How I wish I could be in Aberdeen to join Ken Santema at the Legislative crackerbarrels! My Libertarian blogospheric colleague is providing excellent coverage of Legislative issues. Yesterday he got hold of a useful handout from Senator David Novstrup (R-3/Aberdeen) comparing the costs of the competing road-tax-and-fix bills proposed by Governor Dennis Daugaard and by the interim Highway Needs and Financing Committee:

Comparison of Daugaard and Interim Committee Road Tax Proposals, distributed by Sen. Al Novstrup, published by Kan Santema, SoDakLIberty, 2015.01.24

Click to embiggen—Comparison of Daugaard and Interim Committee Road Tax Proposals, distributed by Sen. Al Novstrup, published by Kan Santema, SoDakLIberty, 2015.01.24

The immediate bottom line shows the Governor's proposal imposes half the tax burden of the committee's plan, $51 million versus $101 million, largely by leaving out the 3% wholesale fuel tax.

But remember, that's just in the first year. The above comparison does not note the increasing revenue that will come on the motor fuel tax line from Daugaard's proposed ongoing annual two-cent increase, which far outpaces the increase proposed by the interim committee. The 3% wholesale tax in the committee proposal may provide more revenue, if gasoline prices do what we'd expect and rise over time. But remember: after the 1986 oil price crash, gasoline prices remained remarkably flat through the 1990s. The wholesale tax doesn't guarantee more revenue; Daugaard's plan does.

Of course, as of this weekend, we still don't have the Governor's exact plan. The interim committee's plan was the first bill filed for the Senate; the Governor's plan has not yet been filed as a formal bill.

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Rebuttal of the week to gubernatorial malarkey on K-12 education funding comes from Leola superintendent Brian Heupel, who offers this observation on Governor Dennis Daugaard's persistent shirking of responsibility for South Dakota's perennial barrel-bottom teacher pay:

"The governor always says that the local school boards determine teacher pay," Heupel said. "Well, I look at it, when I was growing up, if my dad gave me 50 cents, I couldn't go to the store and buy something for a dollar" [Patrick Anderson, "Teacher Shortage Stories," that Sioux Falls paper, 2015.01.22].

The teacher shortage is real. Heupel and his colleagues in Flandreau, Alcester-Hudson, Chamberlain, and Estelline aren't making it up. And the amount the Governor is willing to spend on education is directly responsible for our continued sorry state.

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I must give John Tsitrian kudos for catching Governor Dennis Daugaard in a brilliant contradiction. In Tuesday's Rapid City Journal, Governor Daugaard responds to a question about South Dakota's weak regulations on uranium mining by saying, "I don't like the notion that the state duplicates federal regulation. So, to the extent that the Atomic Energy Commission or the EPA is looking at this, I think we should let it run its course."

Tsitrian goes just seven months back and finds the Governor saying pretty much the opposite in a press release warning the feds off using the Clean Air Act to impose more regulations on power plants and calling the feds to recognize states as "co-regulators." Hee hee!

Further verbal chicanery lies in Daugaard's feigned preference for EPA regulations of uranium mining. His pal Senator Mike Rounds wants to eliminate the EPA; where would that leave our uranium mining regulations?

Inspired by Tsitrian to jump on the contradiction bandwagon, I scroll up through the Tuesday RCJ article and find another obvious whopper. Asked by RCJ's Meredith Colias about why he left education out of his State of the State Address and his funding priorities in favor of roads, Governor Daugaard dismissed complaints thus:

Bottom line is, you can’t spend money that you don’t have....

I try to give an increase to education every year … so I’m doing what I can with the resources available [Gov. Dennis Daugaard, interview with Meredith Colias, Rapid City Journal, 2015.01.20].

Um, Dennis? You don't have the money to fix the roads, either. You're proposing a plan that goes and gets more money (and still lets the roads get worse). Tell us again: why can you go get money that we don't have now for roads but not go get money that we don't have now for schools?

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I guess Governor Daugaard is going to go full-tilt global-warming denialism on South Dakota's teacher shortage:

Instead of offering answers during an appearance on Argus Leader's "100 Eyes" program, the governor asked questions. He also questioned the state's culpability for South Dakota's low teacher salaries.

"Is there a shortage?" Daugaard said Monday. "Maybe in some areas. Is it driven by a salary differential, or is it driven by location, geography? What is it driven by?" [Patrick Anderson, "Teacher Shortage: Questions from Daugaard," that Sioux Falls paper, 2015.01.20]

Is there a teacher shortage? Dakota Wesleyan University president Amy Novak thinks so:

With fewer teachers for students in South Dakota's rural communities, lawmakers and educators are developing a plan to encourage other staff members at those schools to get teaching degrees.

Amy Novak, president of Dakota Wesleyan University in Mitchell, told The Daily Republic on Tuesday that she has been included in talks about legislation that would help paraprofessionals, such as teacher's assistants, already working in rural communities get a bachelor's degree in elementary or secondary education. Novak said Dakota Wesleyan would like to be involved in any effort to revitalize the state's rural communities [Chris Mueller, "Local College Joins Fight Against Teacher Shortage," Mitchell Daily Republic, 2015.01.20].

So does freshman District 14 Rep. Tom Holmes:

The legislation, prepared by State Rep. Tom Holmes, R-Sioux Falls, is still in its early stages. But, essentially, it would provide tuition assistance to those paraprofessionals who agree to teach for at least five years in a rural community.

The legislation comes as a response to a shortage of teachers in South Dakota, which the numbers indicate is likely to get worse in the near future [Mueller, 2015.01.20].

So does District 20 Rep. Tona Rozum:

State Rep. Tona Rozum, R-Mitchell, said she has visited schools in her district, which includes Davison, Aurora and Jerauld counties, and has seen the teacher shortage firsthand.

"There is a shortage," Rozum said. "They need help to get teachers into the system" [Mueller, 2015.01.20].

And so does the Mitchell Daily Republic, whose editor at no point requires Mueller to qualify "teacher shortage" with "alleged" or "purported" or anything else that would support our Governor's feigned agnosticism.

South Dakota is short on teachers. We're not paying them enough to compensate for two generations of gubernatorial and legislative disrespect. We're not paying them enough to compete with other states and other professional opportunities. The Governor may want to ignore that reality, but evidently even members of his own party cannot sustain that denialism. Let's hope Holmes and Rozum can propose honest solutions to this very real problem.

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In his post-speech press conference yesterday, Governor Dennis Daugaard responded to the criticism he knew was coming that his proposed tax and fee increases for road repairs violate his 2010 election promise not to raise taxes. In responding to this criticism, Governor Daugaard reveals his confidence that the nation has fully emerged from the recession and will not go double-dip:

I'm not unwilling to ask for increases in revenue where I feel the need is genuine and concrete. IN the case of the state highway system, I was unwilling to support a tax incrase the first term because, when I ran for re-election [sic] we were still wondering whether or not we would recover from the recession, and even though there were some indications that we were starting to emerge, there was also some concern about a double-dip recession. There was certainly not a strong rebound in the economy, so when I ran I promised to oppose tax increases. The worst time to raise taxes is when you are trying to recover from a recession. And I kept my promise. But when I ran for re-election this time I made it plain that one of the concerns I had was about funding adequacy for our roads and that everything was on the table, including taxes. So anybody that was paying attention to this issue should ahve been well aware that I was looking at taxes as a potential part of the solution [Governor Dennis Daugaard, press conference, recorded and posted by Todd Epp, Northern Plains News, 2015.01.13].

The need is concrete... oh, the subtle wit!

Governor Daugaard is thus affirming the success of the Obama recovery. Looks like Rep. Steve Hickey's Cassandrafication about a Long Economic Winter will get no traction on the Second Floor....

Now if the Governor can believe the recovery is here to stay, what can we do get him to believe that the federal money to expand Medicaid is here to stay, too?

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Udpate 12:50 CST: My original post ignored a 3% wholesale tax imposed by Senate Bill 1. I have refigured my spreadsheet and adjusted the text here to include that new tax in this explanation.

Wait a minute: did I call Governor Daugaard cheap? His road plan would raise you gasoline tax just as much as the Legislative plan he's rejecting.

We don't have the Governor's formal bill yet, just the points he laid out in his State of the State Address yesterday. The Governor proposes raising the tax on motor fuel two cents per gallon each year, starting this July. He gave no sunset date. He says that hike would raise $13.75 million in the first year.

Governor Daugaard justifies that annual increase by pointing out the failure of our motor fuel tax to keep up with inflation:

The legislature implemented the current $.22 motor fuel tax in 1999. That was 16 years ago, when I was in the State Senate, and Bill Janklow was governor. Gasoline was around $1 per gallon, so the motor fuel tax at the time represented 22% of the total price per gallon. That per-gallon fee of $.22 was fixed in statute and has been the same for the last 16 years. If the legislature had indexed the gas tax to inflation for construction costs, the fuel tax would be $.45 today – more than double [Governor Dennis Daugaard, State of the State Address, as transcribed by that Sioux Falls paper, 2015.01.13].

Two cents more each year won't break 45 cents per gallon until 2027 (Fiscal Year 2028).

Senate Bill 1 raises the motor fuel tax in smaller increments, from 22 cents per gallon now to 28.16 cents per gallon in 2025. SB 1 doesn't start boosting the tax until next year. SB 1 specifies no increases after that.

To keep up with inflation, SB 1 creates a new 3% tax on the wholesale price of motor fuel. That tax starts at 7.5 cents per gallon, which is then established as an ongoing minimum, just in case oil prices miraculously stay cheaper.

You can check out my spreadsheet comparing the Governor's motor fuel tax proposal with Senate Bill 1. I assume constant gasoline demand extrapolated from the Governor's first-year revenue estimate. For the wholesale fuel tax, I assume 3% inflation from this year's levy and further assume that the cost will be passed on fully to consumers at the pump. Your mileage may vary. Here's the fiscal impact by July 1, 2026:

  1. The Daugaard plan would have South Dakotans paying 5.8 cents more per gallon than SB 1.
  2. The SB 1 motor fuel taxes raise more revenue than the Daugaard motor fuel tax for the first five years.
  3. In Fiscal Year 2021, Daugaard's fuel tax raises more revenue than SB 1's motor fuel taxes.
  4. In FY2026, Daugaard's two-cent-per-gallon increases will bring in almost $40 million more than SB 1's smaller retail per-gallon hike and 3% wholesale tax.
  5. A household driving 20,000 miles a year and averaging 30 miles per gallon would pay around $293 in annual fuel tax under the Daugaard plan, versus around $255 under SB 1 and $147 under the current 22-cent tax.
  6. Over the next eleven years, the Daugaard fuel tax raises $907.5 million in additional revenue; the SB 1 fuel tax, $884.6 million. Translation: The Daugaard motor fuel tax takes 2.6% more money out of your pocket at the pump than Senate Bill 1.

The plan Governor Daugaard laid out yesterday raises the vehicle excise tax from 3% to 4%, just like SB 1. Daugaard raises vehicle registration fees 10%, just like SB 1. We'll see where the Daugaard plans gets its savings over SB 1 in its final draft when it hits the hopper.

But as it stands right now, over the next eleven years, Governor Daugaard's plan would hit you as hard as Senate Bill 1 when you buy, register, and gas up your car.

Related Reading:

  1. John Tsitrian calls Governor Daugaard for reneging on his 2010 no-new-taxes pledge after ignoring obvious shortfalls in road funding throughout his first term.
  2. Bob Mercer lists the new revenue Governor Daugaard would get from his various tax and fee increases in the first year of the plan.
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One man's efficiency is another man's absurdity. Check out these three slides from Governor Dennis Daugaard's 2015 State of the State Address.

(Governor Dennis Daugaard, South Dakota State of the State Address, 2015.01.13, slide 9)

(Governor Dennis Daugaard, South Dakota State of the State Address, 2015.01.13, slide 9)

Governor Daugaard told the Legislature that we don't want all of our roads to be in the best shape. Apparently there some actuarial calculation that tells us that we get the most bang for our highway buck if we maintain 30% of our roads in "excellent" condition and 50% in "good" condition while letting 15% slip into "fair" condition and 5% into "poor."

I can see the sense in this 80% sub-ideal. You can paint your house every year, but you're not getting much added value for your expense over the guy next door who settles for one good coat that maybe fades a touch but sticks for seven years.

Governor Daugaard reports that our roads actually exceed this 80% sub-ideal:

(Governor Dennis Daugaard, South Dakota State of the State Address, 2015.01.13, slide 17)

(Governor Dennis Daugaard, South Dakota State of the State Address, 2015.01.13, slide 17)

Governor Daugaard's translation of this slide: "Because of the stimulus, pavements today are a little better than we need them to be." Yes, the 2009 stimulus made South Dakota's roads too good. Blame Obama.

The seemingly crazy conclusion one could draw from this chart is that we could adopt neither Governor Daugaard's highway funding proposal or the interim Highway Needs and Financing Committee's Senate Bill 1, maintain the status quo, and cruise through 2018 before our roads would drop below that optimal 80% excellent/good ratio. Contrary to the opinion of your keester as you ride the washboard to Ramona, this slide says, There is no roads crisis.

Asserting foresight and frugality, Governor Daugaard says we should nonetheless act. He says his road-tax-and-fix proposal will bump those bars thus:

(Governor Dennis Daugaard, South Dakota State of the State Address, 2015.01.13, slide 18)

(Governor Dennis Daugaard, South Dakota State of the State Address, 2015.01.13, slide 18)

Compared to the status quo projections for 2024, Governor Daugaard's road expenditures would...

  • boost "excellent" roads from 25% to close to 50%;
  • boost the excellent/good percentage from 48% to just under 75%;
  • reduce "fair" roads from 27% to around 20%;
  • reduce "poor" roads from 25% to under 10%.

But but but but but: look where we end up. Governor Daugaard isn't living up to his own 80% standard. Under his action projections, he appears to squander the advantage the stimulus spotted us and lets South Dakota's roads decay to less than 75% excellent/good. Under Daugaard's plan, in 2024, our roads will be in worse shape than they are now.

Maybe those suboptimal outcomes are why Senator Mike Vehle (R-20/Mitchell) says the Governor's proposal is "a little too frugal." Maybe Governor Daugaard is afraid that letting anything in South Dakota remain "better than we need them to be" will degrade our self-reliant pioneer hardiness.

This much is certain: Governor Daugaard's road plan is no moonshot. The headline initiative that dominated his State of the State Address is really a low-aiming stopgap plan that lets slip quality that we enjoy now.

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Governor Dennis Daugaard's State of the State Address can be boiled down to this family anecdote, delivered at the end of his lengthy opening discussion of his first policy priority, fixing South Dakota's roads:

You know, just last week Linda and I welcomed the birth of our fourth grandchild, Greta.

It reminded me of when our first grandchild, Henry was born. Some of you have heard this before. I asked Henry's dad how they planned to distinguish between me and Henry's other grandfather. I thought maybe "grandpa" and "papa." He said, "Well, we are going to call the other grandfather, 'Grandpa Fat.'" "Oh," I said. "What will you call me – 'Grandpa Thin'?" "No," he replied. "We are going to call you 'Grandpa Cheap'" [link added; Governor Dennis Daugaard, State of the State Address, as transcribed by that Sioux Falls paper, 2015.01.13].

[Insert the only editorial comment from legislators during the State of the State Address: hearty laughter.]

I suppose that's about right, but I would really prefer, "Grandpa Frugal." You know me. No one wants to raise taxes less than I do. But as I've said before, there is a difference between being "frugal" and being "cheap." A cheap person refuses to spend money even when it would be wise to do so. A frugal person is careful with money, but understands that sometimes spending in the short term can pay bigger dividends in the long term.

That is today's situation. Maintaining our roads and bridges is one of the most basic functions of government and it is vital – for this year and for decades to come. I don't want to leave this problem to future governors, future legislators, and future generations [Daugaard, 2015.01.13].

A cheap person refuses to spend money even when it would be wise to do so. Raising teacher pay to competitive rates would be wise. Expanding Medicaid would be wise. Promoting renewable energy and efficiency would be wise. But Governor Daugaard refuses to spend money on those policies.

South Dakota, brace yourself for four more years of Grandpa Cheap.

P.S.: Credit where credit is due: the originator of this phrase is the Governor's chief of staff and son-in-law Tony Venhuizen.

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