Is it time for an intervention?

By David Lias

I know last week I blabbed quite a bit about the taxes you and I paid in the last year that has allowed the state of South Dakota to end the fiscal year with not only a $24 million positive general fund balance, but also a record high $159 million in the state’s two “rainy day” or reserve accounts.

David Lias

David Lias

I think it’s human nature, especially here on the plains of South Dakota where we must deal with a great deal of uncertainty from year to year, to prepare for the worst, and be ready for that rainy day.

I’m still waiting to see that “rainy day” hit South Dakota.

It’s not as if fate hasn’t tried to make us think that day has finally arrived.

For over a decade now, we South Dakotans (along with other states) have had to deal with one calamity after the other.

When terrorists attacked our nation in September 2001, I thought our rainy day had arrived.

It sure seemed like storm clouds were brewing when the Great Recession began in 2009.

Parts of our state were literally under water for some time during the massive Missouri River flooding in 2011. Thought for sure that “rainy day” we’ve been saving for had hit then.

Things seemed bleak last year, too, when record high temperatures and a severe drought burned crops in much of the state. Those were certainly bad times that one would think fit the definition of a “rainy day.”

Despite all of those things happening, our state’s reserve funds – the piggy banks that the governor and Legislature like to keep out of reach – contain a near record amount of coin.

The nearly $159 million presently in the state reserve accounts is equal to 12.3 percent of state government’s general-fund spending from the 2013 budget.

Gov. Dennis Daugaard is credited (or blamed, according to your point of view, I guess) for getting South Dakota’s fiscal house in order by with his 10 percent across-the-board cuts in state funding during his first year in office.

His predecessor, Mike Rounds, proved to be tight-fisted, too.

In January 2009, as the nation reeled from the affects of the Wall Street crisis and the severe recession that followed, Rounds requested the Legislature make more than $46 million in spending cuts. He told lawmakers that without those revisions to the state budget for 2009 and 2010, the state would be $133 million short for the next 18 months.

At that time, Rounds proposed cutting the state fair, the food tax refund program, adult Medicaid dental services, the State Children’s Health Insurance Plan (SCHIP), nursing home client cost share, the state Division of Arts, the Archeological Research Center program, the Teachers’ Compensation Assistance Program (TCAP) and the School for the Deaf, which would be taken over by an outside agency.

It certainly felt like South Dakota’s rainy day had finally arrived.

Except for one thing.

Rounds said in 2009 that he did not intend to utilize the state’s budget reserve fund.

Hmm. That’s sort of a head-scratcher.

I’ve attended enough school board and city council meetings to know that the local government budget process can be long and complicated. On the state level, it must be much more difficult. It would be nice, however, for Pierre officials to more fully explain that $159 million in reserves, and whether parts of it will ever be used.

According to the “South Dakota Budget Primer,” compiled by the South Dakota Budget and Policy Project, South Dakota has four “special funds” – namely, the budget reserve fund, the property tax reduction fund, the Dakota Cement Trust Fund and the Health Care Trust Fund.

Recent news reports note that the $159 million in reserves is the total in two rainy day accounts. Which must mean we are socking away extra money in more than just the budget reserve fund.

Plus, the budget reserve fund, according to the primer, “can be no greater than 10 percent of general funds appropriated for the previous year.”

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

So, it would appear that the budget reserve fund has hit its 10 percent limit, and extra funding is being squirreled away somewhere else. It would be nice if state officials in Pierre would more fully explain exactly where our money is.

I would almost go as far as recommending that South Dakota set a cap on its reserve funds. Right now, we appear to have a “make-believe” cap – that 10 percent limit on the budget reserve fund. Which, once hit, means extra money is, apparently, simply funneled into some other reserve fund.

Idaho calls its reserves a “stabilization fund.” By law, it is capped at 5 percent of the state’s general-fund budget. Beyond that point, surpluses stay in the state’s general fund. Where, I would imagine, they are put to good use.

I realize that rainy day funds are a good thing to have built into a state budget. The flexibility such a fund provides can be critical. Caps on such funds may prevent states from building them up to adequate levels.

However, South Dakota has been hit by one “rainy day” after the other in the last decade or so, and our lawmakers and governor appear to be hoarders of state revenue.

Is it time to call for an intervention?


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