Fiscal Inflation Big in Olivet, Bigger in Pierre!

I learn from a Bob Mercer tweet that Hutchinson County is thinking about replacing its 1881 courthouse (the oldest functioning courthouse in South Dakota). Built for $2,400 by a guy named Ferdinand Cash, the 136-year-old building would cost $3.5 million to remodel and $4.5 million to replace. Yesterday the commission voted to build new, if they can get the Olivet Town Board to approve swapping land so the county can build its new edifice on the town’s former baseball diamond.

Naturally somebody’s got to be against spending tax dollars on a new courthouse. Cue rural Mennoite (not to be confused with Mennonite!) Tom Hertz, who gets all economistical:

Hertz cited numbers he found in county records showing that Hutchison County’s population peaked in 1930 at about 14,000. It included 12 county employees and three unsalaried commissioners, and, when taking inflation into consideration, had a budget of about $1.7 million annually. That translated to about $124 in taxes per person, he said.

By comparison, he said, the 2017 county population is about 7,350, Hutchinson County employs about 40 — including five paid commissioners — and operates with an annual budget of just under $3 million. That translates to about $405 in taxes per person.

“If everything is declining, why is it necessary to build a new courthouse?” Hertz asked. “A lot more things are being done online, there are a lot less people to serve, the overhead is disproportionally higher than it used to be.

“Admittedly, a lot of things have changed since 1930, but from a taxpayer’s standpoint it looks like it costs us three times as much to run the county than it did then,” he continued. “Are we getting three times the services for half as many people? I don’t know” [Jeremy Waltner, “Hutchinson County Approves Resolution for Land Exchange,” Freeman Courier, 2017.11.27].

Hertz’s math entices me to try applying his math to our state budget, just for some perspective.

Back in 1930, our Legislature appropriated $7.29 million to the state general fund. (Before 1968, the Legislature appears to have done two-year appropriations, so I invite better fiscal historians to let us know whether the listed appropriations were for each year or for the whole two-year budgeting period.) South Dakota’s population in 1930 was 693,000. So back then, we appear to have been running the state on $11 per resident.

Taking the product of yearly U.S. inflation rates, I figure that one 1930 dollar is equivalent to $14.36 in 2016. Adjust the 1930 South Dakota general fund by that factor, and back in the good old Hoover/Bulow days, we could see the state was spending the equivalent of $105 million a year, or $151 per resident, in 2016 dollars.

In 2016, we operated the state with $1.43 billion in the general fund. Our state population was 865,454. That’s $1,650 per taxpayer.

So by Hertz’s math, the inflation-adjusted per-resident cost of running Hutchinson County is 3.3 times higher now than it was in 1930. Statewide, the inflation-adjusted per-resident cost of running the government has 10.9 times higher. So heck, Hutchinson County! You must be getting a deal!

Bonus Inflationary Theory: From 1979 to 2016, the national inflation rate pushed prices up 3.31 times. In other words, a dollar burger in 1979 would have cost you $3.31 in 2016. Over that same period, over 38 years of Republican rule in South Dakota, general fund appropriations increased from $176 million to $1.43 billion, a factor of 8.11. In other words, where the last South Dakota budget signed by a Democratic governor bought a hamburger, the 2016 Republican budget buys a hamburger, fries, pop, and an ice cream cone.