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Tuesday, December 8, 2009

Live-Blogging Governor Rounds FY2010 Budget Address

Live notes (in case you don't have SDPB handy) on the governor's budget address! Hit Refresh for updates!

[Update 2009.12.13: Go straight to the horse's mouth: see the budget proposal in its full glory on the state website!)

Governor Mike Rounds calls it a "basic-needs budget" with an "emphasis on taking care of people."

FY2009 required stimulus to balance, allowing us to avoid touching one penny of our reserves so far. $105 million in stimulus used.

FY2010, right now, expenses total $1.2335 billion, 0.1% growth over FY 2009 expense levels. $1.1163B + $104M stimulus... still a shortfall of $15.8 million for the rest of FY2010: Rounds proposes using one-time cash instead of reserves, allowing us to finish FY2010 without touching reserves.

Revenues have declined by 3.2%, or $37.1 million, compared to 2009, while expenses have remained level.

FY2011: Rounds proposes expenses $1.2529B, a 1.6% increase over FY2010. Balanced with $70.5 million in stimulus, $31.8 million shortfall. Revenues expected to increase $3.1 million over FY 2010.

Looking ahead to FY2012, for the folks who get elected, the Rounds proposal leaves the state facing a FY2012 shortfall of $107 million. That assumes zero federal stimulus and zero increases in expenditures, zero inflationary increases. Rounds says "that has to drive what we do this year."

Rounds is assuming economic recovery taking hold and bringing increases in sales and use tax, excise tax, insurance tax, and trust fund returns. He does see lower video lottery returns meaning less money for the property tax reduction fund.

The big expense increase for FY2011 is in medical assistance. Rounds is actually proposing modest cuts in state government.

In FY2010, the state has reduced budgeted expenditures by $1.9 million to offset a little of this year's shortfall, but the $17.6M reduction in revenues means we need one-time cash transfers from the Large Project Refund Account, the Tax Relief fund, the Aeronautics fund, the budgetary accounting fund, and a Custer State Park obligation to pay back some interest (that is about $60K more). The Property Tax Reduction Funds and Budget Reserve Balance funds—the "rainy day" funds—remain untouched. Rounds emphasizes that we are riding out the recession and leaving our reserves intact.

FY2010: the top five revenue sources have all dropped more than forecast back in March, including $11.7 million less from sales taxes. We have seen $5.8 million more than forecast from interest earnings, plus $2.1 million more from the Department of Corrections for a cancelled check on a land purchase in Rapid City that we didn't make.

Rounds projects general fund revenues will increase in FY2011, including $20.7 million more in sales tax. The trust fund transfers are projected to add another $17.7 million. Interest earnings and video lottery receipts are still projected to go down. Rounds proposes that we can recoup another $3.5 million by changing the Large Project Refund program. He also proposes repealing a refund on cigarette stamps. Both actions require legislative approval.

Unemployment has essentially doubled since the national recession began in December 2007, from 11,000 to 22,000. 5% unemployment is the highest SD rate since 1985. Over the same time period, the number of folks eligible for Medicaid, folks who have applied and been accepted, has grown from 102K to 110K (including 500-some folks added just last month). This growth over the last ten months outpaces the growth of the previous four years. 68% of the folks on Medicaid are kids, 11% are disabled adults, folks who "have no place else to go for their health care needs."

Rounds notes these two figures put us in a double bind: fewer people working, less money available to spend, less revenue to support state programs just when we see increased state expenses. This is not an easy problem to solve.

[13:28 CST] Rounds emphasizes that the deficit is not caused "by our spending being out of control." He emphasizes that expenditures from FY2009 to FY2011 are going up less than 1% a year. It's the recession, the decreases in revenues, and the increases in folks needing assistance that are responsible for the structural deficit. Since 2008, revenue has gone up just $2.2M, while expenses for taking care of people have gone up $64M. Add education, and costs have increased $103.1 million. (I didn't catch whether he made eye contact with Dave Knudson or Scott Heidepriem on those lines.)

[13:31] Rounds now turns to spending increases throughout his administration: "taking care of people" has increased by 193M; education by $131 for education; $43M for "protecting people"; the other increases (bureaucracy, gov's office, etc.) up just $10 million over the eight-year period.

Rounds notes that $56.3 million of the increases in the FY2011 budget are mandatory: more people receiving government medical services alone is $24.5 million of the increases. There's another $20.2 million of expiring stimulus funding for the last couple quarters of the fiscal year that we need to pick up. Increases in South Dakota income that have outpaced national rates mean South Dakota has to pay another $7.5 million for its "FMAP state share," funding that supports Medicare (if I heard that right). We also must appropriate $2 million more to support Opportunity Scholarship funds for 3294 eligible students (and Rounds says paying that money is a good thing).

Governor Rounds is asking for a $1 million budget increase to establish South Dakota's first Ph.D in physics, a shared program among SDSU, USD, and Mines. With the Homestake lab getting going, Rounds says we can't be sending our physics grad students elsewhere when we have a great opportunity like this coming our way. Rounds sees this Ph.D. program as "a long term investment in our future" that will have a lasting effect on our economy.

Among big cuts, Rounds proposed freezing State Aid levies to save $4.1 million, instead of offering property tax payers another cut in their rates. Overall, we're cutting under $5 million.

No increase for state aid to education, no raises for state employees (second year in a row—time for me to go into building wind turbines!), no increases for health care providers receiving state payments.

[13:45] Summary of major spending changes:
  • Education: down $3.4 million
  • "TCoP": up $58.4 million
  • Protecting people: up $542K (and Rounds praises the chief justice for volunteering to go back and cut his budget request further)
  • Rest of gov't: down $573K
More details on education funding:
  • tech schools are getting $2.7M more, due to increased enrollment
  • consolidation and sparsity are causing a $2.6 increase
  • health insurance goes up 6.3%, $729K
  • state aid to K-12 goes down $3.8 M
  • state aid to special ed goes down $4.1M (now compare this to the $1 million increase to create the physics Ph.D. I like the Ph.D. Rounds is right that it's an investment... but can we justifiably reduce our investment in earlier ed at the same time? Rounds will emphasize that "reduce" is relative: the negative sign on the budget line comes from not increasing the state aid)
We are saving $520K thanks to declining natural gas rates and thus lower utility bills for heating our state facilities. Utility reductions across the board are reeducing FY2010 expenditures by $1.6M.

[13:55] Rounds notes that the bureaucracy consumes only 4 cents of every tax dollar, down from 5 cents on the dollar last year. Rounds is recommending a reduction of 102 full-time equivalents, the second consecutive year of recommended FTE reductions. Rounds notes that most of the cuts over the past year have been done through attrition. So the boss isn't coming with the ax, but he's also not taking apps for new workers.

[13:58] Birth to 3 is safe for now: Rounds says we're keeping it alive with stimulus funds. There's something else he's leaving for his successor to figure out in 2012.

[14:01] Gov. Rounds turns to the Sanford Lab. He mentions the $35 million the Legislature allocated for the Sanford Lab back in 2004 and 2005. The National Science Foundation has pumped $21M into the Sanford lab over the last three years; another $250M is anticipated. More workers and more experiments are coming. Rounds says we are going to be out of money for the lab next December; NSF funding won't kick in until May 2011; Rounds is asking the Legislature to set aside $5 million in one-time funds to bridge that gap and sustain the work of pumping out the water and keeping the lab open. He notes that the Legislature had the foresight to invest in the most lucrative "hole in the ground" in the state a few years ago and urges them to keep the project going with this one-time investment.

[14:07] The big numbers:
  • General Fund: $1.182B
  • Federal Funds: $1.9B
  • [whoops! missed a line!]
  • Total Budget: $4B
(Hey! There's Russ Olson, sitting in the back!)

Rounds says that 49% of the budget goes to education, 36% for TCoP, 11% for protecting the public, and 4% for all the rest, including the bureaucracy. If you want more cuts, those are the parameters within which you must operate.

Rounds wraps up: no increased tax rates, he says. Then Rounds starts handing out the candy, ending with appeal to patriotism, noting the men and women of the armed services who are fighting for our freedom, calling on vets to stand and take some applause, then Dilges and his budget office (hm... that applause didn't sound nearly as rousing)... and then off we go to keep making South Dakota even better.


  1. This is sad for everyone. Our state’s economy is dragging along as the nation moves ahead recovering from the severe recession, which economic experts agree started in December 2007.

    Here we are, two years later, still struggling to recover.
    For a state like South Dakota, there is no magic solution. The only way out is to carefully budget state and local government expenses and to GROW OUR ECONOMY. The latter point is the pro-active part of the solution because it’s how we generate new revenues and new wealth.

    Fortunately, South Dakota stands to gain perhaps more than any other state, between the East Coast and West Coast states, from America’s transition to a clean energy economy. Conservatively, studies show South Dakota would gain at least 5,000 new clean energy jobs that can’t be outsourced.

    Additionally, we have the potential for massive growth in our economy due to a rapid expansion of wind energy in South Dakota. Right now, we generate a tiny fraction of our state’s potential. Without sufficient transmission capacity outside South Dakota, our wind energy development potential will be reached inside a few years.

    If transmission lines become available, funding for which is addressed in the Clean Energy Jobs & American Power Act, we will be in a position to lead the nation in wind energy generation. That’s because South Dakota has the fourth greatest wind capacity and because of South Dakota’s economic climate and solid work ethic, which has proven to attract investments.

    Growing South Dakota economy has been a passion for me for many years. I remember when Larry Pressler and Tom Daschle preached the gospel of gasohol, inviting armies of negative people who said it would never amount to anything. Negative thinking is never going to grow our state. Renewable energy remains South Dakota’s strongest suit for building a robust state economy. The Clean Energy Jobs bill is being introduced as a comprehensive and aggressive response to a global crisis, but for South Dakota it stands as a win-win proposition.

  2. Steve Sibson12/08/2009 8:26 PM


    This is from Dr. William Gray, Emeritus Professor of Atmospheric Science at CSU and heads the school's Department of Atmospheric Sciences Tropical Meteorology Project:

    "The Cap-and-Trade bill presently before Congress, the likely climate agreements coming out of the Copenhagen Conference, and the EPA's just announced decision to treat CO2 as a pollutant represents a grave threat to the industrial world's continued economic development," Gray warned. "We should not allow these proposals to restrict our economic growth. Any United Nations climate bill our country might sign would act as an infringement on our country's sovereignty."

    Note the "restrict our economic growth part". Is Al Gore's money really worth misleading the people of South Dakota for?

  3. Steve Sibson12/08/2009 8:31 PM


    Al GOre is funding Repower America, Here is the truth about his work:

    "Mr. Gore's movie, asserting a 'consensus' and 'settled science' in agreement about human-caused global warming, conveyed the claims about human-caused global warming to ordinary moviegoers and to public-school children, to whom the film was widely distributed. Unfortunately, Mr. Gore's movie contains many very serious incorrect claims which no informed, honest scientist could endorse," project spokesman and founder Art Robinson has told WND.

    Robinson, a research professor of chemistry, cofounded the Linus Pauling Institute of Science and Medicine with Linus Pauling in 1973, and later cofounded the Oregon Institute of Science and Medicine.

  4. Rick, I have heard that claim of 5000 new jobs from Repower et al. I'd like them to be a little more specific. I can claim that I will create 500 new jobs if the state will just buy all the Stip land and let me farm it rent free, giving up their right of sovereignty over it to me, something like what all this Copenhagen BS would do. Would you believe me? WHy should I believe you? Especially now that Gore et al have been proven to be liars out to make a buck off the rest of us.

  5. "I have heard that claim..." I appreciate your skepticism, Linda. Permit me to answer your challenge to be a bit more specific without citing Al Gore (although your "et al." is a pretty sweeping generalization that I may have troubling avoiding):

    You can find the support for the 5000 jobs claim from Matt McGovern of Repower America and Reynold Nesiba of Augustana College in this Huron Plainsman article. And as I noted in my ACESA series, "dollar-for-dollar, investment in clean energy will produce lots more jobs—like two to three times more jobs—than investment in fossil fuels." Both pieces of information come from a U. Mass.-Amherst PERI study from June of this year.

    Not everyone who provides evidence on this issue can be liars... can they?


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