Gov. Mike Rounds met Thursday with business leaders in Mitchell. According to the story by Daily Republic reporter Seth Tupper, the governor said all of South Dakota’s federal-stimulus aid will be used by the end of this year. In other words, the $65 million of stimulus funding which the governor and Legislature had held back for use in the 2011 budget which starts July 1, 2010, will need to be spent to get through the 2010 budget now under way.
The news gets worse. The governor’s forecast for state government’s 2011 budget shows a $170 million chasm between revenues and spending. State government has $107 million in reserves. Someplace, somehow, $65 million of savings and revenue needs to be found. That doesn’t address what happens come the 2012 budget with no stimulus and no reserves left.
Talk began filtering through Pierre in recent days about a possible 5 percent cut coming across the board for state government. A 5 percent reduction in the general-fund budget would save approximately $57 million. That’s probably not possible, however, because of the strings attached to federal stimulus funding. If stimulus money is used for a program, generally it can’t be cut. The two biggest uses of federal stimulus funding are for Medicaid and state aid to public schools. Those two programs are two of the largest in the state budget. It would be surprising if even $20 million of cuts are put in place.
Raising the state sales tax to 5 percent from 4 percent would generate about $160 million. Any new tax or tax increase requires two-thirds majority support in each of the Senate and the House of Representatives. Already Lt. Gov. Dennis Daugaard, who has Rounds’ endorsement in his bid for the 2010 Republican nomination for governor, has firmly stated he opposes any tax increases except in case of emergency. Rounds said in Mitchell he has no intention of seeking tax increases. On the other hand, the Legislature showed little appetite during the 2009 session to make even relatively small cuts. There are tax exemptions which could be repealed, including exemptions which were broadened under Rounds, but repealing them won’t come close to solving the immediate problem.
“We do not have a solution put together yet,” Rounds said in Mitchell. He is scheduled to deliver his budget speech to the Legislature on Dec. 8.
#1 by John on November 1, 2009 - 12:51 pm
While an across-the-board is inartful governance, it is achievable. It can and should apply to each department. The department can (and will) merely move internal funds to compensate where there is a federal match. Thus, while each department takes a 5% (or whatever) across-the-board cut; some programs within the department will receive a bigger cut. Such is the life of a federal welfare state. Don’t like it - then be self-reliant.
#2 by Bob Mercer on November 1, 2009 - 5:25 pm
I’m not clear what you mean. Give us a real-life example from the current budget.