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.

******

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.

South Dakota Election 2014 – Initiated Measure 18

And so we come to the final non-person item on the statewide ballot, the question of the minimum wage. Here’s the summary and the brief description:

An initiated measure to increase the state minimum wage.

 

The initiated measure amends state law to raise South Dakota’s hourly minimum wage for non-tipped employees from $7.25 to $8.50 per hour, effective January 1, 2015. Thereafter, this minimum wage will be annually adjusted by any increase in the cost of living. The cost of living increase is measured by the change in the Consumer Price Index published by the U.S. Department of Labor. In no case may the minimum wage be decreased.

In addition, the hourly minimum wage for tipped employees will be half the minimum wage for non-tipped employees as adjusted by any cost of living increase described above.

These increases would apply to all employers in South Dakota, with limited exceptions.

The full text of the measure is extensive, but I’ll include it here for completeness. It is as follows:

FOR AN ACT ENTITLED, “An Act to increase the state minimum wage and to provide for future cost of living increases.”

BE IT ENACTED BY THE PEOPLE OF THE STATE OF SOUTH DAKOTA:

Section 1. That § 60-11-3 be amended to read as follows:

60-11-3. Every employer shall pay to each employee wages at a rate of not less than seven eight dollars and twenty-five fifty cents an hour. Violation of this section is a Class 2 misdemeanor.

The provisions of this section do not apply to certain employees being paid an opportunity wage pursuant to § 60-11-4.1, babysitters, or outside salespersons. The provisions of this section also do not apply to employees employed by an amusement or recreational establishment, and organized camp, or a religious or nonprofit educational conference center if one of the following apply:

(1) The establishment, camp, or center does not operate for more than seven months in any calendar year; or(2) During the preceding calendar year, the average receipts of the establishment, camp, or center for any six months of the calendar year were not more than thirty-three and one-third percent of its average receipts for the other six months of the year.Section 2. That § 60-11-3.1 be amended to read as follows:

60-11-3.1. Any employer of a tipped employee shall pay a cash wage of not less than two dollars and thirteen cents an hourfifty percent of the minimum wage provided by § 60-11-3 if the employer claims a tip credit against the employer’s minimum wage obligation. If an employee’s tips combined with the employer’s cash wage of not less than two dollars and thirteen cents an hourfifty percent of the minimum wage provided by § 60-11-3 do not equal the minimum hourly wage, the employer shall make up the difference as additional wages for each regular pay period of the employer.

A tipped employee is one engaged in an occupation in which the employee customarily and regularly receives more than thirty-five dollars a month in tips or other considerations.

This section does not apply to babysitters or outside salespersons. This section also does not apply to employees employed by an amusement or recreational establishment, an organized camp, or a religious or nonprofit educational conference center if one of the following apply:

(1) The establishment, camp, or center does not operate for more than seven months in any calendar year; or(2) During the preceding calendar year, the average receipts of the establishment, camp, or center for any six months of the calendar year were not more than thirty-three and one-third percent of its average receipts for the other six months of the year.Section 3. That chapter 60-11 be amended by adding thereto a NEW SECTION to read as follows:

Beginning January 1, 2016, and again on January 1 of each year thereafter, the minimum wage provided by § 60-11-3 shall be adjusted by the increase, if any, in the cost of living. The increase in the cost of living shall be measured by the percentage increase as of August of the immediately preceding year over the level as measured as of August of the previous year of the Consumer Price Index (all urban consumers, U.S. city average for all items) or its successor index as published by the U.S. Department of Labor or its successor agency, with the amount of the minimum wage increase, if any, rounded up to the nearest five cents. In no case shall the minimum wage be decreased. The Secretary of the South Dakota Department of Labor and Regulation or its designee shall publish the adjusted minimum wage rate for the forthcoming year on its internet home page by October 15 of each year, and it shall become effective on January 1 of the forthcoming year.

Section 4. The provisions of Section 1 and Section 2 of this Act are effective January 1, 2015.

Bottom line? If you believe that raising the minimum wage is a good thing then this measure was built for you. If, on the other hand, you understand that the principles of economic reality are but briefly thwarted by even having a minimum wage, let alone raising it, then you would find this measure to be one which deserves a minimum of attention at the voting booth.

Among the measure’s most negative components is the one which ties an increase in the minimum wage to inflation. In the real world, I and many others, are guaranteed no such thing with our wages (above minimum though they be). If one thinks this is a good idea (to index the wage to inflation), then it follows that everyone’s wage should be so indexed, eh? Look at all the extra money we can all have.

I shall be going with a “No” on Initiated Measure 18. More information may be acquired for a minimum amount of effort at Ballotpedia.

South Dakota 2014 Election – Initiated Measure 17

One week until election day, so our review of the items which will be on the statewide ballot continues. It’s time to consider Initiated Measure 17 (initiated because a group of citizens got enough signatures to make it on the ballot). Here are the title and summary:

An initiated measure to require health insurers to include all willing and qualified health care providers on their provider lists.

 

Some health insurers offer health benefit plans in which the insurer maintains a list of health care providers. Plan members must use listed providers in order to obtain the maximum plan coverage, or to have coverage at all. “Health care providers” include doctors and other licensed health care professionals, clinics and hospitals.

The initiated measure establishes who is entitled to be on the insurer’s list of providers. The measure requires that these insurers list all health care providers who are willing, qualified and meet the conditions for participation established by the insurer.

The measure does not apply to all health insurers, nor to certain kinds of insurance and plans including those involving specific disease, indemnity, accident only, dental, vision, Medicare supplement, long-term care or disability income, and workers’ compensation.

And here is the full description:

FOR AN ACT ENTITLED, An Act to ensure patient choice in the selection of health care providers.

BE IT ENACTED BY THE PEOPLE OF THE STATE OF SOUTH DAKOTA:

Section 1. No health insurer, including the South Dakota Medicaid program, may obstruct patient choice by excluding a health care provider licensed under the laws of this state from participating on the health insurer’s panel of providers if the provider is located within the geographic coverage area of the health benefit plan and is willing and fully qualified to meet the terms and conditions of participation as established by the health insurer.

Section 2. Terms used in this Initiated Measure mean:

(1) “Health benefit plan,” any hospital or medical expense policy or certificate, hospital or medical service plan, nonprofit hospital, medical-surgical health service corporation contract or certificate, provider sponsored integrated health delivery network, self-insured plan or plan provided by multiple employer welfare arrangements, health maintenance organization subscriber contract of more than six-month duration, or any health benefit plan that affects the rights of a South Dakota insured and bears a reasonable relation to South Dakota, whether delivered or issued for delivery in South Dakota. The term does not include specified disease, hospital indemnity, fixed indemnity, accident only, credit, dental, vision, Medicare supplement, long-term care or disability income insurance, coverage issued as a supplement to liability insurance, workers’ compensation or similar insurance, automobile medical payment insurance, or any plan or coverage exempted from state regulation by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 18;

(2) “Health insurer,” any entity within the definitions set forth in subdivisions 58-17F-1(11), (12), and (15), any entity offering a health benefit plan as defined by § 58-17F-2, all self-insurers or multiple employer welfare arrangements, and self-insured employer-organized associations. The term does not include any entity exempted from state regulation by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 18;

(3) “Health care provider,” any individual or entity within the scope of the definition of health care provider as defined by subdivision 58-17F-1(9).

Got it? It’s far more complicated that it needs to be. But, then again, that’s what happens when something is crafted with lots of exceptions.

On the one hand, it’s a good thing, in that it would allow people greater access to health care providers whom they may already know and trust. As far as that goes, it would seem to be an answer in part to the mandates of Obamacare whereby a change in insurance has deprived many of the ability to work with known health care providers. So, one could say that it is fixing a symptom of a larger problem.

On the other hand, it’s not such a good thing in that it is forcing association on the part of insurance companies and health care providers. For a variety of reasons, insurance companies may choose to extend affiliation to a smaller group of health care providers than might be available in a given area. It would seem that it is within the insurance company’s right to choose with whom they will engage in business. So, it places more rules on an already burdened group (health insurers) at a time when they are attempting to determine how they can stay solvent.

As an aside, I am drawn to the “willing and fully qualified to meet the terms and conditions of participation as established by the health insurer” section of the proposed law and wonder what might happen were this law to pass and an insurer claim that the terms and conditions required an specific invitation to participate?

My recommendation? I’m going to go with a “No” on Initiated Measure 17. More information may be found at Ballotpedia.

South Dakota 2014 Election – Amendment Q

‘Tis the season to consider amending the South Dakota Constitution with a, wait for it, change in the gambling rules for Deadwood!

Here is Amendment Q described in all its glory:

The Constitution currently authorizes the Legislature to allows two kinds of games of chance in Deadwood: limited card games and slot machines. The proposed amendment authorizes the Legislature to also allow roulette, keno and craps in Deadwood.

Under federal law, any games of chance authorized by the Legislature to be offered in Deadwood would also be allowed at on-reservation tribal casinos.

A vote “Yes” is for changing the constitution to allow the Legislature to authorize roulette, keno and craps in Deadwood.

A vote “No” will leave the constitution as it is.

I’m conflicted on this one and want to vote for a third option which would remove the Deadwood gaming/gambling proviso from the Constitution altogether. As a curmudgeon in training, I find the growth of exceptions in laws and regulations to be the bane of the citizen’s existence.

Ranting aside, I would go with “No” because I fail to see how expanded gaming will benefit the state long term. For further information on Amendment Q, see Ballotpedia. For further information on what dependence on gambling does to a local economy, see Atlantic City.

Happy Birthday Dakota Twins!

I must say that your respective economies are looking pretty good for a pair of 124-year-olds. Too bad we’ll never know which one of you came first. Oh well, it would just give each of you another reason to brag about how you are better than your twin.

Now, North Dakota, if you’d just share a bit more of that oil with South Dakota, that would be a nice thing. And, South Dakota? Quit telling everyone that North Dakota only gets three months of weather above freezing every year. That’s simply not true.

Remember, folks who aren’t from around here pretty much can’t tell you guys apart. And that’s not necessarily a bad thing.

Here’s to another 124 years!

Misunderstanding Government Funding

From KELO :

The pricetag for Medicaid expansion will cost South Dakota an extra $1.5 million in the first year.  The federal government picks up $58.3 million in 2014.

[…]

The Task Force also points out that if the federal government is unable to pay it’s [sic] share of the expansion, there is a risk that taxpayers could end up footing the entire bill, which will amount to more than $409 million by the year 2020.

Civics 101 is apparently no longer taught.

Taxpayers end up footing the entire bill for Medicaid. Period. If there is risk in this equation for taxpayers, it stands at 100%. Whether they are South Dakota taxpayers or New Mexico taxpayers is, in large part, incidental. Any other understanding of the matter is laughable.

Government only has that which it takes from the governed. As Calvin Coolidge said, “Collecting more taxes than is absolutely necessary is legalized robbery.”

I think he was on to something.

Unnecessarily Taxing

From the AP:

You don’t see this very often: a majority of Senate Republicans voting to make people who buy stuff on the Internet pay state and local sales taxes.

Well, no. We don’t see that very often because they don’t vote on that bill very often. That aside, let’s see where it goes from there:

On Wednesday, the bill passed a test vote in the Senate, 74 to 23, with 27 Republicans voting in favor. Senate Majority Leader Harry Reid, D-Nev., vowed to pass the bill this week, before senators leave for a scheduled vacation.

“This is a matter of equity and fairness,” said South Dakota Gov. Dennis Daugaard, a Republican. “The same people who are selling the same products should be paying the same taxes.”

Did I mention that behavior such as this from Republicans is a reason I’m not one of them? Sigh. Since when do equity and fairness permit one state to exercise authority over the citizens of another state? In the interests of equity and fairness, Governor, should not someone in South Dakota be permitted to have a late-term abortion since they could get it in, oh I don’t know, Philadelphia? I thought that one of the values of the states being independent of each other to an extent was that the states could experiment with different things and find out what works for them?

As Mark Alexander notes, states have already addressed the underlying issue and come up with state-level solutions. Here he is:

Many states, which depend in part on sales taxes, have already legislated that residents of their states remit sales taxes annually on any and all out-of-state purchases. This existing legislation is intrastate, between the voters and their state representatives, exactly where it belongs in a federalist system.

Requiring a seller in one state to collect and remit sales tax on behalf of another state is tantamount to “taxation without representation,” according to Heritage Foundation President Jim DeMint. The former South Carolina senator notes correctly that the mega-retailers “are in favor of the Internet sales tax, because online retailers are competitors. But the other big proponents of the tax are state governments, which would be able to reach into other states for revenue. Politicians want this bill passed to raise new tax revenue for broken state governments facing budget shortfalls. But legislators in state capitals don’t want to make the hard decisions to cut spending or raise taxes on their constituents — they fear the voter backlash. So they’d like their allies in Washington to make it legal for them to tax people who can’t vote against them.”

But what about the children? (Oh, sorry, that was another article.) Let’s see what PNR was thinking:

No, what it really amounts to is a big assist to big business.  Barnes & Noble, for instance, has physical stores in most states.  Amazon only has a physical presence in a few.  Walmart, too, has a physical store in pretty much every state.  In addition to the competition between these giants, each of them is also competing against the mom & pop shops.  If you order that book online from Barnes & Noble, for instance, they’ve got to get it to you for $11.27 because they’ve got to add the sales tax and the shipping ($11.27 x .06% = 0.68; $11.27 + 0.68 + 3.95 = $15.90).  Pass this bill, however, and now Amazon, Barnes & Noble, and the mom & pop shop all have to collect the sales tax, the shipping, and the price of the book.

[…]

There’s one big difference, though.  Amazon and Barnes & Noble sell lots and lots of books.  They can, and do, work out special deals with the publishers to get their books at a much lower wholesale price than the local mom & pop shop could ever hope to achieve.  The local shop has to pay $7.50-$8.00 for that $15.00 book.  The others can likely get it for $5.00.  In the name of “leveling the playing field”, it tilts that field rather significantly towards the big names.

Legislation is almost always in favor of those in power–and that includes those who are current powerhouses in the world of business. Unsurprisingly, businesses large and small look out for their own best interests, but it is large corporations who can afford to put money and effort behind things (remember when lobbyists were evil?).

Here’s what I’m thinking. States in general are already showing themselves poor stewards of the tax revenue they have collected. Regardless of where the taxes are coming from (well, it’s always you and me) why would we want to give further resources to spendthrifts? And yes, I understand that not every state is horrible with its checkbook. Unfortunately, a bunch of them give all the rest a bad name.

Allow me to quote a gentleman whose wisdom is currently in short supply:

I want the people of America to be able to work less for the government — and more for themselves.

I want them to have the rewards of their own industry. This is the chief meaning of freedom.

Until we can reestablish a condition under which the earnings of the people can be kept by the people, we are bound to suffer a very severe and distinct curtailment of our liberty.

Thank you Mr. President. I believe that those words are just as needful today as they were when you first spoke them in 1924, if not more so.

 

Staying Free — South Dakota Style

The data is in. South Dakota is Number 2 (right behind North Dakota) on a roster of states ranked by various measures of freedom:

The 223-page report “scores all 50 states on their overall respect for individual freedom, and also on their respect for three dimensions of freedom considered separately: fiscal policy, regulatory policy, and personal freedom,” the study explains. Surprisingly, Texas did not make the top 10 and was ranked the 14th most free state.

“In order to calculate these scores, we weight public policies according to the estimated costs that government restrictions on freedom impose on their victims,” the report adds.

An interesting approach, non? Consider freedom by looking at the negative, the cost of non-freedom. I’d like to think that I have contributed in some small way to South Dakota’s freedom, but it is more likely that I was and am attracted to many of South Dakota’s freedoms.

So, congratulations fellow citizens (and the government which you all helped to elect). We may not be doing everything right, but we are doing better than many. Take a note, New York, if you want people to sing your praises instead of cursing your dietary laws, you could do worse than emulate South Dakota.