Between the Lines: State taxpayers forced to make more than ample effort

By David Lias

Let’s pretend.

Pretend that you visit your bank today to check the balance of your checking and savings accounts, just to make sure the totals are what you expect them to be.

Surprise! There’s more money in each account that what your cipherin’ at home earlier that morning at the kitchen table indicates.

David Lias

David Lias

What’s your initial reaction? Personally, I’d be surprised. And pleased. And, as I stepped out of the bank, with a smile on my face, I’d likely begin to wonder just why my math was so wrong and where that extra money came from. That pleasant feeling likely would be replaced with confusion.

We South Dakotans find ourselves in a similar situation this week.

Gov. Dennis Daugaard, in a press release issued Monday, July 15, informed the state’s citizens that we, as a state, are in better financial shape than expected.

The state general fund budget for fiscal year 2013 ended with higher revenues and lower expenditures than budgeted.

Revenue growth for the completed 2013 fiscal year exceeded estimates adopted by the legislature last March by $13.6 million. In addition, state agencies also demonstrated fiscal restraint, spending $10.6 million less than appropriated.

In total, the state’s financial picture improved by $24.2 million from the March fiscal year 2013 estimates.

The $24.2 million surplus was transferred to the budget reserve account as required by state law.

And, consequently, the state’s two rainy-day accounts now are at a combined record high of $158,952,076.

That total of nearly $159 million is equal to 12.3 percent of state government’s general-fund spending from the 2013 budget.

I suppose we should be happy that our state is apparently flush with cash at a time when many states are struggling financially.

All of that revenue didn’t just suddenly appear out of thin air, however. There are a host of things at work here, including a high reliance by the state on a strongly regressive tax.

Another factor is the ease with which the state Legislature has, for two years in a row now, not only balanced its budget but also had plenty of money left over in its general fund and in reserve funds.

One reason the state’s ledger ends up in the black is the state legislature’s willingness to shift many financial burdens onto citizens’ shoulders in a variety of ways.

An example: For years, now, the Legislature hasn’t adequately funded public education in South Dakota. It has ignored South Dakota law that calls for state aid to education to increase annually by 3 percent or the rate of inflation, which ever is less.

Gov. Mike Rounds, in his last year in office, called for a freeze in state aid, and the Legislature agreed. During Daugaard’s first year as governor, it looked like schools would be hit with a 10 percent cut in funding. One-time monies were found to make that cut approximately 7 percent.

School districts have yet to recover from the double-whammy caused by the recession and state budget cuts.

Officials representing various school districts across the state urged a legislative panel within the Legislature’s Education Funding Formula Study Committee on June 19 to consider recommending a boost in state financial aid to schools, not just changes in the way money is divided among school districts.

School officials reason that they have not recovered from budget cuts made by Daugaard and the Legislature two years ago to help balance the state budget.

Joy Smolnisky of the South Dakota Budget and Policy Project, a nonprofit organization that studies budget issues, said school districts in the state get about the same amount of funding from property taxes as those in surrounding states. However, state funding per student in South Dakota is significantly lower than in surrounding states, she said. The state’s share of school funding was about $3,000 per student in 2011, about half the average state spending in surrounding states, Smolnisky said.

Patrons of a growing number of public school districts across the state, frustrated with the state’s unwillingness to fund public schools adequately, have had to raise needed revenue themselves by opting out of the state property tax freeze.

Of South Dakota’s 151 public school districts, 66 have opted out, raising additional revenue to pay for salaries and other ongoing general fund costs. The Vermillion School District is in the midst of its second five-year opt-out that provides $800,000 annually.

We understand the desire to have a “cushion,” in our state budget. It’s natural to be happy about having a positive balance in our bank accounts, and a wallet that’s has a bit of heft to it.

We can’t help but be concerned, however, that our state wallet is growing fat at the expense of other programs and other citizens in our state. The examples we’ve offered are just in the field of education (by the way, tuition at state universities, including USD, will increase about 4 percent for the 2013-14 school year – another burden the state easily passes on to others).

We can only assume that there are other programs in South Dakota reliant on revenue from Pierre that aren’t funded adequately by the state so they must, at the local level, either cut programs or find other money sources.

In the meantime, South Dakotans, be happy with a $24.2 million surplus in the state budget. Be happy that the state’s reserve funds have reached a record high of nearly $159 million.

Your hard work, your sacrifice, your doing without, your paying more than should be required in local, highly regressive property and sales taxes and fees and tuition have made all of that possible.

Perhaps the state will see fit to dip into those reserves someday, so our efforts at providing more than ample revenue to state coffers will be rewarded with adequate funding of education and other critically important programs.

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