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Budget Notes: Uncle Sam #1 Again in SD Budget

South Dakota to Spend 0.73% Less in FY2018… and Some Education Funding Notes!

Senator Stace Nelson is already cranky about the state budget. This fun fact won’t help: the single largest source of funds in South Dakota’s Fiscal Year 2018 budget is the federal government.

Daugaard proposal Daugaard % Approved budget Approved %
General $1,614,490,787 35.09% $1,585,113,625 34.84%
Federal $1,640,077,610 35.65% $1,630,562,445 35.84%
Other $1,345,957,178 29.26% $1,333,796,323 29.32%
Total $4,600,525,575 100.00% $4,549,472,393 100.00%

Assuming Donald Trump doesn’t throw us into default, the federal government will provide just about 36 cents of every dollar South Dakota state government spends. Our sales tax, property tax, bank income tax, and other taxes will provide just about 35 cents; our fees collected by state government kick in the remaining 29 cents.

Over seven budgets, Governor Daugaard and the Legislature have made some progress in reducing our dependence on federal funding. Daugaard got 41.65% of his first budget from Uncle Sam, while supplying only 31.84% of the budget from state general funds. Daugaard decreased the federal share and increased the state share to the point that, in his FY2015 and FY2016 budgets, the general fund was larger than federal funding. Federal funding jumped back into the lead in the current budget and holds that lead in FY2018:

General Federal Other Total
FY2011 $1,145,136,264 $1,678,698,764 $920,260,624 $3,744,095,652
FY2012 $1,146,794,851 $1,499,882,570 $954,585,373 $3,601,262,794
FY2013 $1,221,722,313 $1,452,121,871 $1,018,744,079 $3,692,588,263
FY2014 $1,285,901,715 $1,396,106,343 $1,039,767,205 $3,721,775,263
FY2015 $1,360,860,291 $1,347,807,566 $1,142,967,124 $3,851,634,981
FY2016 $1,406,363,358 $1,365,281,645 $1,221,694,108 $3,993,339,111
FY2017 $1,554,021,368 $1,651,067,371 $1,377,780,256 $4,582,868,995
FY2018 $1,585,113,625 $1,630,562,445 $1,333,796,323 $4,549,472,393
 each fund as percentage of total state budget
General Federal Other Total
FY2011 30.59% 44.84% 24.58% 100.00%
FY2012 31.84% 41.65% 26.51% 100.00%
FY2013 33.09% 39.33% 27.59% 100.00%
FY2014 34.55% 37.51% 27.94% 100.00%
FY2015 35.33% 34.99% 29.67% 100.00%
FY2016 35.22% 34.19% 30.59% 100.00%
FY2017 33.91% 36.03% 30.06% 100.00%
FY2018 34.84% 35.84% 29.32% 100.00%

My FY2017 includes the $37.6 million net cut in the current budget imposed by Senate Bill 32. The FY2018 budget actually spends $33.4 million less than that reduced FY2017 figure, a 0.73% cut, thanks to decreases in federal and other dollars outweighing the increase in general fund dollars. Let’s hope that 0.73% decrease gives Senator Nelson and his fellow smaller-government advocates some solace.

*     *     *

Looking strictly at general funds, we can see that the FY2018 budget is the first time that Governor Daugaard will invest a larger share of the state’s general funds in K-12 education than his predecessor did in his last term:

General K-12 State Aid K-12 as percentage of general fund
FY2011 $1,145,136,264 $376,588,656 32.89%
FY2012 $1,146,794,851 $335,465,599 29.25%
FY2013 $1,221,722,313 $371,944,344 30.44%
FY2014 $1,285,901,715 $388,886,137 30.24%
FY2015 $1,360,860,291 $391,438,343 28.76%
FY2016 $1,406,363,358 $410,926,937 29.22%
FY2017 $1,554,021,368 $506,987,694 32.62%
FY2018 $1,585,113,625 $529,082,470 33.38%

Even in the current budget, flush with the Blue Ribbon sales tax boost for teacher pay, South Dakota is spending a smaller percentage of its general fund on K-12 education that it did in the 2011–2012 school year.

Six years ago, Governor Daugaard whacked K-12 education with a 10.92% cut in state aid in his first budget, the FY2012 correction of the Rounds deficit. The overall FY2012 budget slashed federal funding but increased general and other funds. As we can see in the table below, general fund spending rose 0.14% in the FY2012 austerity budget. State aid to K-12 education thus seems to have borne a disproportionate amount of that year’s austerity.

Change in general fund over previous year Change in K-12 state aid over previous year
FY2012 0.14% –10.92%
FY2013 6.53% 10.87%
FY2014 5.25% 4.55%
FY2015 5.83% 0.66%
FY2016 3.34% 4.98%
FY2017 10.50% 23.38%
FY2018 2.00% 4.36%
annualized rate of increase since FY2011 4.64% 4.86%

Since then, Governor Daugaard and the Legislature have helped K-12 make up for that lost ground. They have increased K-12 spending at higher rates than the state general fund increases in four out of six budgets, including the FY2018 budget. All together, the seven Daugaard budgets have increased state aid to K-12 education at an annual rate of 4.86% while increasing total state general fund expenditures at an annual rate of 4.64%.


  1. grudznick 2017-03-15 22:44

    You seem to have done a lot of math there, Mr. H, and if we all take it as accurate and I don’t know why we would not because it is just math and you are a former math teacher, what does it mean?

    Mr. Sibby has done an actual analysis of this sort of math. Which way are we headed, and why? Is the budget the same as the real spending? Are the legislatures spending where the budget is pointing them? How does this affect real South Dakotans, people who really live in our great state.

    It is a neat start you have there, but Sibby and I will analyze further.

  2. Wayne B. 2017-03-16 09:57

    Aside from the tired argument about self reliance, the information presented doesn’t tell us anything.

    The interesting questions are:
    1) where is that federal money going & why?
    2) how do we compare against other states & why?

    Of the $1.6 Billion in federal funding, this is where it’s going:
    $9.5 mm – GOED
    $2 mm – Housing Development Authority
    $0.3 mm – Bureau of Finance
    $0.5 mm – Statewide Maintenance & Repair
    $0.4 mm – SD Public Broadcasting
    $0.2 mm – State Radio Engineering
    $0.3 mm – Dept of Revenue – Motor Vehicle Operating Expenses
    $7 mm – Dept of Agriculture
    $0.9 mm – Dept of Tourism
    $25.8 mm – Dept of GF&P ($7.3 mm for state parks rec & improvement)
    $675 mm – Department of Social Services (economic assistance, medical services, children’s services, behavioral health, administration)
    $41.8 mm – Department of Health (smoking cessation, health systems regulation, family/community health, lab services, administration)
    $30.5 mm – Dept of Labor ($6.8 mm unemployment insurance, $11.8 mm is “field operations”)
    $388.5 mm – Dept of Transportation ($347 mm is construction)
    $186.3 mm – Dept of Education
    $17.4 mm – Dept of Public Safety (EMS, Highway Patrol, Legal & Regulatory Services)
    $83.6 mm – Board of Regents
    $20.7 mm – Military
    $3.2 mm – Veterans Affairs
    $6.6 mm – Dept of Corrections
    $115.1 mm – Dept of Human Services (SD Dev. Center in Redfield, rehab services, disabilities assistance)
    $8.3 mm – Dept of Environment & Natural Resources
    $0.3 mm – Public Utilities Commission
    $0.8 mm – Unified Judicial System
    $4 mm – Office of Attorney General
    $1.3 mm – Secretary of State

    Long list. Without a more detailed budget, I’m not willing to say “wow, there’s something there which doesn’t belong” or declare that percentage of our budget as too large.

  3. Cory Allen Heidelberger Post author | 2017-03-16 10:52

    “Mr. Sibby… actual analysis”—ho ho ho! hee hee hee!

  4. Cory Allen Heidelberger Post author | 2017-03-16 10:58

    Wayne, did you make that list yourself? That’s good work!

    True, there are all sorts of discussions to be had about the value of each federal investment in each South Dakota program. Obviously, whatever discussions our Appropriators had about those investments determined that each one of them was important enough to keep in the budget.

    But I don’t think the point about dependence on the federal government is “tired.” It takes on added importance in light of the Trump fear-budget, which might pour some more money into our homeland security spending but fails to outline any plan for increased transportation funding and cuts education, arts, economic development, emergency, and other funding that supports South Dakota, and the GOP health care plan, which would impose new limits on the big Medicaid dollars that DSS handles among that $675M you cite. If we had a hard time this year reconciling sluggish sales tax revenues to our general funding, imagine the grief we’ll have next year when Uncle Sam requires either state investments or cuts of even greater magnitude.

  5. Wayne B. 2017-03-16 13:14

    It’s “tired” in the respect that the argument always comes up and is used for whoever’s political opinion is being espoused. If someone talks about being self-sufficient, they get chided for all the federal dollars the state “relies” on. Yet the chider fails to acknowledge those funds being sent are often tied to federal mandates to provide services. Someone squawks about how they don’t trust the federal government to fulfill their promise to pay for 90% of Medicaid expansion, and they get lambasted for taking other federal dollars (then, ironically, it seems they’re proven right by their own party proposing to end Medicaid expansion).

    If the worst happened and all federal funding dried up next year (which can’t happen due to funding cycles, but let’s just pretend), then South Dakotans would have to decide what, if any, of those holes need patching.

    But if federal dollars are being used to fund federal interests (services, entitlements, whatever you want to call them), then while it’s perfectly fine for everyone to debate whether those programs should exist, it’s not appropriate to poo poo the funds being spent on those interests. Our government of the people has decided those interests are (currently) worth funding and shall make it so.

    If our government of the people has decided those aren’t actually federal interests worth funding, then they won’t. The funding (or lack thereof) will follow.

    IF they are federal interests, we should feel no shame in accepting federal dollars to address those interests.

    IF the federal government abandons those interests, then the state doesn’t have an obligation to increase taxation to fund them – they’re federal interests afterall, not state interests.

    If it’s a shared interest, then we have to decide if we need to fund that interest if the federal government removes its share.

    If 100% of federal funding is a shared state interest, then we’d be asking an extra $5,000 from every household to contribute to the cause. But then, why should we pay income taxes?

  6. Wayne B. 2017-03-16 13:37

    PS – the list is just from the budget bill. Nothing special.

  7. Cory Allen Heidelberger Post author | 2017-03-16 17:58

    Sure, it’s from the budget bill, Wayne, but you still had to pull each number out and type it. That takes some time and attention, which I appreciate.

    A little quibble: we can’t credit Republican legislators for wise caution in not trusting the feds to fulfill their promise on Medicaid expansion. They voted for the feds who are now repealing that promise. Expansion opponents should have been saying, “We don’t want to expand Medicaid, and we plan to vote for candidates who will make that expansion impossible.”

  8. leslie 2017-03-17 04:45

    Cory-now repubs will know how we dems progressives and independents feel everytime mercer rubs salt in our wounds with rising repub registration reports

  9. Cory Allen Heidelberger Post author | 2017-03-17 07:01

    I’m not convinced they’re getting that message yet, Leslie.

  10. Wayne B. 2017-03-17 07:42

    To your quibble: I was referring specifically to Daugaard’s “I don’t trust the feds to maintain their promise.”

    Dougaard has been public he didn’t support Trump. I think he (like many) expected Hillary to win. So for this instance, I give him lucky, albeit ironic, prescience.

  11. Darin Larson 2017-03-17 09:13

    The thought process that we should not take Medicaid expansion funds because the feds might back out years down the road is asinine. If and when the feds cut the Medicaid expansion funds off, then the state will do likewise. The state in terms of economic benefits and its people in terms of proper healthcare would all be better off with having X number of years with the benefits of Medicaid expansion even if the program is ended at some point by the feds.

    You can’t give credit to Daugaard for something that is a detriment to our state just because the benefit may not exist in the future. It’s like saying to a starving person, I would give you something to eat today, but I’m going to be out of town next week, so I don’t want you to get used to regular meals.

  12. Darin Larson 2017-03-17 09:28

    Cory, I would like you to use your math skills to determine how K12 funding would have done under Daugaard without the funding increase last year. In other words, even after a large increase last year, K12 was only 2 tenths of a percent higher than the rate of general fund spending under Daugaard.

    If you take out last year from the equation, K12 funding increased an average of 2.41% under Daugaard, while general fund expenditures increased at a rate of 3.85%. Only last year’s large increase keeps Daugaard’s tenure from looking like total neglect of education funding.

    To summarize, Daugaard favored other general fund expenditures over K12 education spending by an average of almost 1.5% per year with the exception of last year’s large increase in education spending.

  13. Darin Larson 2017-03-17 09:35

    Cory, your chart and comments on K12 funding as a percentage of the total budget is a good way to look at how education funding was neglected under Daugaard’s reign.

  14. Cory Allen Heidelberger Post author | 2017-03-18 18:45

    Darin, good math question! If we had done no Blue Ribbon plan last year—no half-penny sales tax, no new funding formula—and if Daugaard and the Legislature had instead settled for the same 4.98% increase to K-12 that they did in FY2016, the annualized rate of increase in K-12 funding over Daugaard’s term so far would have been 2.55%. The absence of the Blue Ribbon boost in FY2017 and FY2018 would have knocked a chunk out of the general fund increase as well both years, dropping Daugaard’s 7-year annualized growth rate for the general fund to 3.92%.

  15. grudznick 2017-03-18 19:26

    4.89%! That’s insaner than most. How could they raise education almost 5% when the rest of the world is going backwards!?!? I dare say, it’s time to repeal that half-penny especially since they now redirected most of half of it to that animal dissection lab.

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