that may be one of the reasons why it is still in existence and we are sharing among both of our parties,” Rasmussen said. “The Republican Party has had ongoing meetings weekly to discuss priorities and where we would like to see money go, and education has been a priority in our caucus meetings.”
She noted that a portion of the incentive package would be dedicated to housing.
“Housing is a huge component to economic development,” Rasmussen said. “If you want to have a job here, you need to have a home to live in. So, our last meeting we had as caucus spent a lot of time on housing.
“Like Sen. Jones, I’m trusting our leadership because it sounds good,” she said.
Rasmussen disagreed with Jones and Ring when discussion at the meeting turned to whether South Dakota should participate in Medicaid expansion. States were given the authority to decide if they want to be participants in last year’s Supreme Court ruling on Obamacare.
“It looks to me like this (Medicaid expansion) would bring us $300 million a year with no cost to us for three years, and after that it is a minimal amount for three or four more years, and it is capped at 10 percent after 2020,” Jones said.
He noted that the Republican governors in North Dakota, Arizona and Ohio have all decided that their states will participate in the Medicaid expansion.
“If we don’t use our South Dakota monies, Ohio or some other state is going to get to use our monies,” Jones said.
“Just to my practical thinking, a nation that is trillions of dollars in debt really doesn’t have any money,” Rasmussen said. “For us to believe that somebody is going to give us money that we really don’t have and that will put us farther in debt doesn’t make much sense to me.”
“If we don’t spend this money, somebody else will. If nobody else does, a couple billion dollars over the next six to eight years is not going to make that much difference (to the federal budget),” Ring said. “Why South Dakota would give up about $2 billion over the next six years or so in return for spending $100 million – that’s a 20 to 1 return – I don’t think that makes common sense.
“For such a rich country to deny health care to poor people is just inhumane. It’s bad macroeconomics. Two billion dollars over the next few years would stimulate our economy dramatically,” he said, “and it’ bad microeconomics when you force people to go to the emergency room which is the most expensive way to get health care and then shift those costs to private payers.”