State Revenues Lagging Again, Trending Toward $18.69M Deficit

Governor Dennis Daugaard is sounding the same cautious budgetary tone that he did last year, citing lower-than-expected sales tax revenues to lower expectations for his final budget address at the beginning of December.

In the first four months of this fiscal year, we’ve beaten Legislative revenue projections in two months but underperformed by larger margins in two others:

Bureau of Finance and Management, monthly revenue report, July–Oct 2017, p. 6.
Bureau of Finance and Management, monthly revenue report, July–Oct 2017, p. 6.

The Legislature assumed total revenue would grow 3.2% and sales tax in particular would grow 4.0%. Through the first third of FY2018, total revenue has grown 2.7% and sales tax has grown 2.1%.

Dollarwise, we’re down $8.33 million—1.5%—from where the Legislature thought we’d be. That’s enough to eat the entire $7.9-million surplus that the Governor celebrated in July. Still, we’re in a much better situation than we were at this point last year, when our October deficit alone was $8.71 million and revenue underperformance in all four months of the first third of FY2017 left us $19.94 million in the hole.

Interestingly, state government is working on a surplus, but not at a rate that compensates for lower revenues. Adding up expenditures on personal services and operating expenditures from the general fund, I find we’ve come in under budget so far by $2.10 million. Thus, the current trends would bring us to an end-of-year savings of $6.30 million in expenditures but $24.99 million less than expected in revenues, resulting in a budget deficit of $18.69 million.

So we’re probably still not signing up for Medicaid expansion, right, Dennis?

11 Responses to State Revenues Lagging Again, Trending Toward $18.69M Deficit

  1. John Tsitrian

    Per BEA data, since 2011, Daugaard’s first year in office, through 2016, SD’s per capita GDP growth has been .2% (yep, the decimal is in front of the “2”). During that period the overall per capita GDP growth in the United States has been 6%, which means that South Dakota’s economic growth has underperformed the country’s by a factor of 30. Only
    energy-dependent WY has underperformed SD among our surrounding states.

  2. How much longer before voters here see Republican policy for what it is, a total failure? I guess property taxes will be going up again, not sure how much longer I’ll be able to keep my house.

  3. John, 0.2% growth in SD’s GDP vs 6% nationally over the last 7 years says something has been very wrong with how this state views its economy and its self.

    Though Daugaard is a failure in these regards, consider what Ditzy Kristi’s policies might be like as Governor. I, literally (physically), cringe just at the passing thought alone. I can’t even imagine one good reason she might have – to run for Gov.

    This whole state might actually go straight to hell – if Billie Sutton isn’t elected in 2018. I thank God that the Black Hills compensate for most of this state’s shortcomings – in my life anyways.

  4. John Tsitrian

    Adam, just to make sure, we’re talking per capita GDP, not gross GDP. The former takes into account population growth, making it a more revealing statistic of how individuals have fared in the economy.

  5. Please explain how this is just a Republican failure when Democrat majority states are in the same boat ? Before anyone suggests legalizing marijuana, Colorado a democratically held state with legalized heavily taxed Marijuana is facing a $700 billion shortfall.

  6. I see what you’re saying. It truly is a deeper insight than GDP alone.

    Some parts of the U.S. have seen big influxes of people, which account for much of their state’s growth in gross GDP, and when you adjust for that with a per capita measurement, it really does measure how much growth citizens have individually experienced.

  7. John, holy cow! How can that be? I look at those numbers and see we dropped hard, 2%, in 2012, edged lower the next two years, and only in 2015 and 2016 recovered. Did Daugaard’s FY2012 budget cuts really have that hard of an impact? Have other fiscal policy errors sandbagged us? Or are there deeper commercial, resource, and/or cultural factors that are holding us back from the national per-capita GDP growth rate?

  8. I don’t know what’s sandbagging Colorado’s budget, Robin, but looking at the numbers John provides, I see Colorado’s GDP per capita has been growing faster than the national rate over the last five years.

    Plus, this November 1 AP blip says Gov. Hickenlooper foresees no budget shortfall in the next budget year. This March 17 report says the previous budget faced a deficit because Colorado was coming out of a slow-growth period due largely to low energy prices but that the new growth required larger tax rebates and spending.

  9. John Tsitrian

    Robin, I didn’t call it a Republican failure, all I did was post the information and note how horridly SD has compared to the country as a whole. I use 2011 as a starting year because that’s the year Daugaard came into office. You want to read a political assessment into it, go right ahead. I’m just presenting facts. Also, energy-hammered WY has done worse than SD, but all the other surrounding states have fared considerably better. Cory, my general guess is that SD has been so reliant on grain and livestock as the bedrock of the state’s economy that a weak showing in those sectors pretty much weakens support for the macro-economy. It would take much deeper analysis to confirm that or any conclusions.

  10. Focusing too much on commodities, not enough on… value-added industries? Human capital? Research and development? Arts and entertainment? Is there any specific industry that can pull us out of the ditch, or is it just a matter of diversification?

  11. John Tsitrian

    Same old song. Everything seems to be stymied by the lack of a workforce, so rather than targeting specific industry sectors for growth, investing in human capital is probably the most realistic approach. Might not be a bad idea to remember that “human” is an all-inclusive word.