Rep. Wismer Shames South Dakota for Fiscal Irresponsibility

While her male colleagues bloviate about guns and abortion, Rep. Sue Wismer (D-1/Britton) makes one of the best speeches you'll hear in the South Dakota Legislature. On Thursday, Rep. Wismer brought House Bill 1193, a measure to increase the state sales tax from four to five percent, to the House Taxation Committee. In thirteen minutes, she offered a substantive, punishing critique of South Dakota's miserly, irresponsible, and dishonest fiscal policy and political culture.

In subsequent comments in committee (see around timestamp 57:00 in South Dakota Public Broadcasting's audio), Rep. Bernie Hunhoff (D-18/Yankton) called Rep. Wismer's speech "best budget address ever given in this building... probably the shortest too." Consider her speech required reading for all South Dakota legislators and taxpayers.

South Dakota Public Broadcasting has the audio (Rep. Wismer begins shortly after timestamp 36:25); I republish her remarks in toto here, with emphasis added:

Rep. Susan Wismer – House Taxation Committee Remarks - February 7, 2013

I surprised myself as I had this bill drawn up a few weeks ago. I usually just bury myself in appropriations committee. But I am going to do a little tilting at windmills today, something that I’ve been telling people for a few years I didn’t see the point in doing. But I’ve changed my mind, which is a woman’s prerogative, after all.

I finally decided I needed to address South Dakota's problems at their source, so I am here to have a discussion about revenue. By nearly any measure South Dakota gets an F in effort for funding our government services. We are tired of hearing that, but it doesn’t make it any less true. We pay the least amount per student of any state in the union. And we’re not in last place by just a little, we are in last place a lot. We pay the least amount of state taxes per capita, we pay the least amount of state taxes per dollar of gross income, and we are far from the bottom in measurements of income. In fact that’s why our Medicaid match continues to increase: our growth in income is greater than nearly any other state these days.

So why do I think we should quit bragging about our last place funding effort? Because our taxes are only based on two of the legs of the stool, it gets tipsy every so often and we have to fix it, and it’s time to fix it again. Over the last 40 years or so, South Dakota has added a new revenue source every once in awhile: Senate taxation heard from Henry Carlson about the contractors excise tax that we added in the 70’s—that brings in $75 million annually. The sales tax base was broadened during Gov. Janklow’s time to cover many more services. Video lottery was legalized in the 80’s, and that brings in something over $100 million now. We’ve added several trust funds from which we take the earnings of roughly $25 million annually.

Just in the last few years, we’ve LOST several revenue sources: the state inheritance tax completely, and the bank franchise tax and cigarette tax receipts have decreased in the last four years and may very well not return to prior levels.

And here I’ll make two disclaimers to answer two questions you may be having at the moment:

1) Would I prefer a state income tax? Yes, I would. It’s a much fairer method of taxation. It’s the third leg of the stool. It taxes people whether their wealth is in land or in stocks and bonds or in services. If we did a corporate income tax we could tap all sorts of revenue of big companies that we let other states take our share of. But our electorate has been poisoned against an income tax, and we cannot wait for the pendulum to swing back to sanity. South Dakota needs this discussion to be about revenue, not the income tax, so I am not here proposing an income tax. Besides I might get accused of self-interest if I did that. (I do income tax returns when I'm not here.)

2) True blue democrats dislike the idea of another penny of sales tax, especially when it’s still on food, as you’ve been hearing. But as an accountant and tax preparer, I see the federal assistance that is available to low income people: A family that earns between $20,000 and $30,000 with two kids receives as much as $5,000 of earned income credit refunded on their tax return. They do spend about $700 on sales tax in a year according to IRS tables or $1,000 according to SD Budget and Policy Project. A one penny increase would add another $125 per year to that number, or $260 per year according to the SD Budget and Policy Project. To offset that, many receive food stamps, housing assistance, home energy assistance, and Medicaid for the truly destitute families with children. I will admit that I have not walked with the poor as have some of the people you heard testify. But when I weigh the injustices, I feel that poor kids suffer more than others when our schools are struggling, because they don’t have the resources at home to supplement what they get or don’t get at school, and I ask those advocates of the poor not to let the perfect be the enemy of the good in considering this proposal.

But, back to revenues: In the budget cut year, two years ago now during 2011 session, a discipline was enforced to achieve an ideological goal—a script was followed. Now that that‘s been accomplished, several departments did or are recouping their cuts through a combination of federal and fee funding swaps and now general fund increases: but not roads, or education or Medicaid or higher education, because they are big dollars, and we don’t have enough to fix those underfunding problems.

The Governor talked a lot of about living within our means as a virtue during the cut year. Truth-telling is also a virtue. Our state’s citizens need to know the truth about the consequences of our budget choices. The fact that the legislature chooses not to acknowledge the damage done to schools, nursing homes, universities, community support providers, or our crumbling infrastructure, does not mean the damage isn’t there. It just means we are choosing to ignore it, in favor of maintaining our bragging rights to our misplaced priorities. As elected legislators, WE know things the voters do not know, partly because we are not telling them.

What I saw in the budgeting process the last two years was a “the less we know, the less it hurts” approach, because if we dug too deep, the knowledge of our foolhardiness would not allow us to do what we wanted to do, because we have told our voters it could be done. So we did things like this:

1) We increased user fees and local property taxes in order to allow the Governor to claim the budget victory. Was that being honest?

2) We’ve added back to Corrections more than two-thirds of the FTE’s they lost in the cut year. I will always wonder how much our “new culture of fiscal restraint” cost there.

3) We’ve created a permanent class of working poor and tolerate horrific turnover rates by paying those who work with the developmentally disabled and in our nursing homes a wage that they can’t live on without government assistance themselves, while at the same time thumbing our nose at federal Medicaid dollars that could be used to pay them better. How is that being a good steward of our human and monetary resources?

4) We lost investments in talent, leadership, and experience in higher education and all across state government when underpaid employees left for better opportunities. The Ag Research College has lost 37 faculty since the cut year, several to competing industries and schools. How is that fiscally responsible?

5) We borrowed millions just last year to play catch up on maintenance and repair at our universities. We’ve bumped tuition up so that students’ share of the cost of education has increased from 43% to 59% in 10 years. Is that making an investment in the future generation? Is that really a balanced budget?

So, I move on to the election last fall on IM 15, which I supported. We are being irresponsible in hiding behind the vote on IM 15. For starters, the opponents misled voters with several bogus arguments: They cultivated distrust about legislative oversight or the lack thereof; they invoked Sanford jealousy over the hospital’s participation; they invoked drought fears, when any farmer knows that sixty percent subsidized revenue and yield insurance is a deal that no farmer turns down these days. They talked about “taking” money from taxpayers as if it would disappear, when we all know that every community in this state would benefit from investments in its schools and nursing homes. They conveniently omitted the fact that removing some of the pressure of severely underfunded education and Medicaid would allow the natural growth of normal sales taxes to be devoted to the serious problems of infrastructure, public safety, and higher education. They crowed that it was the legislature’s decision to make, but when Farm Bureau and Farmers Union, two of the opponents of IM15, came to Appropriations asking for $6 million a year for the Ag Research station, they certainly didn’t volunteer that the legislature should increase taxes to fund their request. And finally, they confused the voters with fears of federal dysfunction, giving no credit whatsoever to those who came before us and the tight ship that South Dakota state government has always run.

As legislators, we have the responsibility to do more than just say no blindly. Saying no isn’t discipline, or a virtue, or stewardship, when it saves you from having to make really hard decisions. Saying no makes life simple: it saves us from having to really think about what we’re doing and make the judgments we were elected to make.

The average voter does not have the advantage of the information we have, but WE are in a position of responsibility. We have the information; we know the lobbyists’ interests, and it is our responsibility to be able to tell the difference. We know we inherited a well-run state. Our ancestors gave us infrastructure, an educated citizenry. We know we are not doing our part in passing that heritage on to our children.

If we were truly cognizant of the costs of this funding approach to our state and our communities, and truly weighed those costs against the bragging rights to our last place in funding effort, I do not believe any of us have cause to be proud about our so-called balanced budget. I am not proud, and I ask you to help me do something about it.

[emphasis mine; Rep. Sue Wismer (D-1/Britton), transcript, speech to House Taxation Committee, South Dakota Legislature, 2013.02.07]

House Taxation killed Rep. Wismer's proposal to rectify our state cheapskatery with a higher sales tax on a 12–3 vote.