2021 SD Legislature: Federal debt dollars flood into South Dakota

By: 
Steve Haugaard, Speaker of the House

As the next Legislative Session draws near, we are examining various budget issues. As of now, various city, county, state and educational institutions have received in excess of $12 billion ($12,000,000,000). Our annual budget is a total of $5 billion, of which the state generates $2 billion in revenue and the remaining $3 billion is federal debt dollars. So, the amount of money that has flooded into the State over the past year is in excess of FOUR TIMES as much as we would receive in any other fiscal year. When we look at these numbers, it is painfully obvious that there is very little correlation between the effects of the pandemic and the amount of money that is being dumped into South Dakota as well as all of the other states.

As a result of this flood of money, we have seen a spike in lottery spending, a spike in spending on university buildings, a spike in spending on ‘public-private’ partnerships, as well as a spike in absolute giveaways to private businesses that are politically connected.  

Regardless of whether any of these spending projects are ultimately helpful or even generating revenue, the real question is, “How can we sustain profligate spending without any potential to reduce or payoff this increasing new debt?” The only way that our incredible national debt can ever be paid off is to hold the line on any new spending AND see sustained growing economic activity in the range of 3-5 percent, and that is without the additional adverse impact of inflation that we are now experiencing. That growth is no longer happening. And, that inflation has hit the average wage-earner harder than anyone else. When a tank full of gas costs $25 more than it did just 10 months ago and food costs are rising each week, it is upending the lives of most families.  

So, how does that affect South Dakotans? Some are reaping the harvest of various grant programs, others have closed their doors and moved on, and others are just buying less and paying more.

Our $2 billion of revenue receipts for the state budget come in the form of 4.5 percent state sales tax, 2.0 percent municipal sales tax, 1.0 percent tourism tax, 2 percent excise tax, wheel taxes, licensing fees, gambling revenues, bank licensing fees, abandoned assets forfeited through the banks, ever-increasing exorbitant real estate tax along with other fees and taxes.  

At the same time, we are raking in revenue from these various sources we are also seeing a rapid increase in real estate property values, which result in higher real estate tax. In light of the rapid increase in property values, and therefore increasing real estate tax, it is time to thoroughly review the means by which we tax that real estate. At present, there is no real correlation between the value of real estate and the services which that taxpayer is covering. There are some taxes that are a poison pill and aren’t viable options, such as state personal income tax and corporate tax. Everything else should be reviewed, including current tax exemptions that have been carved out over the years and might no longer really be as important as they were in the past.  

The budget is a significant issue every year, but it is especially important this year as we continue to plunge our nation further into debt and our state increases its dependency upon revenue that is at times unstable and sometimes an inequitable burden.

As always, feel free to contact me at steven.haugaard@sdlegislature.gov with questions or comments. You can also go to www.sdlegislature.gov to listen in on the meetings or to see what else is happening in state government.

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The Brandon Valley Journal

 

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