Sacrifice from All… Except Corporations the Governor Likes?

Governor Dennis Daugaard is asking everyone in South Dakota---teachers, principals, doctors, nursing home directors, students paying tuition, state employees going three years without raises, any citizen relying on public services---to make permanent sacrifices (the "new norm") to eliminate our state's budget deficit this year.

Wait: did I say "everyone"?

Gov. Dennis Daugaard wants to re-start it in a different form. He's proposing to continuously divert 22 percent of South Dakota's contractor-excise taxes into a special fund and allow the state Board of Economic Development to provide grants to business projects. The legislation, HB 1230, was introduced today. What it means, bottom line, is that the program would continue to drain the state treasury by more than $10 million annually. To qualify, the project would need to be at least $5 million in costs and could be, according to the legislation, laboratory and testing facilities, manufacturing, power generation, power transmission, agricultural processing and wind energy facilities.... This program began under Gov. Mike Rounds and is one reason why South Dakota is in a structural deficit [Bob Mercer, "Daugaard Seeks to Keep Giving Away Millions," Pure Pierre Politics, 2011.01.31.

Of all the holes in the budget, one would think this hole warrants plugging first, especially when it allows unchecked crony capitalism:

[Rep. Bernie] Hunhoff said the governor's plan would divert up to $200 million from the state treasury over the next decade into a fund that would pay refunds to large construction projects. That diversion is a bad idea when Daugaard has proposed cuts in state aid to school districts and the payments to doctors and others who provide health care to poor people in the Medicaid program, he said.

Daugaard then would spend the money "as he wishes on corporate subsidies," Hunhoff said.

"This newest idea is one of the biggest and richest power grabs in state history," the Democratic House leader said ["Democrats criticize GOP governor's tax refund plan," AP via Rapid City Journal, 2011.02.03].

Mr. Ehrisman encapsulates the contradiction:

What amazes me is that during these down times we cut education but think it is okay to give refunds to out of state corporations? South Dakota's motto, "Big business first, citizens last" [Scott Ehrisman, "Everyone needs to sacrifice, just not the corporations coming to our state," South DaCola, 2011.02.03].

To his credit, Governor Daugaard says his proposal tightens up the tax refund program to prevent such breaks from going to projects that would be built regardless of state handouts. That intention fits with the promise the Governor made in his State of the State Address (and makes Senator Russell Olson look like a chump for defending tax breaks for TransCanada's Keystone pipeline... now if I could just get Dennis to say "TransCanada" when he refers to unnecessary tax refunds!).

However, I don't see any bill text that formally enshrines this principle of economic necessity into law. Read the bill alone, and Hunhoff's concerns appear valid: approval of grants or loans would be at the governor's discretion.

If the current economic situation is so bad that we have to cut support for public schools (a constitutionally mandated function of the state) by 10%, we may have to consider cutting support for non-constitutionally mandated intrusions into the free market even more. Conversely, if we can justify handing cash to already-big, successful corporations to get even bigger, perhaps we can justify handing cash to dedicated public employees who'd just like their wages to keep up with increasing insurance premiums and property taxes.