It’s not every day that a five-million-dollar increase in sales tax revenues amidst a pandemic recession is only the second biggest budget story of the day. But it is today.
One has to wonder why South Dakota businesses need $400 million in CARES Act welfare checks when they appear to generating more tax dollars for the state than expected pre-pandemic. The latest Legislative Research Council revenue report shows that August general fund receipts beat last August’s take by 9.0% and the Legislature’s FY2021 target by 6.45%:
That healthy growth in sales tax suggests that if some businesses are losing, others are gaining. That’s the market at work, consumers voting with their dollars for different products that meet their changing needs, and producers responding by shifting production to meet those needs. Creative destruction only hurts the producers who don’t see which way the Invisible Hand is pointing. Why meddle in market forces with handouts to failing businesses who can’t get out of the way of capitalist progress?
The $5.13 million increase in sales tax over last year was only the second-biggest growth line. We got $6.94 million more than last year from investment income and interest, a difference LRC says comes from “interest earnings from the CRF.”
CRF—that’s the Coronavirus Relief Fund.
So that’s why Governor Kristi Noem has been dragging her feet on spending our coroanvirus money on actual coronavirus relief. She’s evidently whatever’s left of that $1.25 billion ($600 million to $700 million, her finance commissioner Liza Clark told the Legislature’s Approrpriations Committee yesterday, with surprising imprecision) in the bank to earn interest… and that interest won’t have any of the CARES Act restrictions. She’s using free money from the feds to create another South Dakota slush fund! Noem can spend that interest to plug holes in her budget. That $6.94 million neatly papers over the $5.67 million in August declines in insurance company tax, unclaimed property revenues, net transfers in, charges for goods and services, mineral severance tax, and alcohol wholesale tax and leaves a little extra for more national campaign ads and Rushmore replicas for Trump’s sweet dreams.
Every day Governor Noem can put off a Special Session, every month that she can convince her old Congress-critter compadres to extend the deadline past December 30 for spending CARES Act money, she can keep that money in the bank, generating interest for her budget priorities.
More sales tax money is nice. But for Noem, magic money she can generate from interest on coroanvirus relief money that she doesn’t spend on coronavirus relief is even better.