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Tuesday, November 6, 2012

Debunking Two Big Lies about Initiated Measure 15

I voted for Initiated Measure 15, the extra-penny sales tax to fund K-12 education and Medicaid. I'm not deeply enamored with IM15. There are decent arguments against this regressive tax. Whether IM15 passes or not, we will have some serious legislating to do to make our state taxing and spending more just and effective.

But I can recognize bogus arguments made against Initiated Measure 15. Two of the biggest fibs about Initiated Measure 15 are the following:
  1. IM15 is the biggest tax increase in state history.
  2. IM15 dumps much more money into education and Medicaid than has been cut.
The first one is a matter of mathematical interpretation. The dollar figure, $180 million in new revenue, may be correct. But raw dollar figures over time and inflation are bogus. Percentages matter. Jon Walker lists changes in the sales tax in his November 4 article on IM15. We implemented a state sales tax of 2% in 1935 (in the midst of the Depression and the Dust Bowl, no less!). In 1937, we upped it to 3%. Adding that extra penny increased the net sales tax by 50%. In 1969, we added another penny, a 33% increase in the sales tax. In 1980 and 1987, we implemented brief extra-penny increases, each of which was a temporary 25% increase. IM15 proposes to increase the state sales tax from 4% to 5%, a 25% increase. That's a lot of money, but proportionately, it is not the biggest tax increase in South Dakota history.

The second claim above is also untrue, at least in terms of K-12 funding. Jon Walker provides the following numbers on our state per-student allocation for K-12 education:

year
per-student state aid
change
PSA if  increased by 3% 
2006 $4,238
2007 4,365 3.0%
2008 4,529 3.8%
2009 4,665 3.0%
2010 4,805 3.0%
2011 4,805 0.0% 4949.15
2012 4,390 -8.6% 5097.625
2013 4,491 2.3% 5250.553

I added the fourth column to show what would have happened to the state per-student allocation if we had followed the funding formula in 2011, 2012, and 2013 and increased education funding by 3%. We'd be at $5,251 per student. That would be $760 more than we are spending this year per student.

According to this year's sales tax revenue and K-12 enrollment, Initiated Measure 15 would increase state spending on K-12 education by about $720.

In other words, Initiated Measure 15 restores 95% of the funding that schools should have received if Pierre had not reneged on the K-12 funding formula for three years in row. Under IM15, compared to where they would have been under the the fiscal policies preceding 2011, our K-12 system will still be running short $40 per student, or a touch more than $5 million statewide.

IM15 is a big tax increase, but it is not the biggest in South Dakota history. And it does not put back into education more than has been cut. It actually falls just short of filling the gap our legislators have dug in the last three budgets.

7 comments:

  1. Michael Black11/06/2012 8:50 AM

    How many years were state employees denied any raises?

    ReplyDelete
  2. Cory, the state aid is not 100% funded by sales tax, instead a little more than half. The cut was around $50 million. And the increase is not autmatically 3%. It can be lower if inflation is under 3%.

    ReplyDelete
  3. How many years have the minimum wage worker tread the bottom of the trough Michael?

    But, you do have it right,this will guarantee state employee raises.

    Corey, you show how folding for personal gain is not something you are immune to. Disappointing to see you and Kirkeby running in tandem with lies on 15.

    ReplyDelete
  4. I got something to say about it too, Cory.

    http://brianaust.wordpress.com/2012/11/04/why-i-wish-one-im15-opponent-ran-a-porsche-dealership/

    ReplyDelete
  5. No on 15. They can't guarantee the funds will go to education. This money will go the same route as the Video lottery.

    ReplyDelete
  6. Les, I do not fold and I do not lie. I voted for IM15 with reservation. I will not cry hard if it is defeated. The deciding factor for me on IM15 was not personal gain. I do not anticipate any personal gain. Our school may see a personnel gain as we hire back some positions to reinstate programs that have been cut over the last decade, but I'm not banking on a big raise.

    Now indeed, if given the lower inflation rates under Obama, we might have seen less than 3% increases under the formula. But I'm working with the lowest increase seen in the immediately preceding years. If we had kept up with the status quo, 3% would have been a nice minimum. I stand by my math.

    But I'll spot you the actual inflation rates from the last three years: 1.5%, 3.0%, and 2.0%. Had we increased the funding by those factors each year, we'd have a current PSA of $5124, $633 higher than this year's amount. The IM15 that we apply would exceed that amount by 13%.

    ReplyDelete
  7. And Brian: good blog post! Good substantive argument! I hope we hear more from you online.

    ReplyDelete

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