Governor Dennis Daugaard proudly announced another budget surplus last month, this time $14.1 million. He might need it for next year.
According to projections provided by the Legislative Research Council and the Bureau of Finance and Management to the Joint Appropriations Committee at its July meeting, sales tax collections are slowing down and will stay soft for a few months. The Legislature had adopted a sales tax revenue projection of $1.007 billion, $146 million more than the last budget year’s actual $861 million. About $107 million of that increased revenue comes from the half-penny sales tax intended for K-12 teacher pay, property tax relief, and vo-tech teacher pay. LRC and BFM are scaling that projection back by $10.3 million, 1.03% less than expected.
Factor in interim estimates of other revenues—less contractor’s excise tax, telecom tax, and license, permit and fee money; more insurance company tax (though $2 million is designated for stealth vouchers for private schools), mineral severance tax, charges for goods and services, tobacco tax, investment income, and lottery—and LRC and BFM say the state is on track to run $5.7 million short in Fiscal Year 2017. That’s a measly 0.36% in the red, easily covered by FY2016’s surplus. As LRC notes, SDCL 4-8A-16 says that Pierre doesn’t have to hit any fiscal red-alert button to address a shortfall unless the July revenue estimate runs more than 2.5% behind the appropriated budget.
Still, if the state has added a half-penny to its sales tax to add $107 million in revenue, and if it goes from running $14.1 million in the black to $5.7 million in the red, someone is going to ask the appropriators and the Governor where that $19.8 million went. The state had better be ready to point to unexpected economic drag as the culprit and not corruption and other errors in state government.