South Dakota FY 2017 Budget Exam: Part 3

Ahh. Back after the Christmas and New Year’s break. In this final (for now) reflection on the Governor’s proposed budget, I would like to look at some of the budget internals.

  • $561.5 million (37.6%) for Health, Human, and Social Services;
  • $451.7 million (30.3%) for Aid to Schools;
  • $206.6 million (13.9%) for Higher Education;
  • $100.1 million (6.7%) for Corrections;
  • $69.1 million, (4.6%) for the Legislature, Unified Judicial System, Public Utilities Commission, and Elected Officials;
  • $19.6 million (1.3%) for Agriculture; Environment and Natural Resources; and Game, Fish and Parks
  • $83.9 million (5.6%) for the remainder of State Government

Those are some remarkable numbers. Just over 3/8ths of the total is going to support social welfare and related programs. More than 2/5ths is for education; with the balance going to support things which one might claim should actually be the responsibility of the state government.

We could consolidate the above categories further into the following:

  • Social Welfare (37.6%)
  • Education (44.2%)
  • Other (18.2%)

If you could have asked yourself (before reading this post) to rank these categories from largest to smallest, what would you have answered?

South Dakota FY 2017 Budget Exam: Part 2

Last time, in Part 1, we looked at the big number for each year and the changes to that number from FY 2005 through the proposed FY 2017 budget. This time, I would like to consider the three main breakouts of that big number: the general fund, federal funding, and other funding.

General Fund

The general fund has been as high of 34.06% of the total budget in FY 2008 and as low as 28.29% in FY 2012. Its average from FY 2005 through FY 2017 is 31.71%. FY 2017 is 30.85%, or slightly below average.

Federal Funds

Of the three categories, federal funding has fluctuated the most. Over the period in question it has ranged from 38.73% in FY 2016 to 47.51% in FY 2011. Its average from FY 2005 through FY 2017 is 42.64%. FY 2017 is 42.09%, or slightly below average.

Other Funds

This category has been as low as 23.92% in FY 2011 and as high as 28.22% in FY 2016. Its average for FY 2005 through FY 2017 is 25.65%. For FY 2017 it is 27.06, a good bit above average.

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So, what can we tell from this? Not too much, other than the fact that federal funding is the single largest component of the budget, though the legislature spends the bulk of its time debating the contents of the general fund portion of the budget. This is true because federal funding comes with federal strings which determine how the money can be allocated and spent. As a result, there is usually little to be gained from talking about how to spend the federal funds.

There is, however, the continuing question of whether the state should be accepting such funds seeing that the federal government is providing funds to South Dakota which are created via a magical process that turns nothing into something–until that does not work anymore.

One could make argument that some of these federal funds are disbursed to the state for legitimate purposes, such as defense. Nonetheless, the underlying issue of debts and deficits remains.

South Dakota prides itself on having had a balanced budget for the entire existence of the state. It seems wrong for the state to continue to celebrate balancing its budget while taking full advantage of an increasingly lopsided imbalance of the Federal budget.

South Dakota FY 2017 Budget Exam: Part 1

I realize that its a Saturday, which means that most of us are doing different things than during the rest of the week. Despite that, I wanted to crunch a few numbers with reference to Governor Daugaard’s proposed budget for next fiscal year. For purposes of these discussions, I’m going to compare previous actual budgets with the Governor’s proposal for 2017. Historically, the difference in raw numbers between the proposed and adopted budget is quite small, so it does not signify for the big comparisons we need to do.

Let’s start with some history:

  • FY 2005: $2,907,686,333
  • FY 2006: $3,055,919,196
  • FY 2007: $3,186,869,182
  • FY 2008: $3,340,084,390
  • FY 2009: $3,548,708,486
  • FY 2010: $3,919,562,591
  • FY 2011: $4,064,074,188
  • FY 2012: $3,959,175,442
  • FY 2013: $4,006,460,307
  • FY 2014: $4,090,632,223
  • FY 2015: $4,259,323,695
  • FY 2016: $4,326,703,120

And look at a possible future:

  • FY 2017: $4,827,070,205

Next year’s proposed budget would appear to be a raw spending increase of 66% since FY 2005. In the same period of time, the state’s population has increased from 783,033 to 853,175 (as of 2014, the last year for which I could find firm numbers). Let’s be generous and say that the state’s population will go up to 875,000 by the time the new budget would begin.

As a per capita cost, then, we would have the following:

  • FY 2005: $3,713
  • FY 2017: $5,517

Doing the same math we did for the budget numbers above, that would work out to having spending indexed to population increase by 49% since FY 2005.

And yes, we still need to look at inflation. If we average inflation over the years from 2005 through 2017 (realizing that inflation years and fiscal years don’t quite match up, and the future hasn’t happened yet) we would get 2.44%. To arrive at that, I put the unknown current/future years at a 3% rate of inflation since that is the usual placeholder, at least in modern times.

If we adjust for a 2.44% annual inflation rate, the FY 2005 budget of $2,907,686,333 would increase to $3,883,134,136 for FY 2017. This works out to a 34% increase due to inflation.

If we go back to our per capita valuation from above we could change that list to the following:

  • FY 2005: $3,713
  • FY 2017: $5,517
  • FY 2017: $4,975 (if spending had kept pace with inflation and population only)

We find then that the per capita cost of the South Dakota budget has increased by 15% more than can be explained by population increases and inflation load since FY 2005.

What’s Another Half a Billion Dollars?

I think I’m pretty well numb to things (particularly large, wasteful numbers) and then I read about 4 states which just torched the taxpayer’s money:

Each of the states — Massachusetts, Oregon, Nevada and Maryland — embraced Obamacare, and each underperformed. All have come under scathing criticism and now face months of uncertainty as they rush to rebuild their systems or transition to the federal exchange.

The federal government is caught between writing still more exorbitant checks to give them a second chance at creating viable exchanges of their own or, for a lesser although not inexpensive sum, adding still more states to HealthCare.gov. The federal system is already serving 36 states, far more than originally anticipated.

Of course, Massachusetts is familiar with wasteful projects (Big Dig, anyone?) and the other states are hardly bastions of conservative thinking, but really, why haven’t some heads rolled over this? If I were to be in charge of a project which lost my employer tens of thousands of dollars because of poor planning and incompetence on my part, I would be dismissed for cause.

It’s almost as though folks’ brains have gone soft along with their hearts.

Austerity and Budgeting

President Obama’s administration has saved us, again:

The Obama administration put out the word this weekend that the president’s new budget will end several years of “austerity” in Washington.

Come again?

Austerity? Since 2009, federal borrowing has skyrocketed by $6 trillion. This year’s budget deficit is expected to fall to somewhere near $500 billion, which sadly is progress, because the first-term Obama deficits all exceeded $1 trillion.

It is true that federal spending has trended downward since 2011, but this is only because in 2009 and 2010, the $830 billion of federal stimulus spending drove federal outlays from about $3.5 trillion to just below $4 trillion. Yes, federal spending has come down in the last several years, though the federal empire still commands a $3.8 trillion price tag. Most of the “austerity” cuts Obama complains of are merely a result of the reductions in Pentagon spending due to winding down the wars in Afghanistan and Iraq.

As a student of language, I realize that the meanings of words shift over time. (Check out awful and awesome for an awe/some/ful example of this.) But austerity’s meaning, which within the context of government means cutting spending, has stayed constant.

Government budgeting continues to boggle my mind.

Let’s say that I’m going shopping for a gun, and I’ve agreed with my wife that we are going to spend $1000 (after all, that’s what we have budgeted for such purchases this period). Then, I determine that I really should be able to spend $2000. A couple of days later, I find just the hardware I want and spend $1700 for it. I return home and share the good news with my wife, who duly admires the new shiny and then asks how much it costs. I tell her, whereupon she says “But I thought we agreed to spend $1000.” “Well,” I say, “I was going to spend $2000, so really, I spent less than anticipated.”

Sure. That’s going to end well.

Sweden is On to Something

No, not “on something” (that’s Colorado). Sweden is setting an excellent example with regard to the tax code:

Sweden’s tax policies have changed a great deal since the late 1970s and early 1980s, when ABBA was at the height of its popularity. The country eliminated the inheritance tax in 2005, the wealth tax in 2007, and taxes on residential property in 2008.

That is remarkable. In a very good way.

It would seem as though all the smart Swedes didn’t end up migrating to Minnesota after all.

Only on Days Ending in Y

Once again, the President is showing us that no matter how much regard he claims to have for the rule of law, his actions support the opposite:

The Obama administration on Monday announced it is delaying the employer mandate in ObamaCare until 2016 for some businesses.

This delay in the mandate — the second so far — would only apply to businesses with between 50 and 99 employees, who would have until January 2016 to decide whether to offer insurance to their employees or pay a penalty. Businesses would also be barred from cutting their workers in order to fall under the threshold.

Law? What law? Oh, well, don’t worry about that one. We just changed it, without going through the messy process which involves Congress (aka lawmakers).

But you can’t let your company of 100 people shrink just so you can get below the upper limit. No, that would be unlawful. And you will be penalized for such illegal activity. What’s that? No, we’ll probably just impose very stiff fines on you and audit your business.Why? Well, we can’t have folks just deciding which laws they want to follow and which ones they don’t want to follow. That would be crazy.

Wouldn’t it?

Bleeding Fools

Sitting here on the edge of farm country and thinking about the farm bill and how proud Representative Noem is of it. Yes, once again, she’s bringing home the proverbial bacon to South Dakota.

As P&R notes:

Too many votes are at stake for too many in both parties – votes that are accustomed to being purchased with tax dollars from the U.S. Treasury.

And there in lies the real matter. Unless and until we can change the federal government’s penchant for massive money laundering (well, what else should one call it?) there will be no change in the status quo. I’m increasingly convinced that both the Republicans and the Democrats are stuck in the error of their ways, believing that somehow bleeding the patient will make everything better.

The only true disagreement is over how fast the patient should be bled.

Permission Slips Replace Withdrawal Slips at Bank

By now, you have perhaps heard of HSBC’s decision to make it difficult for people to withdraw large sums of cash from their accounts. And, the follow up where the bank determined that it would quit doing so.

Were I a customer of HSBC, I would have immediately withdrawn all of my money from all my accounts and deposited it elsewhere. A bank is, simply put, a safe way for me to store my money in a place where it is less likely to be taken by thieves. Back in the day, I might also earn interest on said deposits, but that’s something which may well have gone the way of the Yugo.

If the decision were made by HSBC because of cash-flow issues (as is suggested), then it would seem to have exacerbated the matter. Regardless of the proximate reasons for doing so, HSBC should understand that preventing people from using their money as they feel like is not the job of the banks.

That privilege belongs to the government.