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Cutting Time: Lawmakers
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| Money – Or The Lack Thereof – Will Dominate The Upcoming Session Of The S.D. Legislature (MCT Illustration) |
Economic Situation Unlike Anything Seen
BY RANDY DOCKENDORF
randy.dockendorf@yankton.net
With legislators heading to Pierre next week for the 2009 session, District 18 Sen. Jean Hunhoff said the current economic uncertainty is unlike anything she has seen in her eight years in the Capitol.
“This is a whole new experience. We walk in and don’t know where we are at today,” said Hunhoff (R-Yankton), who chairs the Senate Appropriations Committee.
Hunhoff foresees a domino effect from the current economic problems. The state may first need to work with the current budget, which runs through June, on top of trying to forecast and craft a budget for July 2009 through June 2010. And the Legislature needs to look even further down the road, she said.
“We may have 6 to 8 months of a declining economy,” she said. “By 2010, we will have depleted reserves or have a very minimal amount. If we have to backfill for next year, there won’t be enough (reserves). If the revenues are not as projected, we will be in dire straits.”
That uncertainty became heightened Friday when Gov. Mike Rounds announced the state revenue situation has worsened since he proposed his $3.67 billion budget for fiscal year 2010 to the Legislature last month.
“We expected that for the sales tax collected in December, we (would) be able to receive $86 million in general fund revenues,” he said. “Instead, there was only $80.9 million, or $5.1 million less than what was projected just a little over a month ago.”
The state sales and use tax, which is the largest general fund revenue source, has shown dwindling returns in the last four months compared to the same months in 2007. Collections in December actually declined by 2.1 percent compared to December 2007.
“Looking back 20 years, we have not found a month where that had ever occurred before,” the governor said.
Rounds advised legislative leaders that he intends to revise the 2010 budget proposal to reflect the anticipated reduction in revenues. He told reporters that he will first focus on reduced spending, then look at new revenue sources.
Sen. Hunhoff had warned that the state’s three trust funds were not producing investment income, creating a $25 million revenue shortfall.
The state will get no interest earnings from the three funds, other than the $12 million required by law from the Dakota Cement Trust.
With the recent growth in state government, state officials should follow the same spending limits imposed on school districts, said District 18 Rep.-elect Bernie Hunhoff (D-Yankton).
“The state has seen growth of 4, 5 and 6 percent a year. The schools are held to 3 percent or the rate of inflation, whichever is less. Maybe we should hold the state to the same accountability,” said Rep.-elect Hunhoff, the House Minority Leader who will serve on the State Affairs Committee and the Taxation Committee.
“We have been deficit spending our way at 5 to 7 percent a year. We have spent up the property-tax reduction fund. Now, in hard times, it’s not there. It’s like the cookie jar is empty when you’re hungry.”
The state’s move toward basing ag land values on productivity amounts to an income tax on farmers and ranchers, Bernie Hunhoff said.
The state will likely consider a number of ways to generate new revenue, said District 18 Rep.-elect Nick Moser (R-Yankton). Legislators will look at each revenue proposal on its own merits, he predicted.
“The general rule is that you don’t want to increase taxes when the economy is in a recession,” he said. “I would really prefer that we kind of look at some of the mechanisms that we already have in place rather than creating new taxes.”
Legislators may be willing to raise some fees within reason, Moser said.
“I think we have some fees out there that are due to be raised. But I want to be very careful about raising those things when the economy is in the shape it is in,” said Moser, a member of the Health and Human Services Committee and the Judiciary Committee.
The increased fees are just another way of placing a financial demand on citizens, Bernie Hunhoff sad.
“‘Fee’ is a pretty feminine word for ‘tax,’” he said. “(Legislators) may look at those fees that do not produce a hardship or are needed because of inflation. The governor may find agreement (from lawmakers) on those things. If it does create a hardship, this is not the year to do it.”
Jean Hunhoff questioned how far the state should rely on raising fees. “Should we have fee increases in the depressed economy? Where are the dollars going to come from?” she asked.
When it comes to reduced spending, some highway projects will be delayed, Moser predicted.
“That process is already happening,” he said. “Over the course of 2009, there are going to be some projects that we need to look at that simply aren’t going to happen this year.”
The Legislature should look at transportation spending before deciding whether and how much to raise license plate fees and gas taxes, Bernie Hunhoff said.
“If we vote for a tax increase to match the federal (highway) funds, the Legislature might bend,” he said.
The three Yankton County lawmakers believe that unemployment will climb this year, placing a strain on state resources such as unemployment insurance and Medicaid. They noted that Yankton manufacturers have already laid off workers or shut down operations for an extended period of time.
“We only have $25 million in the unemployment fund, and that won’t last a long time before it’s depleted,” Jean Hunhoff said, pointing out that neighboring states have $100 million to $200 million in their unemployment funds.
South Dakota does not rely on a personal income tax, which has helped the state weather the lost income from layoffs across the state, Bernie Hunhoff said.
“Many states are in much greater (financial) problems. They have the housing and banking crises and the car manufacturing (losses),” he said. “South Dakota has the ag economy, which has stayed really quite strong and robust in 2008.”
The three District 18 lawmakers agree that South Dakota should not rely on a federal stimulus package when passing the budget this session.
“The stimulus package could come in mid-February,” Jean Hunhoff said. “If it’s after the end of the (legislative) session, an option is that the governor could call a special session.”
Moser agreed that federal money may arrive too late for this year. “I don’t know if relying on stimulus money can be anticipated for the 2009 session. For us to look at the 2010 session would be more viable,” he said.
Even if the federal government passes a stimulus package, it’s not a long-term solution, Jean Hunhoff said.
“The feds will not continue to bail us out. What can we sustain?” she asked. “Any (federal) funding is likely very specific to fit projects. It’s not like we are getting dollars to backfill the budget.”
The state may need to look at eliminating programs, Jean Hunhoff said. And the governor may revisit his proposed 1.5 percent raises for state employees and health care, she said.
Rounds has proposed changes in education funding, and the tight state budget could affect local school districts, the District 18 delegation said.
A bill could seek to amend the current funding formula, allowing school districts to receive a larger annual increase in state aid, Jean Hunhoff said.
“But with the economy, if you don’t have the money (for schools) — that’s the question,” she said.
On a positive note, the Hunhoffs said the retail holiday shopping figures may come out weak but better than forecast.
The District 18 delegation said the influx of new lawmakers could bring fresh ideas and ways of thinking that will help meet the current fiscal challenges.
Those ideas will prove extremely valuable as the Legislature faces a grave financial situation, Jean Hunhoff said.
“We will work through the process,” she said. “There will be some long nights late in the session.”
“This is a whole new experience. We walk in and don’t know where we are at today,” said Hunhoff (R-Yankton), who chairs the Senate Appropriations Committee.
Hunhoff foresees a domino effect from the current economic problems. The state may first need to work with the current budget, which runs through June, on top of trying to forecast and craft a budget for July 2009 through June 2010. And the Legislature needs to look even further down the road, she said.
“We may have 6 to 8 months of a declining economy,” she said. “By 2010, we will have depleted reserves or have a very minimal amount. If we have to backfill for next year, there won’t be enough (reserves). If the revenues are not as projected, we will be in dire straits.”
That uncertainty became heightened Friday when Gov. Mike Rounds announced the state revenue situation has worsened since he proposed his $3.67 billion budget for fiscal year 2010 to the Legislature last month.
“We expected that for the sales tax collected in December, we (would) be able to receive $86 million in general fund revenues,” he said. “Instead, there was only $80.9 million, or $5.1 million less than what was projected just a little over a month ago.”
The state sales and use tax, which is the largest general fund revenue source, has shown dwindling returns in the last four months compared to the same months in 2007. Collections in December actually declined by 2.1 percent compared to December 2007.
“Looking back 20 years, we have not found a month where that had ever occurred before,” the governor said.
Rounds advised legislative leaders that he intends to revise the 2010 budget proposal to reflect the anticipated reduction in revenues. He told reporters that he will first focus on reduced spending, then look at new revenue sources.
Sen. Hunhoff had warned that the state’s three trust funds were not producing investment income, creating a $25 million revenue shortfall.
The state will get no interest earnings from the three funds, other than the $12 million required by law from the Dakota Cement Trust.
With the recent growth in state government, state officials should follow the same spending limits imposed on school districts, said District 18 Rep.-elect Bernie Hunhoff (D-Yankton).
“The state has seen growth of 4, 5 and 6 percent a year. The schools are held to 3 percent or the rate of inflation, whichever is less. Maybe we should hold the state to the same accountability,” said Rep.-elect Hunhoff, the House Minority Leader who will serve on the State Affairs Committee and the Taxation Committee.
“We have been deficit spending our way at 5 to 7 percent a year. We have spent up the property-tax reduction fund. Now, in hard times, it’s not there. It’s like the cookie jar is empty when you’re hungry.”
The state’s move toward basing ag land values on productivity amounts to an income tax on farmers and ranchers, Bernie Hunhoff said.
The state will likely consider a number of ways to generate new revenue, said District 18 Rep.-elect Nick Moser (R-Yankton). Legislators will look at each revenue proposal on its own merits, he predicted.
“The general rule is that you don’t want to increase taxes when the economy is in a recession,” he said. “I would really prefer that we kind of look at some of the mechanisms that we already have in place rather than creating new taxes.”
Legislators may be willing to raise some fees within reason, Moser said.
“I think we have some fees out there that are due to be raised. But I want to be very careful about raising those things when the economy is in the shape it is in,” said Moser, a member of the Health and Human Services Committee and the Judiciary Committee.
The increased fees are just another way of placing a financial demand on citizens, Bernie Hunhoff sad.
“‘Fee’ is a pretty feminine word for ‘tax,’” he said. “(Legislators) may look at those fees that do not produce a hardship or are needed because of inflation. The governor may find agreement (from lawmakers) on those things. If it does create a hardship, this is not the year to do it.”
Jean Hunhoff questioned how far the state should rely on raising fees. “Should we have fee increases in the depressed economy? Where are the dollars going to come from?” she asked.
When it comes to reduced spending, some highway projects will be delayed, Moser predicted.
“That process is already happening,” he said. “Over the course of 2009, there are going to be some projects that we need to look at that simply aren’t going to happen this year.”
The Legislature should look at transportation spending before deciding whether and how much to raise license plate fees and gas taxes, Bernie Hunhoff said.
“If we vote for a tax increase to match the federal (highway) funds, the Legislature might bend,” he said.
The three Yankton County lawmakers believe that unemployment will climb this year, placing a strain on state resources such as unemployment insurance and Medicaid. They noted that Yankton manufacturers have already laid off workers or shut down operations for an extended period of time.
“We only have $25 million in the unemployment fund, and that won’t last a long time before it’s depleted,” Jean Hunhoff said, pointing out that neighboring states have $100 million to $200 million in their unemployment funds.
South Dakota does not rely on a personal income tax, which has helped the state weather the lost income from layoffs across the state, Bernie Hunhoff said.
“Many states are in much greater (financial) problems. They have the housing and banking crises and the car manufacturing (losses),” he said. “South Dakota has the ag economy, which has stayed really quite strong and robust in 2008.”
The three District 18 lawmakers agree that South Dakota should not rely on a federal stimulus package when passing the budget this session.
“The stimulus package could come in mid-February,” Jean Hunhoff said. “If it’s after the end of the (legislative) session, an option is that the governor could call a special session.”
Moser agreed that federal money may arrive too late for this year. “I don’t know if relying on stimulus money can be anticipated for the 2009 session. For us to look at the 2010 session would be more viable,” he said.
Even if the federal government passes a stimulus package, it’s not a long-term solution, Jean Hunhoff said.
“The feds will not continue to bail us out. What can we sustain?” she asked. “Any (federal) funding is likely very specific to fit projects. It’s not like we are getting dollars to backfill the budget.”
The state may need to look at eliminating programs, Jean Hunhoff said. And the governor may revisit his proposed 1.5 percent raises for state employees and health care, she said.
Rounds has proposed changes in education funding, and the tight state budget could affect local school districts, the District 18 delegation said.
A bill could seek to amend the current funding formula, allowing school districts to receive a larger annual increase in state aid, Jean Hunhoff said.
“But with the economy, if you don’t have the money (for schools) — that’s the question,” she said.
On a positive note, the Hunhoffs said the retail holiday shopping figures may come out weak but better than forecast.
The District 18 delegation said the influx of new lawmakers could bring fresh ideas and ways of thinking that will help meet the current fiscal challenges.
Those ideas will prove extremely valuable as the Legislature faces a grave financial situation, Jean Hunhoff said.
“We will work through the process,” she said. “There will be some long nights late in the session.”
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