Three months ago, Governor Dennis Daugaard said the state revenue outlook wasn’t great. Today, his Bureau of Finance and Management tells us the revenue outlook is worse than the Governor thought—$24.3 million worse:
The big nick is sales tax, coming in $22.9 million lower for this fiscal year than the Governor projected in December and $54.9 million lower than the Legislature projected in its adopted budget last year. BFM projects the state will actually collect 10.56% more sales tax this fiscal year than last, but given that we raised sales tax from 4% to 4.5% to raise teacher pay last year, steady total sales should have produced 12.5% growth in sales tax revenue. From BFM’s figures, we can mathematically deduce that BFM is projecting a net decrease in taxable sales of 1.7%, from $21.52 billion in FY2016 to $21.15 billion in FY2017.
Throw in other revenue wiggles up and down, plus $28.1 million in magic one-time receipts, and the net shortfall for the FY2017 budget revenues as adopted last year compared to these new revenue projections is $22.2 million.
Governor Daugaard has already signaled that falling revenue projections will shelve his $2.5-million plan to turn Spearfish Canyon into a state park. If these revenue projections mean the Governor’s park plan is out (and Senator Jason Frerichs told the Watertown crackerbarrel Saturday that Spearfish Canyon State Park is “dead on arrival“), then Senator Al Novstrup’s plan to raise property taxes $39 million to fund nursing facilities is even deader.
At the Aberdeen crackerbarrel Saturday, Novstrup suggested the tax price tag is down to $11.8 million, but if we’re down twice that amount, Appropriators will defend existing programs from cuts before creating any new state spending lines, even if Republicans approve a tax hike to get new revenue.
Of course, none of this would be a problem if Governor Daugaard, Senator Novstrup, and the rest of the Legislature had expanded Medicaid. Participating in that program would have saved our state budget $85 million, enough to cover the sales tax shortfall, acquire Spearfish Canyon, fund Novstrup’s nursing facility pay hikes, and fund 60% more Democracy Credits than IM 22 originally proposed.