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Saturday, January 24, 2009

South Dakota Budget: Why Cut Anything?

As I review the various cuts Governor Rounds has proposed, I am reminded that, for all the anti-government rhetoric we like to engage in, the state of South Dakota runs a pretty tight ship. When we come up $58.7 million (this year) or $$83.8 million (next year) short, we don't have a lot of fat in the budget to cut. The state does a lot of good on a lean tax structure (and a lean tax base from our low wages).

So I'm wondering: why cut at all? Instead of all the doom and gloom from Pierre, why not take the fiscal stimulus route that Washington plans and plow right through this recession at full strength?

But we don't have the money, says Governor Rounds.

Yes we do. $698 million in the state trust funds [see November 2008 report]. Crack those funds open, and we could cover every cut the governor has proposed, this year and next, put no state employee out of work or increase taxes on any South Dakotan during a recession.

I think I've heard Governor Rounds say this year's state revenue situation is the worst he's ever seen. Doesn't that mean we have just the rainy day our trust funds have been waiting for?

Don't play Herbert Hoover, South Dakota. Face the recession boldly. Stand out among other states by saying "Yes We Can!" preserve state services.

26 comments:

  1. But what about the big blizzards that are to come ? and the forrest fires ? how are you going to pay for dealing with this crises ?

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  2. Sure we need a backup rainy day fund, but if you never use it there is no point.

    Blizzards and fires a) don't required 700 million in the bank and b) cross state boundaries.... the Feds always help.

    My take: the reason the state likes to sit on such a fat rainy day fund is so the Governor's office doesn't have to make hard choices for themselves. The Executive also controls access to information about these funds... it's their own private kitty that the Legislature frankly doesn't have any say over. This non-separation of powers needs to end, and the current looming state budget defecit is a great time to take that wall down.

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  3. Using more reserves is a thought in the right direction, since the governor's flawed budget cuts services without increasing efficiencies. His budget merely transfers many costs to local governments and non-profits. The governor said his proposal is "optimistic" and also plans for > $30 million deficit going into FY 2012. Economists are saying the economy is getting far worse than their timid forecasts: http://www.washingtonpost.com/wp-dyn/content/article/2009/01/23/AR2009012304172.html . The governor's budget won't survive January's economic drops.

    Regardless of further tapping reserves, this is a lifetime opportunity to repair structural defects in providing government services at lower cost. Opportunities abound:
    -unicameral legislature (hey it's part time, works in NE, will save millions);
    -improve higher ed delivery through state campus system;
    -consolidate horse-n-buggy era counties (cut the number of east river counties by at least two-thirds);
    -consolidate school districts to no more than one per county with low population counties sharing;
    -no more four lane roads, exits, and bridges to no where or towns losing population;
    -increase state / county retirement eligible age to life expectancy (as when social security was enacted);
    -cancel Class A retirement putting all on Class B;
    -ban double-dipping (state / county worker receives one check per period-either retirement or work -- never both, and extend to cover pseudo-contract work);
    -ban no-bid contracts save for small amounts & times (weeks) where bid processes exceeds savings;
    -put high school extracurricular activities into clubs so there will be plenty of money for EDUCATION.

    Adopting just a few of these will provide tremendous savings now and in the future and will improve efficiency of service delivery.

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  4. The governor's count of his shortages is:
    -FY 2009 ~$ 52 million;
    -FY 2010 ~$ 82 million;
    -FY 2011 ~$ 31 million;
    That's nearly $170 million, and will probably exceed it when realistic numbers and not his "optimistic" numbers are used.

    This puts the surplus in perspective.

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  5. Anon 1:20. Great ideas!

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  6. I agree with Cory's original post. I don't know who Anonymous 1:20 is, but I hope you are talking to your legislators! Maybe you should both drop a quiet note to the Governor, he doesn't seem to be getting very good advice.

    Note to his high paid communications team: less is more, particularly when you have a voice like Rounds and the subject is as dry as saw dust.

    Note to bloggers: has Rounds ever given a speech where he didn't gratuitously invoke the brave service of our military/national guard men and women to get applause?

    I have to admit, I didn't/couldn't listen to the second budget address.

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  7. Penny Pincher1/24/2009 3:59 PM

    If we have that much money stashed away, and supposedly it's going to take a couple of years to turn things around, then why don't we tap those reserves for this very reason? Rounds himself said this is just as bad or worse than the Great Depression. If he isn't going to use that money in this type of emergency, then what do we have the money for? To brag that we have it? Or is it that Rounds doesn't want to be the one to start using it for fear that he would be blamed for using it improperly???

    Does't make sense to me.

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  8. I agree lets use some of that reserve. According to one of my legislators the state has 6 airplanes, and other states in the area have 1 or 2, or none. We do have to remember that our insurance salesman governor is also a pilot who loves airplanes.

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  9. penny pincher1/24/2009 8:39 PM

    Rounds is going to do what is best for him and no one else. That is what he has done in the past and continues to do. If a recession that is worse than the "Great Depression" isn't emergency enough, I don't know what is.

    Would Gov. Rounds please explain what the reserves are to be used for again?

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  10. why couldn't people realize how worthless old M. Mike was 2 years ago.

    He should have to explain why the government can horde that much of our money anyway.

    Funding should not even be an issue in my eyes, the government has our money and they have a responsibility to fund programs that we have determined essential.

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  11. It's a rainy day, all right. I suspect, however, that Gov. Rounds is trying to hold off using the reserves for as long as he can, just in case the rainstorm turns into a hurricane.

    My dad grew up in the Great Depression. He used to tell us kids stories about it at suppertime in the 1960s when we all actually ate at the same table at the same time. This situation is nowhere near that bad, at least not yet. If Gov. Rounds really said that this situation is as bad as the Great Depression, I think he's wrong.

    I'm getting a little tired of the constant gloom and doom talk, the "circling of the wagons," the fear-mongering. I think all of this negativity is turning into a self-fulfilling prophecy. But the media folks just keep on and on with the chatter. What's the deal? Are they willing to starve to death just for the opportunity to stand on their little boxes and tell us all "I told you so"?

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  12. Pretty busy comment board for a weekend! This budget really has people's attention... now if we can just get our legislators to pay attention to your ideas!

    Anon 1:20, I can find particular points to disagree with (like school consolidation), but I'm impressed with the heavy thinking and detail of your list. Keep it up!

    Stan, if this rainy day turns to a hurricane big enough to blow away the whole $700 million in trust funds, then we're going to have bigger problems than our state balance sheet. If the water is at flood stage, we should start sandbagging now, rather than waiting for the water to reach 10 feet above flood stage. Let's spend that money and maintain services.

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  13. Still, you have to appreciate that while we are facing some tough times, our state government is showing some fiscal restraint and not following the examples of Minnesota, New York, and California (i.e. Deficit Spending).

    It's nice to know SOME government entities know how to live on a budget!

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  14. Sadly I can't agree with Stan. Bank of America and Citibank are on the brink. Bank stocks have dropped something like 78%, right in line with the 29 crash, although with the 29 crash they went down some more and stayed flat for many years (there's an interesting graph on CNBC). The media is not causing that. The major difference we don't have a dust bowl, but we also have vastly fewer farmers and so much of our manufacturing is gone. Last week a farmer told me during the depression they fixed a car tire by filling it with flax seed until they could afford a used tire later that year. We ain't there by any means, but we have yet an unknown number of bad mortgages, and every house and lost job causes more ripple effect. Hopefully BofA won't fail, but it's essentially dead without government help. Positive thinking is fine, but you also have to take a real look at things. jh

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  15. Governor Rounds criticizes and publicly degrades school districts who carry a reserve fund balance of 8% or greater, yet his executive branch can carry almost $700 Million in reserves, over 35% fund balance, and we're not supposed to question that.

    Why is gubernatorial hopeful, Sen. Dave Knudson, calling for removal of the 3% per pupil K-12 increase mandated by state law, simply because state employees may not get a pay raise this year?

    There's no comparison, and the 3% per-pupil school funding increase is required by law. Who do you think deserves more pay, the $30,000 teacher or the Governor's $100,000 spokesman?

    Sen. Dave Knudson will never become governor in this state.

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  16. The state of Colorado had a law that only so much money could be held in surplus. We got checks backs more than once because they collected too much in state income tax. Everybody is hoarding cash right now, but our own state? For what should be necessary services?

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  17. Cory: Anon@1:20 didn't advocate school consolidation; it was school district consolidation. The big difference is in savings of top-heavy management & administration; and can have little impact on class room delivery.

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  18. I stand well-corrected: that is an important difference! If you can consolidate districts and still keep the teachers and the classrooms so kids can go to school where they live, then let's talk!

    Now, do you plan to mandate that from Pierre? And do you expect a quiet, gentle transition as we fire Vince Schaefer and Sharon Knowlton and put Dr. Fahrenwald in charge of the new Lake County School District?

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  19. I do have to agree with the school district consolidation. Do we really have to have a superintendent and business manger at Madison, Chester, Oldham-Ramona, Rutland, Howard, and Colman-Egan? Sioux Falls has 3 High Schools, 5 Middle Schools, and 23 Elementary Schools all under one superintendent. Couldn't we do the same?

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  20. Cory:

    The amount you pay a teacher does not correlate to the quality of the education a student receives. Paying them well does keep those good teachers in education. It would not surprise me that the state would lower the boom on education since it is one of the biggest line items.

    Just shutting the doors on smaller districts is not going to save the state very much money.

    Of course we could save a great deal if we gave up all local control and let the state dictate everything. We could get to the point where all kids could be taught at home by one teacher per subject through their computer. Maybe we could get rid of the teacher entirely and just let a software package take care of it.

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  21. Why not spend all the reserves right now? We could keep all the programs now in place. We could give raises like in past years. And then two years down the road when the state is completely out of money, what do you do? Well, the Dems would just say raise taxes, institute income tax, etc. Sorry, I don't go down that road.

    The gov't is too big, federal and state. Get rid of the excess. Trim from every agency. Justify every dollar spent. Have an impartial panel of people pass on necessary expenses and sorry, but the rest are gone.

    Fans of big gov't want it to continue to grow, provide more services, and think there is a never-ending well of money. People who believe in less gov't and more personal responsibility know there is a limit to money and that we have to learn to live within our means.

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  22. Anon 6:32...yeah the way to balance the budget is too attack the poor, the young and the disabled. Where do I sign up for that belief system. We are already one of the poorest states in the union and now we are going to take more away from our young poor and disabled. Wow, wonder why are states population is stagnet and why our youth that are educated leave.

    If we have to balance our budget on the backs of these people then we need to take a long hard look at our society and our beliefs in South Dakota. Especially if we have 600million in reserves.

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  23. But at the same time, Clueless... we also have to show fiscal responsibility or we risk becoming another Minnesota, New Jersey, or California with out of control tax burdens.

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  24. Jackrabit1,

    I couldn't say it better. Why do you suppose Massachusetts and California were the first states to ask for "bailout" money?

    Clueless,

    If I were a new college grad, I'd want to get out of here. Not because of economics, but because of the ferocious weather and the lack of cultural diversity.

    Stan,

    Why the heck are you here, then?

    --> Low crime, low cost of living, great place for entrepreneurs, decent people -- and low taxes, by Jove.

    :-)

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  25. Kearin is right. Although Sioux Falls has one Superintendent for a host of schools, she also has several assistants and principals in each building, who also have assistants, so she is not as exposed as our local sups. There's no reason Lake County couldn't have one superintendent for four districts. After all, there's a superintendent shortage and this would help solve that problem. Consolidating county seats would also work. Your biggest obstacle? Ego and Local Pride. Same reason districts like Rutland are still open.

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  26. My point exactly. Higher taxes do not equate with fiscal sense, balanced budgets, providing services, etc. Look at CA and all the states begging the broke feds for bailout money. It's ridiculous. We have finally reached the point where we have to face reality. There is only so much money available, and we have to start realizing that the gov't can't be all to all. The trouble is that with O's election, gov't is only going to grow and people are only going to become more dependent on it, translating into more future votes for Dem's and higher taxes for the rest of us.

    I remember asking my better half about the FICA guarantee of our bank deposits etc in case the gov't completely collapsed. He assured me that would never happen, but I don't think we can honestly believe that anymore.

    And don't blame it on Bush. It's the result of politics on both sides, greed, Acorn demanding that people be able to buy homes even when they couldn't afford it, lack of regulation, now even lack of oversight in the gov't "stimulus" packages, and the lack of faith in gov't ethics (i.e. Blago, Geithner, etc) who blatantly ignore laws but get a pass. What if I don't pay my taxes? Can I just apologize IF caught? I don't think so, but Geithner did. So much for new ethics under the great O.

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