Listening to South Dakotans Talking

How South Dakota collects and spends money should reflect its citizens’ shared values — the consensus about needed public services and how they should be financed. That belief prompted a facilitated community dialog process by the South Dakota Budget & Policy Project. Called South Dakotans Talking, it brought together 475 individuals in 16 communities across the state in late 2011.

Those who took part represented health care, public education, city government, nonprofit organizations, current and retired business owners and volunteers. Invited to attend as listeners, more than half of state lawmakers were present at one of the two-and-a-half hour session.

Participants first learned about state budget basics, then took part in nonpartisan budget discussions. Joy Smolnisky, who directs the South Dakota Budget & Policy Project, said the process demonstrated the ability of groups who don’t always agree to respectfully find areas of consensus.

“Reaching consensus about which state services we value and how we want to pay for them is the hard work of democracy,” Smolnisky said. “Public support for state and local fiscal policy increases when citizens have the opportunity to understand, discuss and have input on options.”

Residents followed a similar format in every community that allowed them to anonymously select from among the following topics for discussion:

• State budget formation process,
• K-12 education,
• Higher education,
• State revenue,
• Medicaid,
• Other

The sessions were hosted by local organizations, such as Chambers of Commerce or Community Based Services. 

According to the South Dakotans Talking report (available at www.sdbpp.org), the top discussion topics across all sessions were state revenue, K-12 education and Medicaid.

Cross-topic themes visible across all the discussion topic tables in order of frequency were:

1. Find new revenue
2. Re-examine consumption tax exemptions regularly
3. Levy a sales tax on internet sales
4. Support the initiated measure for a 1% sales tax increase dedicated to K-12 education and Medicaid

Citizen ideas and suggestions are summarized in Appendix C, pages 39-40 of the report.

Following the sessions, nearly 95 percent of those who took part indicated they had a much better or somewhat better understanding of the budget process. That assessment has prompted Smolnisky to expand South Dakotans Talking to other communities. She can be contacted at 605 367-9667 to schedule a session to learn about state budget basics and begin a consensus-building discussion.  

Ellie Haerter of the Bush Foundation, a project funder, said her organization supports opportunities like South Dakotans Talking because “people understand better than anyone the current and future needs of their communities. The collective wisdom that came out of these community meetings can serve as a guide to the elected state leaders who bear the responsibility for ensuring a vital and stable future for South Dakota citizens.”

The Northwest Area Foundation also provided funding.

Click for link to table

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Joint Appropriations Committee shares full amendment packet with public via Internet

Repeating their practice of last year, the Joint Appropriations Committee has published on its internet site the Proposed Amendments to the General Appropriations Bill for FY13 (SB197).    The Legislative Research Council posted the full list of amendments as well an the individual wording for each amendment on the Appropriations web page for public access late Monday afternoon.

Legislative rules do not require Internet publication of the amendment packet, but co-chairs Senator Corey Brown and Representative Dean Wink have made deliberate efforts to ensure improved constituent access to proposed amendments both last year and this year.

The publication of the proposed amendments is the first opportunity the public has to review the alternative proposals to the portions of the Governor’s budget contained within the general appropriations bill.  Even with the prompt publication, the public has a limited time frame within which to provide feedback to their legislators and appropriations committee members.   The appropriations bill, and its amendments, are schedule for a hearing on Wednesday, February 29 at 9:00 am [although Chair Corey Brown has cautioned the hearing may need to be delayed until later Wednesday or Thursday morning should relevant conference committee issues remain unresolved].  The final budget must be approved by end of day Friday, March 2, 2012, unless the legislators choose to extend the session.

Legislators have submitted 37 proposed amendments, the Bureau of Finanace and Management has submitted five  proposed amendments and the Unified Judiciary System and Legisaltive Audit have each submitted one amendment.

Amendments address a range of funding alternatives, including proposed funding changes in education, medicaid reimbursement, court services, post secondary education and many others.  The name of the legislator or agency sponsoring the amendment is listed with each amendment.

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Tentative timeline for final week of legislative session 2012

Friday morning Joint Appropriations chair Senator Corey Brown described his anticipated timeline for appropriations actions during the final week of session:

• Monday noon (2-27-12) – Amendments to general appropriations bill due to Legislative Research Council.  Only legislators or agencies can submit amendments.
• Late Monday – amendment packet available to legislators and public.  The LRC currently expects to post the amendments on-line under Agency Hearing Budget Materials.  Look for a tab across the top labeled Amendments SB197
• Wednesday 9:00 am Rm 414 (2-29-12) Joint Appropriations public hearing on amendments.  Senator Brown cautioned that this hearing might be delayed to later on Wednesday or early Thursday if other major spending bills remain unresolved.  Typically, this hearing affords an opportunity for members of the public to testify on proposed amendments to the Governor’s budget proposals.
• Friday (3-2-12) Amended Appropriations Bill sent to house and senate floor for consideration and action.

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Extra revenue creates opportunity to address critical need

Revenue projections adopted by the Joint Appropriations Committee on Friday 2-24-12 reflect an expected increase over those contained in Governor’s proposed budget. 

Bottom line?  The legislature expects an $12.1 million additional revenue in the current fiscal year (FY12) and an additional $9.7 million in FY13.  This offers the legislature some additional dollars to work with in their last week of session.   How ought these dollars be used?

• Backfill cuts imposed last legislative session in areas such as education, medicaid and the judiciary?
•  Fund new initiatives in economic development?
•  Lower existing taxes or fees?
•  Or, should the dollars be allowed to revert into the budget reserve fund?   

This is the last weekend citizens will have to provide input to their legislators before the end of legislative session 2012.  All final budget bill amendments are due by noon on Monday, 2-27-12.

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Can the Legislature improve information flow in the current budget process?

Two bills have been introduced that have the potential to impact information flow in the South Dakota state budget process. 

The first (HB1133) creates a formal mechanism for the legislature to research and conduct long term planning on a bipartisan basis.

The second (SB151) requires a minimum 24 hour time lapse between passage of the final amended appropriations bill and floor voting on the budget.

HB 1133:   An act to establish the Legislature’s Planning Committee.  This bill has passed the House State Affairs 2-6-12.

Analysis:  The bi-partisan committee’s charge under this bill is to make a continuing study of emerging trends, assets, and challenges in South Dakota and to address the long-term implications of the decisions made by the Legislature.  Such a planning mechanism creates the opportunity for multi-year bi-partisan legislative study and planning.   It also allows an opportunity public input and public access to the findings of the committee. Excerpt from bill language: 

“collect and analyze data and give special consideration to matters concerning demographics, education, labor, revenue, natural resources, assets, challenges, trends, and the growth and efficiency of government in South Dakota. The committee shall continuously identify long-term issues significant to South Dakota, set goals, and issue a yearly report of its findings. The committee shall draw upon public input from all those who may be concerned and knowledgeable in these areas. The committee may propose draft legislation and policy recommendations to the Legislature to effectuate its mission.”

SB 151:  An act to provide a time period before certain action on the general appropriation bill may commence.  Scheduled for hearing in Senate Appropriations Wednesday, Feb 8, 2012 15 minutes after final Senate adjourns.

Analysis:  The delay created by this bill would allow time for the public and legislators to read and discuss the final amended version of the appropriations bill before voting.  Excerpt from bill language:

“No action may be taken on the floor of the House of Representatives or the Senate relating to the second reading of the general appropriation bill unless twenty-four hours have elapsed since the committee engrossed version of the bill was made available to the members of those bodies.”

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HB 1214 – a food tax sunset  compared to HB 1216 a food tax swap

On 2-7-12 the South Dakota House Taxation committee will look at two bills using different approaches to removing state sales tax from groceries. 

HB 1214 proposes a food sales tax sunset, using 1/2 cent decreases to phase out the current 4 cent sales tax.  The 1/2 cent decrease would not occur unless the states sales tax revenues increased 6% over the previous year AND at least 3% over inflation.  Once a decrease was triggered, it would stay in place permanently.  A subsequent year of high state tax revenues would trigger another 1/2 cent decrease in food taxes - potentially leading to the eventual elimination of the state sales tax on food.  State revenue lost secondary to each 1/2 cent sales tax on food decrease would be approximately $8 million. See HB 1214 Food Tax Sunset for more details. 

 HB 1216 proposes a food sales tax swap, removing the 4% state sales tax on food and simultaneously increasing the state sales tax on other goods and services by .35 cents, to make the action revenue neutral.  See HB 1216 Food Tax Swap for more details.

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Senate Bill 194 Sales and property tax relief for elderly persons and persons with a disability.

Senate Appropriations Committee is scheduled to hear SB 194 Thursday morning, 2-2-12.  South Dakota has a long-standing program that provides sales and property tax relief to the elderly and disabled poor.  Program eligibility is determined by a fixed dollar income amount, not an amount adjusted for inflation, such as the Federal Poverty Index (FPI). 

Because eligibility increases have not kept up with inflation, the number of households able to take advantage of the program has eroded over time.  Fifteen years ago the program was helping almost 5,700 households with almost $1.2 million of relief.  By FY 11 the resources distributed through the program had fallen by over 50%, dropping to less than $500,000 and helping only 2,392 households.  In 1990, elderly and disabled with incomes at 143% of the FPL were eligible for the program.  Today, even with the increases proposed in SB 194, South Dakotans won’t qualify unless their incomes are below 94% of the FPL (for singles) or 91% of the FPL (for households of two).  According to census data over 12,000 South Dakota elders are living in poverty. 

To be eligible, applicants must have an annual household income below $10,500 for single individuals or $13,750 for households.  Over 80% of the applications denied for this program (1,663 applicants denied between 2002 and 2010) were denied based on income eligibility.

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Do you want to be part of a local discussion about how our state raises tax revenue and spends it? 

Have you ever wondered how the budget process actually works and how you can influence it?

YOU are invited to be part of a public forum in your area discussing the formation of the South Dakota budget and fiscal policy research.   Meetings are being scheduled in over a dozen locations around the state. 

All events will include a light meal, followed by education and discussion around the South Dakota budget and  fiscal policy.

How South Dakota collects and spends money for the common good reflects our shared values – our consensus about what public services are needed in our state and what we are willing to pay for together.

The goal of these South Dakotans Talking sessions is to provide local communities with an opportunity to come together for a non-partisan budget discussion, to learn state budget basics, and to begin a consensus building discussion.  Participants will share their thoughts and ideas in small group discussions and by using electronic technology called “Turning Point.”

Each session in the state will be hosted by local hosting organization(s).  Local Legislators are invited to attend as distinguished listeners. Check the SCHEDULE and contact your local host with an RSVP if you would like to attend.  Meeting sizes are limited.  Be part of South Dakotans Talking!

 
Research provided by:  Joy Smolnisky, Director,South Dakota Budget & Policy Project,  A project of SD Voices for Children

Funding support provided by:  Bush Foundation and Northwest Area Foundation

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SD Summer tax exemption study – what happened, what didn’t happen…

The 2012 legislative summer study concluded their study of sales tax exceptions using less than half of the five days proposed for the process.

Here is a look at what they did.  And what they didn’t do.

They did:

1) Listen to presentations from the Department of Revenue explaining sales and use tax exemptions and itemizing the current exemptions that exist in statute.

2) Following the Department of Revenue explanation, vote up or down on each existing exemption to decide if they would consider it further (they choose to examine 16 out of 79 exemption categories or $88 million out of $578 million in waived revenue).

3) Listen to public testimony on the sixteen exemptions they identified. 

4) Vote up or down on each of the exemptions – identifying two to be referred for potential action in the next legislative session

a) Statutes 10-45-110, 10-46-71 Exempts coins, currency, or bullion. Exempted July 1, 2007.  This exemptions foregoes approximately $32,000 in annual revenue

b) Statutes 10-45-62, 10-46-51 §32-3A-50 Increase tax from 3% to 4% tax on “Large boats,” any boat over twelve feet in length or a motorboat, used or capable of being used as a means of transportation on water, except canoes, inflatable boats, kayaks, sailboards and seaplanes”  Changing this exemption would make the tax rate paid on large boats comparable to the tax rate paid on boats under 12 feet.  The exemption currently foregoes approximately $300,000 in revenue annually

5) Vote to refer minor style and form suggestions identified by the legislative research council for correction during the next legislative session.

That took less than 2 ½ meeting days.  Let’s also look at issues the committee identified but choose NOT to study further or take action on:

1) Double taxation policy:  repeatedly during the public testimony and committee discussion, the avoidance of “double taxation” was cited as the rationale for allowing sales tax exemptions. 

 Example 1:  Lawn chemicals used by lawn care firms are exempt from sales tax when purchased by the business because sales tax is paid on the overall service charge by the customer. 

Example 2:   Cleaning chemicals used by cleaning companies are NOT exempt from sales tax when purchased by the business EVEN THOUGH sales tax is paid on the overall service charge by the customer. 

The committee voted to continue the sales tax exemption for lawn care companies, but did not address the continued inequity of withholding double taxation exemptions from cleaning companies or the myriad of other companies paying double taxation under similar scenarios.   

2) Value of lost revenue:   In February 2009 the Department of Revenue produced estimates of the revenues lost secondary to sales tax exceptions.  The committee did not ask the Department of Revenue to update the 2 ½ year old information they were using to make their decisions.

3) Mechanism for routine tax exemption review:  Study members raved about how much they learned through the sales tax exception study process and the importance of sharing the information with other legislators.  However, they made no recommendations establishing a mechanism for routine tax exemption review as do 43 other states.

The South Dakota Consitution references the importance of consistent tax policy in Article 11, Section 2 “… Taxes shall be uniform…”  It is difficult during the rush of the short legislative session to look at overall consistency and uniformity of sales  tax exemption policy.  This topic, as well as the broader topic of overall revenue policy, merits ongoing review.

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How did the Department of Social Services end up with $14.3 million in excess funds?

That is a nice problem to have – but a takes a little explaining since the state of South Dakota cut provider reimbursements for the fiscal year that just began July 1, 2011.

Let’s look at the facts, as presented to the Joint Committee on Appropriations on June 23, 2011. 

The SD Department of Social Services budget ended FY11 with over $25 million excess funds.  The legislature had anticipated a $10.8 million excess and encumbered that amount forward into FY12 in SB 190 at the end of the legislative session in March 2011. (SB 190 was the bill that eased FY12 Medicaid provider reimbursement cuts from an average of -10% to -7.4%.)

However, at the end of the fiscal year, the Department of Social Services reported they had an additional $14.3 million in surplus funds.  Table 1 shows the source of extra funds and the uses (re-allocations) recommended by the department.

TABLE 1:  Sources and Uses – FY11 Excess Funds – SD Department of Social Services

The SOURCES of funds highlighted in green ($3.9 million) represent unexpected help from the Federal Government – in the form of a higher unemployment bonus and a more favorable drug rebate charge. 

The sources of funds highlighted in yellow ($10.4 million) represent savings because the Department over estimated the number of eligible people enrolled in Medicaid and over estimated the utilization of services and the cost of high dollar claims. 

The final $10.8 million source is the money left over from FY10, encumbered into FY11 and  allocated by Senate Bill 190.  

For further explanation, see the bullet points of the handout to the Appropriations Committee from the Department of Social Services. 

The USES of the fund not previously allocated by Senate Bill 190 include:

• encumbering money for use in FY12 ($3.3 million)
• paying FY11 Medicaid claims during the first 6 months of FY12 ($2.5 million),
• Preserving TANF & Child Care Block Grant ($3.8 million).  This means transferring the funds into a holding account so they will be available in future years to cover any shortfalls between the federal dollars allocated to South Dakota for TANF and the Child Care Block Grant and the actual cost of the program.  
• MMIS ($4.7 million). This represents to new, additional general fund dollars for South Dakota’s Medicaid Management Information System.

Because these reallocations were completed before the end of the fiscal year, these excess funds will not create retroactive ineligibility for the Federal Stimulus funds South Dakota  accepted in FY11.

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