Noem Talks Budget as Trumpistani Economy Goes Limp

It’s been a rough couple weeks for Kristi Noem. She stuck her boot in South Dakota’s mouth with her unexpectedly (?!?) ridiculous and ridiculously expensive “I’m On Meth™” campaign. The Legislature’s interim hemp committee today approved a new bill to legalize Noem’s great bogeyman, industrial hemp, with only one dissenting vote.

And now, when she gets her chance to come to the big House dais and prove to legislators with her annual budget address that she’s not already a lame-duck ninny who can’t be trusted with our budget, Creighton University economist Ernie Goss poops on her procession with his assessment that Trumpland’s economic momentum is in the wrong direction:

A new monthly survey of business leaders suggests the economy is slowing down in nine Midwest and Plains states as the U.S. trade war with China continues.

The overall index for the region slipped into negative territory at 48.6 in November from October’s 52.6. The overall Nebraska index fell 5.5 percentage points.

…The overall index for South Dakota fell to 48.9 from October’s 52.6. Index components were new orders at 37.5, production or sales at 43.9, delivery lead time at 61.7, inventories at 55, and employment at 46.6. “Over the past 12 months the state’s manufacturing sector has lifted hourly wages by 8.7%, first in the nine-state region. Until November, both durable and nondurable goods manufacturers had been adding jobs at a solid pace,” Goss said [“Survey Suggests Economy Slowing Down in Midwest; Nebraska Falls 5.5 Percentage Points,” AP via Omaha World-Herald, 2019.12.02].

A slower economy means slower revenues, and slower revenues mean fewer promises and contracts Noem can offer tomorrow to calm her restless constituents‘ souls. Amidst this growing economic pessimism, Noem can’t even keep the state’s word to finally get teachers up to the target salary we were promised when we jacked up our sales tax three years ago, let alone propose the bold new (and inevitably costly) actions she needs to transform her On Meth™ campaign from costly online joke to meaningful public health intervention.

Even if Noem has some cash up her sleeve, legislators are going to be cautious about spending any new money on projections that could easily go poof:

Republican State Representative Lee Qualm is the house majority leader. He says he’s concerned about revenue.

“We’ve been hit so hard by flooding in this whole state and we’re an ag state,” Qualm says. “Regardless of what any one else thinks, we are ag. We had the largest amount of prevent plant acres in the United States. Almost a third of prevent plant acres were in South Dakota. So, that really says what it is. Farmers are not out spending a lot of money. That will have an impact on our sales tax revenues.”

One state lawmaker says revenues coming in for this year are on track, but he says he’s concerned about next fiscal year.

Democratic State Senator Reynold Nesiba sits on the appropriations committee. He says they’re seeing some softness in agriculture. He points to another stream of revenue the state will lose next fiscal year… a tax on telecommunications.

“I’ve seen estimates of that between 10 to 20 million dollars and how to figure out that replacement revenue,” Nesiba says [Lee Strubinger, “Lawmakers Concerned About Revenues Ahead of Budget Address,” SDPB, 2019.12.02].

Noem’s only hope for a good speech tomorrow may be to set really low fiscal expectations. I wouldn’t be surprised if she’s already decided, for instance, that she won’t be able to give state employees more than a 0.5% raise for Fiscal Year 2021, but to soften the blow, she’ll come out tomorrow and say “No raises for anyone, not even Kennedy and Kyle!” just so she can make the pittance she has planned look better than a kick in the pants.

Governor Noem will slink into the House to talk budget tomorrow afternoon, Tuesday, at 1 p.m. Central, 12 p.m. Mountain.