Finding $75 million to increase pay is $32 million more difficult, according to information presented to the state Council of Economic Advisers yesterday:
Jim Terwilliger told members of the Governor’s Council of Economic Advisers that state sales tax revenue was up 5 percent so far for the 2016 fiscal year that began July 1.
That was better news after a sluggish fiscal 2015 that ended June 30 with sales tax revenue up 2.2 percent.
…Terwilliger said the 2017 budget would have a deficit of $32.6 million if nothing changed from where it stood Wednesday. That won’t be the final proposal the Legislature gets [Bob Mercer, “Is South Dakota in the Slow Lane?” Yankton Press & Dakotan, 2015.10.29].
Terwilliger isn’t saying we’re running a deficit right now; he’s saying that if we want to maintain the levels of funding and service in FY2017 comparable with what we have right now,* we’ll need to find another $32.6 million. That need could torpedo the pre-emptively compromising proposal batted about by the Blue Ribbon K-12 panel yesterday to win support for $110 million in new sales tax by cutting property tax $30 million.
Retired USD econ prof Ralph Brown repeated the sluggish GDP figures that show what we learned this summer: Daugaardonomics has kept South Dakota mired in recession-hangover while other states have grown more.
*Update 22:33 CDT: An observer well-versed in the state budget corrects my reading of Mercer’s brief explanation: Terwilliger’s $32.6 million deficit estimate assumes that the state maintains current levels of service and funds every new anticipated budget request for additional spending. The need may thus not be as dire as the incorrect impression I first drew from the article… which is good news, as that means we won’t be fighting against a deficit and current programs but just other new wants and needs for funding for increased teacher pay.
My, my, my!!! Surprise, surprise, surprise. I’ll bet they are talking about funding education. There is always a shortfall in tax collections when the State Government of SD is talking about funding education. However when they need money to pee down the drain on any of their economic development projects for their cronies and funders, the well is bottomless and filled to the top.
hahahah
One other thing, cut property tax to raise sales tax? A freeze on property tax to the benefit of those with the most property and with the biggest load in property taxes was not enough? Now we need to cut property taxes and put more of the tax burden on the poor and renters. Does this story always have to go this way in SD? Will someone please wake up to the fact that those who have, don’t want to pay their fair share and keep rigging the game so that they can pay less and less? How do you spell GREED?
See Jerry’s comment, yesterday at 8:31 on “Gant Miscounted Cash, Lost iPads, Delayed Blue Book, Misspent Federal Grant Money”
I agree completely. How can economic growth be sluggish, when nearly every business in town has a help wanted sign out? McDonalds and other fast food places are offering 10 bucks an hour to start. I remind you that food sellers are among many businesses that give the state an extra penny of sales tax collection.
It’ll be interesting to see if a trade off on property tax-to-sales tax actually occurs which classes of property will be affected. Dollar to doughnuts there will be no reduction on commercial or rental properties. Ag will get the lion’s share with owner occupied getting the bones.
Makes no difference if rental gets the discount or not. Landlords will continue to raise rent every year, just because they can.
Don, you just hate farmers. ;-)
Important correction! An observer well-versed in the state budget corrects my reading of Mercer’s brief explanation: Terwilliger’s $32.6 million deficit estimate assumes that the state maintains current levels of service and funds every new anticipated budget request for additional spending. The need may thus not be as dire as the incorrect impression I first drew from the article… which is good news, as that means we won’t be fighting against a deficit and current programs but just other new wants and needs for funding for increased teacher pay.
I’ve added this correction to the main blog post as well.
@Lanny: I suppose if you want to guarantee that domicile renters receive their tax cut that the State could reimburse the cut à la Minnesota. However that increases the economic deadweight loss that comes about from the inefficiencies of the rebate. Comme ci, comme ça
Don, I absolutely don’t want a rebate, since the owner of the property gets no tax cut. What I don’t want is a freeze on property taxes, because that is the main source of funding for schools and counties. The only way for those two entities to raise their needed funding, is to opt out of the freeze and that can be put to a vote of the electorate, or to float a bond. The bond for a school district requires a vote of 60% whereas, a municipality bond issue for say an events center or an indoor aquatic center requires a vote of 50% plus 1 vote.
By the State freezing property taxes and continually trying to raise sales taxes, the State is taking away from the school districts and counties, and without paying the commensurate increases of cost that those two entities face, putting them in the situation we see now, because neither the school district or the counties can put on a sales tax. So all the increase goes to the State.
So renters pay a larger share of the increase, each time that they make a purchase. Every state that borders us taxes autos at 5% or more, SD is 3%. There is no tax on advertising in SD. There is no tax on buying and selling stocks, bonds, commodities. But we tax food in the grocery store at 6%, while few states have a tax on food and clothes.
I just don’t want the funding of government all put on the sales tax.
Amen Larry, however, can SD lawmakers understand. Smart money says “are you kidding?”. Remember who is funding their campaigns.
huh?
I am certainly no economist Cory…it would seem to me that a miniscule sales tax (regressive I know) on services provided by medical providers…physician services, hospitals, etc. of even 1% would more than cover the amount needed to cover the increased cost for teachers pay…and provide extra dollars for other services…ie. Medicaid Expansion. Of course vice taxes, such as increasing the tax on tobacco by a nickel a pack, a nickel a six-pack of beer or bottle of liquor or wine could help accommodate this goal also…you get my drift.
A sales tax is regressive by nature of course…but is it any different than how real estate taxes are guesstimated on actual value or how much we pay per wheel for our vehicles…and may be the lesser or all evils (an income tax isn’t going to happen..nor is a corporate type tax). An increase in a vice tax is the price to pay for a voluntary habit…a 1% medical sales tax would be built into everyone’s health insurance premiums including the federal government and virtually invisible to the 25-40% increases we will see on premiums this year. Overall, a pretty minimal impact over the population as a whole. And then if we increase the lodging sales tax like other state’s do to our citizens when we travel..(after all, who travels to our state but people from out of state)…which we pay in their state.
It seems to me there are many opportunities to ‘regressively’ tax people fairly…other than us directly…assuming that an income tax is off the books!
I, like others I talk to am so embarrassed that South Dakota is satisfied being in the lowest tier of almost every benchmark, but especially in the investment we make in education. Doesn’t anyone else feel embarrassed?
Oh sure I feel embarrassed about that, BOHICA, but I also feel embarrassed that you suggest another regressive sales tax, and this time on healthcare. TAKE THE FREEZE OFF PROPERTY TAXES to fund school districts and counties and then make sure that the legislature spend the dollars that they have already collected for education but keep peeing down every rathole that they can find.