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.

2 comments

Governor Dennis Daugaard addressed several important topics in his State of the State Address to open the 2015 Session of the South Dakota Legislature this afternoon. He made up for a glaring omission from his December budget address by focusing the first half of his speech on roads and bridges. The Governor needed to do that to jump out in front of Senate Bill 1, a massive proposal from the Interim Highway Needs and Financing Committee. Governor Daugaard made clear that he "appreciates" the committee's efforts, but by gum, if taxes are going to get raised and roads get fixed, it's going to be done the way he says so. The Governor says he will be submitting his own bill on road repairs.

To justify the coming tax increases—and among the highlights, Governor Daugaard proposes outdoing Senate Bill 1 by raising the motor fuel tax two cents every year, starting now—the Governor emphasized that our economy and "our entire well-being" depend on good roads, and "our roads are underfunded. Governor Daugaard said nothing about how our economy and statewide well-being depend on K-12 education, and he said nothing about how our K-12 system is underfunded.

The Governor took time to promote his juvenile justice reform plan, which is apparently supported by everybody and requires little salesmanship. He took no time to mention how improvements in K-12 education would keep kids from ever falling into the juvenile justice system in the first place.

The Governor discussed his workforce development plans address the shortage of workers in certain technical fields and in health care. The Governor said nothing about the widely recognized K-12 teacher shortage.

The Governor talked up his rural agricultural development programs. He said the state has won an award for its innovative site-analysis program designed to help counties determine where they can put CAFOs and other big ag businesses. The Governor did not mention that good teacher pay is crucial to sustaining rural communities where the public schools are often the largest employers.

The Governor praised the state's investment in parks and pheasant habitat. The Governor said we need to spend money to preserve grasslands so pheasants have places to live and sustain our hunting our industry. The Governor said nothing about the need to make South Dakota friendly habitat for teachers.

The Governor led a rousing ovation for the South Dakota National Guard, which for the first time in ten years has not one soldier deployed overseas. The Governor did not call for any such ovation for the teachers, firefighters, construction crews, ranchers, stay-at-home moms, or other groups who serve the Republic.

The Governor's only acknowledgement of K-12 education came in praising high school vo-tech classes (which Governor Daugaard's own budget austerity has cut) and dual-credit courses (which are a really good idea, helping kids get a jump on college and save money and helping South Dakota universities recruit South Dakota students).

The bad news from the State of the State Address is that Governor Daugaard does not appear to have any plans to do anything for South Dakota's public school teachers. The good news may be that he doesn't plan to do much to us, either. (Whew—maybe that means we can focus on fixing that really bad House Bill 1044, the Teacher Inquisition bill.)

43 comments

The Department of Transportation is proposing a couple bills to make South Dakota's roads safer for non-motorized travelers.

For cyclists, SD-DOT offers House Bill 1030. HB 1030 seeks to codify the three-foot separation that cars and trucks should give to bicycles. That three feet is measured from your mirrors and the 2x4 sticking out the side of your trailer, not just your wheels. DOn't give that wide berth, and HB 1030 will give you a Class 2 misdemeanor.

HB 1030 also inserts a provision for stupid bicyclists:

No driver of a bicycle may overtake another vehicle on the right if the overtaken vehicle is signaling to make a right turn.

If you need the law to tell you that maneuver is a bad idea... well, I'll just let Darwinian selection handle that problem.

For folks on foot, SD-DOT recommends House Bill 1032, which clarifies crosswalk rules. Right now, SDCL 32-27-1 says drivers "within a business or residence district shall yield the right-of-way to a pedestrian crossing the highway within any clearly marked crosswalk or any regular pedestrian crossing...." HB 1032 gets rid of the qualifier "within a business or residence district," making clear that drivers must yield to pedestrians at crossings on any road. HB 1030 strikes "yield the right-of-way to" and inserts "bring the vehicle to a complete stop for." Under HB 1032, you can't keep creeping up on those walkers; you need to stand on those brakes. HB 1032 extends the reach of the law by adding "entering or" between "highway" and "within." I'll be curious to see the exact definition and geometry of "entering," but I'd say that if I'm driving and I see a pedestrian on the sidewalk with feet in motion breaking the plane of the curb, HB 1032 says I must stop.

Finally, HB 1032 nicely clarifies that if you're driving toward a crosswalk, and a vehicle in front of you has stopped to let a pedestrian cross, you also need to stop. I guess we need to spell things out for some people.

7 comments

Last November, Tony Venhuizen told us that 2014 was Dennis Daugaard's last election. The Governor now confirms that statement, in not so many words, by announcing that he will support raising taxes to fix South Dakota's roads and bridges:

During his 15-minute inaugural address, Daugaard promised more of the frugality that led to eliminating state government’s structural deficit and improved bond ratings during his first term.

During his 15-minute inaugural address, Daugaard promised more of the frugality that led to eliminating state government’s structural deficit and improved bond ratings during his first term.

But he also pledged he wouldn’t be cheap and he will “seize opportunities in the short term where it can lead to savings, or efficiencies, or better government in the long term.”

The first example came immediately after the ceremony. He told news reporters a priority in the legislative session would be raising more money for roads and bridges.

He said too much maintenance was deferred in the past, such as buildings at the state Human Services Center in Yankton.

“We need to confront decisions like that — and make them, right or wrong,” Daugaard said [Bob Mercer, "Dennis Daugaard Begins Second Term as South Dakota's Governor," Aberdeen American News, 2015.01.11].

As he did with the structural deficit four years ago, Governor Daugaard finds himself in a hole dug by his smiling predecessor Marion Michael Rounds, who let roads and bridges crumble while praying at the altar of corporate welfare. Rounds wouldn't support fixing roads, since there was no way to do that without raising big taxes, and he had his eye on running for Senate when he was done in the big chair in Pierre. Evidently with his last election behind him, Daugaard feels he can throw his weight behind some hard, practical investments.

Alas, the Governor's approach shows another problem with one-party rule in Pierre. Bob Mercer reports that instead of backing the comprehensive road funding package created by Senator Mike Vehle (R-20/Mitchell) and his diligent Highway Needs and Financing interim committee, the Governor will demand having things his way:

That means however the interim transportation committee’s road-and-bridge legislation, Senate Bill 1, likely is dead on arrival. It’s a sweeping plan that would raise every conceivable fee and tax affecting motor vehicles that travel state highways in some fashion at some point. Naturally something so broad would have broad opposition. Vehle wanted everybody to be in the boat. Look for a bill from the governor that would be trimmer and that he — Daugaard — could put his clout behind in the first year of his second and final term [Bob Mercer, "Governor Gets Aboard on Road and Bridge Funding," Pure Pierre Politics, 2015.01.11].

Politics aside, the Governor is talking sense:

This is a big change from Gov. Daugaard regarding taxes and fees, but as he took care to explain in roundabout fashion in his inaugural speech Saturday and much more directly in his remarks afterward to reporters, sometimes more money in the short term is needed to save money in the long run. That perspective is consistent with much of what he did in his first term and is proposing in other areas of his latest budget proposal [Mercer, "Governor Gets Aboard...," 2015.01.11].

Invest now, save later—why is that clear only to politicians who aren't running for re-election?

17 comments

In my summary of Senate Bill 1, the big road-fixing, fuel-taxing bill, I mentioned that the bill exempts aviation fuel from a new 3% wholesale tax. Incurable snark that I am (maybe SAB Biotherapeutics can engineer a shot for that), I mentioned Mike Rounds and linked the fact that he's a frequent user of aviation fuel.

But a report on NPR this morning chides me for even thinking that our Legislature would shape policy around a favor for our former Governor and now Senator. It turns out the Federal Aviation Administration has clarified a fuel tax rule, declaring that states and municipalities can spend aviation fuel taxes only on airport and aviation-related projects. Since Senate Bill 1's intent is to "finance improvements on the public highways and bridges," an increase in aviation fuel taxes, which can only be used to finance improvements in airports and runways, would be non-germane... and the South Dakota Legislature sure as heck isn't going to have any non-germaneness in its bills (right, LRC?).

The question now: will this rule clarification affect the money available for South Dakota road and bridge projects?

15 comments

Hartford just got bus service. Yay, mass transit! Hartford City Administrator Teresa Sidel tells me that Hartford residents can ride a new (well, new to Hartford!) ten-seater bus around town three days a week (MWF), courtesy of Hartford Area Transit (what fun! "Ride the HAT to the store!" Or, on snowy, windy days, "Careful, Harold! Don't tip your HAT!"). Once a week (Tuesdays for now!), Hartfordians will be able to ride the HAT to Sioux Falls. (Sidel did not indicate whether one can bring one's cat.) Rides will be $2 one way in town and $8 for the big Sioux Falls round trip. Bus fare is optional for folks 60 and older. Sidel says riders can call 906-1483 for service.

The way Perry Groten (KELO's subtle gadfly) writes it, mass transit is making its way up Highway 38 thanks to the AARP and no thanks to Pierre. Groten frames the story around the efforts of 78-year-old Hartfordian Ellie Sturdevant, who, bless he heart, recognizes her limitations:

"I have no family around and eventually, I know I'm not going to be able to drive into Sioux Falls and I saw the need, I saw the need of many others in the Hartford community and it was something I thought I could give back to the community," Sturdevant said [Perry Groten, "Bringing Bus Service to Hartford," KELOLand.com, 2015.01.01].

That's the spirit, Mrs. Sturdevant! But she says that spirit was not shared in state government:

At first, Sturdevant ran into many road blocks.

"I called Pierre, the social services, and I called different places and I called places that had buses and I was getting no place," Sturdevant said [Groten, 2015.01.01].

So who got the bus rolling?

But the persistent Sturdevant didn't slow down. With the help of the City of Hartford along with area non-profit agencies and businesses, she helped secure grant money that will pay for a ten seat bus that will begin picking up passengers of all ages next week.

"This way, you can pick up the phone and call and say hey, I'd like to go to Dollar General tomorrow, or I'd like to go to the grocery store tomorrow, and so they'll come and pick you up right at your door," Sturdevant said [Groten, 2015.01.01].

Thank you, O mighty Republican regime in Pierre, for reinforcing your credo that big government can't solve problems and that local action and volunteers work best—

But hold on a minute: Ellie's efforts were essential, but Pierre and Washington both helped, According to the Hartford City Council minutes from December 16, 2014, the city arranged the grant in cooperation with the South Dakota Department of Transportation. Sidel explains that Hartford Area Transit is funded by "grants provided by South Dakota Department of Transportation through the Intermodal Surface Transportation Act of 1991." SD DOT is covering 80% of the cost; the city covers the remaining 20%. Sidel says the city expects the first-year cost will be around $28,000. Thus, federal dollars will pay for $22,400 of this year's operating cost; the city will pick up the remaining $5,600. Sidel says the city has received some donations to help defray the local cost. AARP says it's chipping in, as are Sioux Valley Energy, Sanford Health, the Hartford Foundation.

Pierre saved Hartford and the feds a nice chunk of cash by finding Hartford a cheap set of wheels. Bruce Lindholm, program manager for public transit at the South Dakota Department of Transportation, explained to me that DOT tracked down a used bus—2003, Ford chassis, 80,000 miles—that the feds had funded in Clark. These small buses usually run $70K, DOT valued the used Clark bus at $4K. The federal interest in the bus remains at 80%, so the acquisition cost to Hartford was a measly $800, which it paid to Clark.

DOT offers this map of rural transit services in South Dakota. Much of the state is covered, but there are some notable exceptions, including the relatively populous I-29 corridor from Minnehaha to northern Union County. Urban Minnehaha and northern Lincoln are served by Sioux Area Metro. Also lacking rural mass transit are Pine Ridge, Harding and Perkins counties, Hanson County (can you picture Stace Nelson taking the bus to go visit friend of the blog Owen in Alexandria?), and Noem-land around Codington, Hamlin, Clark, and Kingsbury counties.

Groten reported that Mrs. Sturdevant was planning to serve coffee and rolls on yesterday's inaugural voyage. Let's also send a donut or two to Bruce Lindholm at the state Department of Transportation and the nice folks in D.C. who are footing most of the bill. Hartford Area Transit seems to be a fine example of local, state, and federal government working together to make the quality of life in rural South Dakota better.

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On the eleventh day of Christmas, my true love gave to me—bills!

The first bills filed for the 2015 South Dakota Legislature don't necessarily predict how the Session will go any more than the first two tiny precincts that report their ballot count dictate how the election will turn out. But the first nine bills in the hamper show an interesting difference between the House and the Senate.

The House's first bills deal with the pressing need to sell more alcohol in South Dakota. House Bills 1001 through 1004 come from the Interim Alcoholic Beverage Shipping and Distribution Committee (yes, this issue needed a committee). HB 1001 lets us order hooch at home by FedEx. HB 1004 lets brewers sell their brew to retailers and wholesalers.

In other hoochie-coochie, HB 1002 spends $100,000 right now! to implement electronic reporting and submission of alcohol taxes. HB 1003 gets rid of a 2% wholesale tax on alcoholic beverages but raises the occupational tax on everything stronger than beer by 25%. It also cuts the municipalities' share of the state alcohol tax from 25% to 20% (hey! shout the munis).

To round out the House's first urgent offerings, HB 1005 removes language about the defunct foundation program fund, and Rep. Dick Werner (R-22/Huron) introduces HB 1006 to allow the use of bullhead and fish guts as bait.

Meanwhile, the Senate earns its title as the upper chamber by focusing on two far more significant (and somewhat related!) statewide issues: roads and drainage. Senate Bill 1 is the monster we knew was coming, Senator Mike Vehle's (R-20/Mitchell) latest swing at getting the state to pay for road repairs. SB 1 will...

  1. raise the motor vehicle excise tax from 3% to 4%;
  2. raise the motor fuel excise tax in ten annual steps, starting July 1, 2016, from 22 cents now to 28.16 cents per gallon on July 1, 2025;
  3. tax ethanol at ten cents per gallon starting July 1, 2015, and bump that tax up two cents each year until July 1, 2021, when it reaches 22 cents;
  4. tax dyed special fuel at seven cents per gallon;
  5. tack a 3%-of-wholesale tax—7.5 cents to start with and as an ongoing minimum—on all fuel except aviation and jet fuel (Mike Rounds is our U.S. Senator now);
  6. moves 50% of the funds from petroleum release compensation and tank inspection fees to the highway construction fund starting July 1, 2020;
  7. moves a little bit of money from the petroleum release compensation fund to the state capital construction fund (wait a minute: with Keystone XL and Dakota Access pipelines maybe coming, is it a good idea to put less money away for oil spills?);
  8. raises motor vehicle license fees ten percent (for a small car, the plates price rises from $30 to $33);
  9. imposes a new license fee of $80 on all-electric vehicles and $40 on hybrids (8o bucks?! That's the tax you'd pay now on 364 gallons of gas, or just over 10,000 miles of travel in a conventional 30-mpg vehicle);
  10. leaves the cap on county wheel taxes at $4 per wheel, but raises the cap on total per-vehicle wheel tax from $16 to $48 (Doug Wiken! That's your idea, isn't it?); and,
  11. creates funds to help local governments fix their roads and bridges.

Senate Bill 1 by itself probably fills the stepping-in-it quota for the Senate. But then comes the Regional Watershed Advisory Task Force shaking our trees with two bills on drainage. Senate Bill 2 would create "river basin natural resource districts," new governmental entities with the power to tax and regulate to protect their watersheds. SB 2 also repeals some current drainage statutes that could get in the way of the work of the new river basin districts.

Senate Bill 3 would create a new statewide mediation program to help resolve disputes over drainage. However, it places that program under the Department of Agriculture, not the Department of Environment and Natural Resources. Hmm... the fatal flaw in that bill seems clear from the get-go.

The first six offerings from the House should not raise much ire, other than that sneaky HB 1003 business of cutting the municipalities' piece of the action. The first three Senate Bills, however, may bring storms of debate and lobbying, as they all three deal with issues of major import for numerous groups in South Dakota.

33 comments

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