Perspective on the FY14 tax numbers

The post below reports on the major sources of general-fund revenues for state government in fiscal 2014 that ended June 30. I went back a bit farther in time to add some perspective from the 2013 results.

The 6.10 percent growth for sales and use tax was an improvement from the 2013 growth of 4.26 percent.

The 7.04 percent growth for contractor’s excise tax was a big jump from the 2013 growth of 1.78 percent.

The 6.86 percent growth for insurance taxes wasn’t quite as strong as the 2013 growth of 8.01 percent.

The 38.52 percent loss for bank franchise tax came in the wake of a 40.93 percent loss in 2013.

Bank franchise tax revenue fell by nearly two-thirds over the course of the 2013 and 2014 fiscal years. The fiscal 2014 collections totaled $10,782,035; they totaled $29,688,991 in fiscal 2012.

That loss of $19 million from bank franchise tax revenue is important to keep in mind when people discuss the growth in unclaimed property revenue. The growth is coming mostly from financial institutions.

State government received approximately $13.9 million in ongoing revenue from unclaimed property during fiscal 2013. The amount climbed to nearly $59.8 million in ongoing revenue in fiscal 2014.

Some numbers behind the budget numbers

That South Dakota state government finished the 2014 fiscal year on June 30 with a small surplus  of $9.8 million in its general fund wasn’t a surprise. Tax receipts were up a little more than expected and social services spending didn’t cost as much as expected. More interesting might be the growth year over year in the major sources of taxes for the general fund. They tell us a generally positive story about South Dakota’s economy:

Sales and use tax collections came in 6.10 percent higher at $823,401,593. That was a $47.3 million increase from 2013;

Contractor’s excise tax receipts landed 7.04 percent higher at $90,409,495. That was a $5.9 million increase from 2013;

Insurance company taxes finished 6.86 percent higher at $75,110,734. That was a $4.8 million increase from 2013; and

Bank franchise tax receipts plunged 38.52 percent to $10,782,035. That was a decrease of nearly $6.8 million.

As for reversions — the money that state agencies don’t expend and turn back — the total was $7,166,563. The Department of Social Services provided most of it: $6,288,147. The Department of Human Services gave back $449,184. Thirteen others reverted the rest. There were 11 agencies, offices, branches and departments that turned back zero. They were Agriculture; Tourism and State Development (I thought we split those four years ago?); Health; Labor and Regulation; Transportation; Education; Environment and Natural Resources; Board of Regents; Public Utilities Commission; Unified Judicial System; and Attorney General.


State justices split on sex-offender case

To read the entire opinion and the entire dissent, go here on the South Dakota Supreme Court’s Internet site. In a decision publicly released today, the justices split 3-2 on whether a court services officer improperly imposed a requirement on an admitted felon that he receive a sex offender evaluation and participate in sex offender treatment. The majority of justices John Konenkamp, Steven Zinter and Glen Severson ruled it was improper delegation and only the court — in this instance, the circuit judge — has the authority to impose a condition of probation. Wrote Justice Konenkamp in the majority opinion:

“This Court has never addressed the issue of improper delegation of
judicial power to a non-judicial officer in the context of a CSO’s authority to impose
a treatment program, counseling, or evaluation as a condition of probation.”

In one key respect, this case turns on the definition of the word “any” that the circuit judge used in the sentencing. The three- justice majority decided “any” didn’t automatically include sex offender treatment and therefore the court service officer exceeded the authority granted by the judge.

The two dissenters, Chief Justice David Gilbertson and Justice Lori Wilbur, argued that the defendant never brought up the issue of unlawful delegation. Wrote Chief Justice Gilbertson in his dissent:

“At no point during the three separate hearings did Blakney mention that the CSO should not have imposed the sex offender treatment condition.”

This was a rape case in which Christopher Blakney pleaded guilty to two assault charges in order to avoid prosecution for rape crimes involving a 16-year-old babysitter at his girlfriend’s residence and for raping his girlfriend in another incident. In each instance he allegedly held a box-cutter to his victim’s throat. He was placed on probation with the possibility of a 13-year prison sentence if he didn’t meet the terms. The circuit judge ruled he violated probation when he didn’t take part in the sex offender treatment ordered by the court services officer. The 3-2 decision by the Supreme Court overturns the circuit judge’s decision.

But it is worth noting that Justice Konenkamp also makes clear in the majority opinion’s final sentences that the circuit judge can modify the sentence:

“This is not to say that the circuit court could not have ordered Blakney
to undergo a sex offender evaluation and complete sex offender treatment. Indeed,
SDCL 23A-27-20.1 provides that “[t]he court, upon notice to the probationer, a
hearing and good cause, shown, may modify the terms and conditions of a
probation[.]” But because the CSO was given ultimate authority to determine
Blakney’s condition of probation, the court erred when it unlawfully delegated its
judicial authority, and in turn, when it revoked Blakney’s suspended sentence.”


The picture of Mike and John

Lest you have any doubt about where the Dakota War College blog stands on political matters in South Dakota this election cycle, the banner photo across the top of the page comes from the South Dakota Republican state convention, showing U.S. Sen. John Thune and U.S. Senate nominee Mike Rounds with hands raised high together in victory clench. The photo is a reminder of another time when the two men’s futures were, like their hands, very much in the air. That was in about 2000. Mike Rounds, a state senator facing his term limit, was trying to decide whether to run for governor in 2002. John Thune, seeking his third term in the U.S. House of Representatives, was looking ahead to 2002 as well, trying to decide whether to run for governor or for the U.S. Senate against Democratic incumbent Tim Johnson. Thune seemed a sure winner if he ran for governor but the bigger question was whether he personally wanted the daily grind of dealing with all of the situations that confront a governor, from weather disasters to pleas for criminal pardons. Rounds went back and forth about whether he wanted to run for governor. Once Thune made his decision to seek the U.S. Senate, the door opened for the three-way primary between state Attorney General Mark Barnett, former Lt. Gov. Steve Kirby and Rounds. Thune lost against Johnson in 2002. He returned in 2004 and defeated the most powerful politician in South Dakota’s history, Senate Democratic leader Tom Daschle. Barnett and Kirby meanwhile destroyed each other and themselves in their primary fight in 2002 while Rounds kept smiling and won the Republican nomination. Rounds served eight years as governor. In late 2012 he didn’t wait for U.S. Rep. Kristi Noem to announce her plans for 2014. Rounds bolted to the front and announced his plans: He would run for the U.S. Senate in 2014. Not long after, Johnson formally announced his retirement. Now, as the convention photo shows, John Thune will do what he can to help lift Mike Rounds to the U.S. Senate too and give Republicans a presumably clean sweep of every statewide elected office in South Dakota. The photo marks a coronation. You can almost hear the Queen song in the background.

GFP plans to incur debt for park projects

The state Division of Parks and Recreation will issue debt bonds to help pay for work at Good Earth State Park south of Sioux Falls and to help pay for the new visitor center at Custer State Park. Division director Doug Hofer began to outline the finance plans Tuesday afternoon to the state Game, Fish and Parks Commission. GFP’s administrative director, Chris Petersen, provided further details later in the meeting. Hofer said the Parks and Wildlife Foundation is still raising money for the projects. “2015 will basically be a construction year at Good Earth,” Hofer said.

At Custer State Park, there’s been no shortage of grand ideas but the challenge is fitting ideas within the budget, Hofer said. They’re hiring Scull Construction of Rapid City as the construction manager at the front end to guarantee a maximum price. Using the construction manager at risk approach can help accelerate the process, according to Hofer, because work can begin on the foundation while planning is still under way for other parts of the building. (In separate work, Scull Construction is also handling the state veterans home project at Hot Springs.) Ground is scheduled to be broken for the Custer visitor center in October.

The Legislature gave GFP authority to issue bonds for the projects. There is a 13-year commitment to provide $1 million for Custer State Park and a 25-year commitment to provide $2 million for Good Earth State Park. Petersen said South Dakota State University will issue some sports-related bonds this fall and GFP can tail onto that bond issue. GFP would issue $2.2 million of bonds, he said, and that would make $880,000 available for Custer and $1.3 million for Good Earth.

Governor wants longer-range finance forecasts

Before the Independence Day holiday break, Gov. Dennis Daugaard filed a potentially important executive order that calls for significantly more planning by his Bureau of Finance and Management on budget matters. Here are the three key sections of the July 2 order:

Section I. A long-term financial plan outlining actual general fund revenues and expenses for the most recent completed fiscal year, and forecasts for the current fiscal year, the next fiscal year, and the succeeding two fiscal years. The financial plan shall include input from the Governor’s Council of Economic Advisors and other financial planning information that is deemed relevant to the financial plan assumptions.

Section 2. A capital expenditure plan outlining projected expenses for construction projects as well as maintenance and repair projects for the next five years. The plan will address cost projections as well as fund sources used to finance the construction and maintenance and repair projects.

Section 3. Recommended policies pertaining to the issuance, maintenance and servicing of debt of the South Dakota Building Authority and the South Dakota Health and Educational Facilities Authority (Vocational Education Program only). The poljcies shall include limits imposed on the total amount of debt to be issued, financial metrics used to govern the servicing of existing or projected future debt service payments, and shall measure compliance with those policies.

This comes on the heels of another executive order from the governor dated June 11 revising and expanding the responsibilities of the Council of Economic Advisors. You can read it here. Essentially it requires the Bureau of Finance and Management to make more information available to the council and to the public. The council in turn is to use that information in its analysis and advice. Also noteworthy is the council membership expands to 12 from 10.

These are major changes that put South Dakota’s state government on a longer-range financial path.

The Tim Johnson inheritance

Whether other Democrats do follow his lead, U.S. Sen. Tim Johnson certainly set an example when he pledged $200,000 from his political account to help support the South Dakota Democratic Party. Essentially he is creating a trust fund that can generate $5,000 to $10,000 per year forever, assuming the $200,000 principal isn’t depleted through investment difficulties.

If 19 other Democrats did the same thing for their South Dakota party organization, there would be $100,000 to $200,000 annually to support a Democratic office and a small cluster of year-round staff. If 199 other Democrats did the same thing as Sen. Johnson, there would be $1 million to $2 million annually to not only operate a central office but also to pay field staff and to provide start-up cash to Democratic candidates seeking election to federal and state offices.

South Dakotans need look only as far as the Republican state organization. To stay afloat after spending more than the party’s central treasury had for the 2012 elections, the Republican organization needed infusions of cash last year from Gov. Dennis Daugaard’s campaign fund and loans from South Dakota Republican chairman Craig Lawrence.

It was Republican Gov. George S. Mickelson who helped create the South Dakota Community Foundation in 1987 as an ongoing way for South Dakotans to make their money work for the benefits of charitable organizations and local projects. It was Republican Gov. Bill Janklow who led the way to creating the education trust fund and the healthcare trust fund from financial windfalls that came to state government in the late 1990s. It’s now U.S. Sen. Tim Johnson, as he prepares for retirement at 2013′s end after 28 years in Congress, who is applying those same principles to the realm of partisan politics.

The South Dakota Democratic Party clearly needs the help. The South Dakota Republican Party might take the idea forward as well. For those who think money has too much influence in U.S. politics, the trust fund approach could be a way to make political parties and their candidates less reliant on contributions from people looking for something immediate in return whether a contract or an appointment or a change in law. The Johnson donation is political reform that is true and pure — and could be transformational for the future of democracy in South Dakota.

SD held its primary elections (and Democrats lost voters)

Believe it: As of July 1, there were fewer voters registered as Democrats in South Dakota than before the June 3 primary elections. The number is down to 175,061. That’s 345 less than on May 1.

Republicans meanwhile gained more than 1,700 during that same span and stood at 237,575 as of July 1. Independents picked up approximately 700 and reached 97,240.

The Constitution Party lost eight to fall to 591. Libertarians gained 18, getting to 1,295, which might be that party’s high mark.

BHP wants to add major transmission line into RC

Black Hills Power wants authority from the state Public Utilities Commission to build the South Dakota segment of a new 230 kV electricity transmission line from Campbell County, Wyoming, into the Rapid City area. The company said the line will address new demand coming in 2016 and will improve the reliability of Rapid City-area service if other lines go out. Estimated total cost is $54 million with $16.6 million for the South Dakota segment and about $780,000 for changes at BHP’s Lange substation. The proposed new line would run from the Teckla substation between Douglas and Reno, Wyoming, and cross east to the Osage substation and continue to the Lange substation on BHP’s Black Hills loop at Rapid City.

The new line is intended to address reliability concerns. According to the company, if two of the three lines feeding the Black Hills loop were lost, BHP would need to run at least four of its five Rapid City electricity generators at maximum capacity. And if the two lines currently feeding the Lange and South Rapid substations were lost, BHP would need to run at least three of its five Rapid City generators at maximum. Further, BHP in its application says a transmission customer wants 130 megawatts of firm power starting in 2016. The new line would help fulfill that demand. Overall the line would be 144 miles with 45.4 miles in South Dakota. Approximately 47 miles of BHP right of way that currently isn’t used would handle part of the route. The right of way would need to be widened to 100 feet from its current 40 to 50 feet. Approximately 9 miles of the South Dakota segment crosses private land and about 36 miles goes through National Forest Service land. A northern alternative route was eliminated in part because it crossed an additional 15 acres of sage grouse habitat, while a southern alternative route likewise was eliminated, also in part because it crossed an additional 14 acres of sage grouse area, both in Wyoming.

State utility regulators will discuss the initial application during their meeting Tuesday, July 8. A formal hearing and decision process then will begin. To look through the full application click here. Parties seeking to intervene in the case face a deadline of Aug. 29.