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South Dakota Richer Than We Think: Let’s Budget Accordingly!

I noted in yesterday's post on South Dakota's exported tax burden that, according to 2010 data, South Dakotans earned nearly the national average per capita income but paid over a third less in state and local taxes on that wealth.

Jon Walker updates: according to new 2011 data, South Dakota's income beats the national average, while South Dakota puts less of that income to public use in the state budget than any other state. Here are some key numbers from Walker's paywalled report:

  1. South Dakota per capita income in 2011 was $44,217, up nearly $4,200 from what I reported yesterday and beating the national average by nearly $2,700.
  2. We rank 13th in the nation on per capita income.
  3. We still don't beat Minnesota, North Dakota, or Wyoming.
  4. Farm income rose 107%; non-farm income rose 5.7%.
  5. 88,000 South Dakotans remain in poverty.

In a glaring endorsement of the red-state moocher model, Governor Daugaard's chief of staff Dusty Johnson complains that our increasing income means we'll have to bear a larger share of our Medicaid costs. Our Medicaid share will rise three points to 45.8% next year, taking $20 million more from our pockets to help the sick and poor among us (who have not enjoyed a great trickle-down effect from the ag boom).

Don't let Dusty's tears (or the flim-flam show he's helping Governor Daugaard prepare for next week's budget speech) fool you: if our increased Medicaid bill is $20 million, we can cover that with half a percent of the $3.9 billion in new income brought in last year. If our tax system is accurately capturing increasing wealth (which is the basic assumption of both the Medicaid cost-share policy and the Daugaard argument that economic growth is the best way to increase government revenue), we won't even notice that $20 million as an added burden.

South Dakota's rising wealth is coming mainly from an ag boom, and every farmer watching corn dry out last summer can tell you that ag booms don't last. As Rep. Bernie Hunhoff (D-18/Yankton) tells Walker, "If it doesn’t rain soon, we may be 43rd again real soon."

Given our fluctuating wealth, we should probably avoid going on a fiscal bender this year... although there is an argument to be made that we should intensify investment in roads, bridges, school buildings, and other lasting infrastructure that can continue to serve as a basis for economic development when corn and beans go bust. Maybe it's time to invest some of our growing wealth in an education trust fund that would allow the state to fund schools according to the statutory funding formula during the coming lean years without resorting to the disruptive cuts of the first Daugaard budget.

Whatever the proper policy, we need to approach our next state budget with the understanding that we are not a poor state. South Dakota's wealth is growing. We should make sure that wealth benefits everyone. Instead of continuing to strangle public services, we should invest in infrastructure and programs that benefit everyone, including the thousands of our neighbors who are struggling to get out of poverty.


  1. Michael Black 2012.11.26

    As we head into the 2013 recession, maybe you should reconsider.

    To the State of SD: this is the money you get. Use it wisely.

  2. Steve O'Brien 2012.11.26

    As a teacher, non-farm income did not rise 5.7% in my household. I also imagine that the minimum wage salaries did not rise 5.7% either. As with all averages, these statistics mask another picture of our state - of the haves and have-nots.

    Certainly farm income has the potential for boom and bust - but even the bust is not bust it once was.

  3. caheidelberger Post author | 2012.11.26

    But Michael, as Steve points out, the State of SD is not getting that wealth. It's getting socked away in a few rich folks' bank accounts and not translating into better wages for public servants or other investments in public goods.

  4. Steve Sibson 2012.11.26

    "although there is an argument to be made that we should intensify investment in roads, bridges, school buildings, and other lasting infrastructure"

    Cory, where in the heck do you thing the hundreds of millions of federal stimulus money was suppose to be going to over the last 4 years? Remember "shovel ready"? Time to cut spending and give the people a tax cut. Perhaps we should reduce the sales tax and property taxes.

  5. Steve O'Brien 2012.11.26

    Steve, "Time to cut spending and give the people a tax cut. Perhaps we should reduce the sales tax and property taxes."

    This seems to get to the heart of the matter. How do you get to this conclusion? Clearly South Dakota is doing well financially - (some) people have a good deal more money in their pockets, more than the majority of this nation. Yet SD infrastructure languishes - state educators lag far behind national averages in wages - college students pay more for tuition. How do you combine these two elements to conclude citizens of SD need to spend LESS of their increasing wealth? It all seems devoid of reason and reliant on mottos.

  6. Bree S. 2012.11.26

    Steve, the reason teachers can't get a raise is because the number of school support staff has increased 55% in the last 20 years. Meanwhile the number of teachers has only increased 4%. The problem isn't low taxes. The problem is selfish corruption and cronyism in the government. Stop hiring your cousins for unnecessary positions and stop giving administrators big fat raises. The teachers are the ones who deserve a raise, but the Union isn't working for them.

  7. Charlie Johnson 2012.11.26

    If we implemented the BEEF concept, a maximum of 1 % of all gross revenue would fully fund the school aid formula. The funding would go into a k-12 education trust fund that would build up a balance to fully fund education 2 years out. Then the BEEF levy would back off to a levy less than 1% if possible. With SAF fully fund by BEEF, the state could eliminate the need for a property tax general levy and the 54% that needs to come from the state general fund.

  8. Steve Sibson 2012.11.26

    "It all seems devoid of reason and reliant on mottos."

    When the 2008 state spending level was just over $3 billion grows to $4 billion, what logic and reasons say that govenment can't avoid to pay teachers and fix roads? Bree is right, those in charge of government are milking it, and all in the name of giving us other words, making us slaves. want to give the poeple more power, then let them keep more of their money. Stop the coveting.

  9. Bill Fleming 2012.11.26

    Slaves, schmaves, Sibby. What a crock. The only thing you are a slave to is your own delusions.

  10. Michael Black 2012.11.26

    The BEEF proposal would eliminate all local control of school board funding. The state would dictate all education spending. No thank you.

  11. Steve Sibson 2012.11.26

    I thought a Marxist would agree that South Dakota low paying jobs are on the lines of slave labor. Or were the slaves better off Bill?

  12. Bill Fleming 2012.11.26

    Do you feel like a slave, Sibby?

  13. Tom Emanuel 2012.11.26

    Sorry, last link was a bit outdated, from 1996. Here's the Institute on Taxation & Economic Policy's 2009 edition of "Who Pays?" - though you'll have to do some more digging to find the SD info:

  14. Steve O'Brien 2012.11.26

    Bree, none of your numbers explain why education is poorly funded. There has been an increase of support staff, mostly to accommodate students who would have been flushed out of the school system years ago: special needs, drop-outs, etc. All those are students we have said deserve an education, students that should not just be case aside. I agree with the value of providing education services to all children, but Pierre doesn't fund those civic responsibilities. They funds don't increase nearly as fast as the needs. In economic terms, those special needs students are not "cost-effective." Another way that schools do not act like businesses, but there is a cost.

    Even the corruption, cronyism, administration raises (who I say deserve a salary that reflects their education and status as much as I as a teacher do) is pennies when applied to the underfunded schools because of revenue decisions made in South Dakota. As the economic health of the state more comes into light, the underfunding of social services and infrastructure becomes difficult to justify on moral footing.

    None of this is a reason to neglect paying ALL a wage that reflects the wages of the state. If the state earns above average wages on average, what is the justification for paying teachers 63%?

    As for "the union" not doing its job, I am the union. I have lobbied in Pierre; I have worked on task-forces on enhanced compensation models; I have advocated for leaders who share these goals. In a "right to work state," worker and collective bargaining rights are limited. We rely only on the ethos of our elected officials, and we all see where that has gotten education in this state.

  15. Steve O'Brien 2012.11.26

    Steve, if government's failure is to provide appropriate services, why then isn't the argument for doing a better job providing those services? Why is the argument to cut the funds? Certainly you are not of the belief that social security, education, and infrastructure ought to be abandoned because right now they are done poorly. Your brand of conservatism seems very quick to throw the baby out with the bath water.

  16. caheidelberger Post author | 2012.11.26

    Michael, Charlie's BEEF proposal doesn't have to mean the end of local control any more than the current system does. Charlie proposes a system to support the state's current share of K-12 budgets. Charlie, are you proposing changing that state share, or having all K-12 funding come from BEEF?

  17. caheidelberger Post author | 2012.11.26

    Yup, Sibby, we did spend $472 million in stimulus dollars. But we've lived on such a shoestring state budget that even that infusion of cash wasn't enough to refit all of our bridges and roads and schools. And it certainly didn't stop our Governor and Legislature from abandoning the funding formula and unnecessarily hammering the K-12 system.

  18. caheidelberger Post author | 2012.11.26

    Steve O'Brien, you've quite accurately described Steve Sibson's conservatism. He wants a Norquistian drowning of an irredeemible government, followed by a return to the state of nature.

    Mr. O'Brien's assessment of the reason for increased staff at schools is very important. Bree and the Governor have been barking up the wrong tree, hollering about "bloat" in K-12 education when in fact K-12 is simply responding to the choices society has made to educate all children, no matter how inefficient it may be to introduce students with enormous learning disabilities into mainstream high school classrooms. You just aren't going to find enough fat in K-12 to solve the funding shortfall. The funding shortfall is a choice made by our state not to back its words and values with money.

  19. Charlie Johnson 2012.11.26

    BEEF would still have property taxes cover any op-outs, capital outlay, bond issuance, and special education. On a scale of 1 to 10 with a chevy as an 8 and a cadillac a 10, the SAF through BEEF would meet the state's constitutional responsibility at the Chevy level. Local school districts through a tax op-out could fund from 8.1 to 10 based on what they wanted to do. As to local control, let's keep in mind that paying property taxes doesn't always mean local buy-in. Many property owners are outside of the district. Many individuals earn good incomes without owning real property and thus don't contribute to education on a local basis. BEEF would have no exceptions, no exemptions, no deductions. Everyone pays in--on their first dollar and last dollar no matter their position in life.

  20. Bree S. 2012.11.26

    O'Brien if you are the Union, why did you support the Republican in your district instead of one of the Democrats? Don't you Union bosses usually support Democrats? I just don't get it. Please explain.

  21. Bree S. 2012.11.26

    Were we flushing special needs students out of the system 20 years ago? However did they manage in the Austere Dark Ages of Education.. er, I mean the 90's. If I roll my eyes any further at this incredible nonsense I will dislocate an optical nerve.

  22. Jana 2012.11.26

    Charlie, I am guessing that renters have the property tax + a little more factored into what they pay for rent.

    I believe renters in Minnesota receive a tax credit for the property tax they pay on their dwelling. But any Minnesotans could certainly clarify that.

  23. Les 2012.11.26

    Don't go getting to wired over yur 1bil plus stim find Corey. I doubt much of that money if true, found much shovel ready or more to the point, found the confidence to spend under the current admins rock steady uncertainty.

  24. caheidelberger Post author | 2012.11.26

    Bree, I admit I didn't pay much attention to special needs students 20 years ago, before I became a teacher. When I was in high school 25 years ago, I don't recall seeing students with the levels of disability I see today in school. I honestly don't know what services we provided or where back then.

    Of course, 25 years ago, a lot more South Dakota schools had gifted programs. The state cut funding for that "fat" in 1997, and most schools shed their gifted programs within a decade due to budget pressures.

  25. Stan Gibilisco 2012.11.26

    "South Dakota puts less of that income to public use in the state budget than any other state."

    Please provide this dummy with a direct link to a statement that clearly verifies this claim.

  26. Stan Gibilisco 2012.11.26

    "Instead of continuing to strangle public services, we should invest in infrastructure and programs that benefit everyone, including the thousands of our neighbors who are struggling to get out of poverty."

    By taking more of their money?

  27. caheidelberger Post author | 2012.11.26

    Link, Stan? We rank 50th in state taxes as percentage of personal income. Walker cites the stat in his report and points to the South Dakota Budget and Policy Project's "Budget Primer," p. 12.

    We don't take more of the money from the people who are struggling. We take some money from where it is and put it where it ain't.

  28. Stan Gibilisco 2012.11.26

    Suppose we raise the sales tax a percentage point from 4 to 5 percent, and then completely exempt all groceries (from all 5 percentage points).

    I wonder how much additional revenue that would raise? Or would it raise any? Has anyone calculated it?

    If the recent referendum item concerning sales tax had included an exemption for groceries, it would probably have passed 65-35.

    It might even have passed had the increase been from 4 to 5.5 or 6 percent.

    That change would make the sales tax less regressive and, as you say Cory, and as I would agree, take some money from where it is and put it where it ain't.

    And people would actually go for it, which of course matters in any plan that includes contact with the real world.

    Wealth redistribution, done right. That's okay by me ... but ...

    ... then, with our improved education and improved infrastructure, let us get get down to the business of creating new wealth by attracting big-time investors here, not merely rearranging what we have by manipulating the tax system.

  29. Stan Gibilisco 2012.11.26

    Has anyone ever gone out and actually asked potential big investors (Microsoft, Apple, Google, etc.) what South Dakota could do to make itself more attractive to them?

  30. MOSE 2012.11.27

    Cory, quit making Dusty look so bad, it might be just a matter of time till he jumps ship again for something that looks better for him.

  31. Rich Mittelstedt 2012.11.27

    Bree, I am also part of the union. SDEA only supports education issues and when they support candidates, it is because of their position on supporting public education and nothing else. To that end, we don't really care what party a candidate is from if their support of public education is in line with that of our members. Republicans and Democrats alike were recommended in this election, but SDEA did not recommend a vote for a Republican candidate in Steve O'Brien's district (mine as well) because they were all incumbents who voted yes on HB 1234 (R.L. 16) and that bill clearly was not pro-public education.

    Regarding students with significant diabilities in previous decades, there was a time into the 1980s when those with the greatest needs were simply institutionalized in a facility that operated in Redfield. Most school districts had separate buildings or self-contained special education classrooms where students on IEP's were placed and it meant that the district could provide education much more cheaply because a much smaller group of special education teachers could handle a much larger number of students when they were all in one place. Someone who has never experienced a need in their family for special education services might roll their eyes at the assertion that government was not serving the educational needs of those students during that time period while they were so neatly tucked away out of sight from the mainstream society, but it was clearly a case then of keeping them out of sight and pleasing the public moreso than helping those with the greatest need. Society has decided that that sort of setting was not in the best interests of all but the most severely disabled and that everyone needed to be placed in the least restrictive environment. Schools have been trying to comply with federal law since the mid-1980's, which is why we saw exponential growth in special education employees (certified teachers and classified paraprofessionals) throughout the 1990's and 2000's. There was improvement in the 1990's, but the vast majority of regular education teachers still did not see the need, nor did they have the skills or knowledge, to deal with students on I.E.P.'s and so those students still were not being educated to the greatest extent possible. The law of the land is inclusion, which compels all teachers, rightfully so, to educate all students in a regular-education. That means that more support staff and special education teachers have had to be hired to be placed in those classrooms to assist students with special needs and to help the regular classroom teacher ensure that no child is being left behind. It has amounted to a ton more work for regular education teachers and a mountain of paperwork, but it is good for students. Why wouldn't we want to fund that?

  32. Bree S. 2012.11.27

    Rich, O'Brien endorsed a Republican school administrator over the Democrat VP of the Board of Education in the District's population center. Both Democrats running in the District were former teachers. Union Boss O'Brien stamps his name on the Republican administrator's political mailer, endorsing him over both Democrats who spent their time serving their community by actually teaching students. So tell me Rich, who is the Teacher's Union working for?

  33. Bill Fleming 2012.11.27

    Bree, sometimes, as with politicians, it's a mistake to confuse the bosses with the rand and file. I'm just sayin'.

  34. Bill Fleming 2012.11.27

    ....RANK and file. ...sorry.

  35. Bree S. 2012.11.27

    Rich, for the last time (I get so tired of repeating myself to people who blatantly ignore the truth) there has only been a 4% increase in the number of teachers, ALL TEACHERS, in the last 20 years. That 4% is probably the extra special education teachers you keep bringing up as though that explains away the 55% increase in the number of administrative positions.

    Would it help you if I stated it so: In the last 20 years there has been nearly 14 times as many new administrative positions compared to new teaching positions. For every new teacher close to 14 new "support staff" were hired. You have no logical excuse for this. A special education teacher does not require 14 administrative assistants to do his or her job, no matter how tough that job is.

  36. Bree S. 2012.11.27

    Bill, O'Brien is the one who said he is the Union, and that he has lobbied in Pierre.

  37. Rich Mittelstedt 2012.11.27

    Bree, Let's make it clear that that wasn't O'Brien's district you are referring to. Let's also make it clear that union members also have the right to their personal opinions. You didn't see an SDEA endorsement for any candidate in that district. In the Legislative District you are referring to, the candidate that O'Brien (and I) lent our name to was a former school board member in our school district. He wasn't an administrator. He was an elected citizen and community member who had children in the district and who was a very solid, reasonable and rational voice where making sound education policy was concerned. The local education association had an excellent working relationship with him as a board member. Why wouldn't members of that local association want to see someone like that in the Legislature? Who cares what party he belonged to? In the Legislative race in that district, the "union" (SDEA) didn't endorse anyone because they were afraid of alienating any one of the three pro-education candidates and decided to let things run their course and work with whomever won. You seem to be suggesting that once someone joins a union that they are not entitled to their own opinions, nor should they be allowed to make their own personal choices as to whome they endorse, nor do so publicly, and that when one or more individuals who have membership in SDEA put their personal names on a flyer, that that must mean that the entire organization endorses the candidate. For us, it wasn't a matter of being against the other candidates. I don't think any of us who endorsed the board member from our school district (who lives in our school district, but NOT our legislative district) know them, and I hear and know from other local associations in that legislative district that they think the two Democratic candidates are great. That's wonderful. Now that they won, I look forward to getting to know them and work with them.

  38. Bill Fleming 2012.11.27

    Bree, exactly as per Rich. Union members have minds of their own. You must be mistaking them for Republicans. LOL.

  39. Bree S. 2012.11.27

    So now that Union Bosses endorse Republicans over Democrats in South Dakota, we can drop the nonsensical argument that RINOs don't exist.

  40. Bill Fleming 2012.11.27

    Bree, aren't you an Independent?

  41. Bree S. 2012.11.27

    So he wasn't even an administrator, he was just a school board member. So a Teacher's Union lobbyist endorsed a Republican "reasonable voice" over two Democrat teachers. Excellent. Move along - nothing to see here.

  42. Bree S. 2012.11.27

    No Bill, I've been a Republican since about 2004. Which is a lot longer than several Republican legislators.

  43. Rich Mittelstedt 2012.11.27

    Bree, you are confusing what "administrator" means in school lingo. There are three tiers of employees in K-12 public schools in South Dakota: classified staff, certified staff, and administrative staff. Classified staff are employees who are hired on an hourly basis. They do not usually have the same benefits or rights as other employee levels. Most of them are not required to carry any sort of endorsement or certification from the Dept. of Education. They can be fired at will. These are the paraprofessionals (aides), secretaries, cooks, bus drivers, custodians, etc. If you think teacher pay is low, you should see what qualifies as a living wage for these folks who pour out their heart and soul for children. Certified employees are teachers, nurses, counselors, psychologists, etc. who are required to be certificated by the SD Dept. of Education. Administrators are also certificated, but hired for management positions and generally have 10-12 month contracts. When you say there has been a 55% increase in administrative positions you start to talk about the people hired to help in classrooms. They aren't administrative. I could believe that classified employees have increased by that amount, but not administrators. And yes, to be compliant with federal education law, they do need that many people. I don't know of a single district that keeps around a classified employee one day longer than they need to. Usually, classified employees who are hired to work with a specific student are terminated the moment that student moves or graduates, unless they are lucky enough to be reassigned to a new student. It sounds like your complaints lie with federal law more than they do with the school districts who are forced to hire more staff to be compliant with the law; however, I do realize that it is more convenient to be angry with the school officials in your community because they are close by and real, unlike federal law which is nebulous and has no clear target.

  44. Bree S. 2012.11.27

    So Rich, your claim is that federal law has required a 55% increase in support staff in the last 20 years? Please tell me the name of the statute so I can verify.

  45. Bree S. 2012.11.27

    Over the same period that South Dakota increased non-teaching staff by 55% Montana decreased non-teaching staff by 3% and California increased non-teaching staff by only 37%. Are Montana and California in violation of federal law for not increasing these positions as much as South Dakota has?

  46. Bree S. 2012.11.27

    I think it bears mentioning that California experienced a 24% increase in the number of students in public schools over that 20 year time period while South Dakota saw a 4% decrease in the number of students in public schools.

  47. Ken Santema 2012.11.27

    Well, if we really do have this extra wealth laying around it may be a good time for South Dakota to change public education: opt out of the federal DOE. Localize education and get rid of the one-size-fits-all approach taken for for fifty diverse states.

  48. larry kurtz 2012.11.27

    Nice catch, Cory: field 'em on yer own.

  49. caheidelberger Post author | 2012.11.28

    Rich, thank you for your good explanations on both issues. Bree, I think you're trying to play some strange gotcha distraction with your pursuit of the Deutsch endorsement issue. (And to be clear, Deutsch ran in rural district 4, while Rich and Steve are, I believe, in District 5.) That has nothing to do with the availability of wealth to better fund education in South Dakota. And it doesn't say anything about RINOs or "union bosses," a term which has no meaning in South Dakota. (Steve in particular can be intimidating, but he's not Jimmy Hoffa.)

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