Montgomery, Mercer Question Daugaard’s Fiscal Consistency

I'm not the only person concerned that Governor Dennis Daugaard's austere fiscal principles may lack consistency. Consider the points from Bob Mercer and David Montgomery, who get paid good money to think and write about issues like this.

Montgomery gently notes that Governor Daugaard is advocating cuts to schools and social services while proposing putting more money into economic development:

Daugaard is proposing various different methods to bolster the state's REDI Fund for economic development loans and to revamp the state's large project tax refund system into a development grant program. Democrats say those efforts are all well and good — but not in a time of sharp budget cuts when other parts of state government are having their funding slashed. They particularly focus on education — which they say is the best form of economic development there is [David Montgomery, "Where Should We Spend to Develop?" Mount Blogmore, 2011.02.08].

Montgomery lets the question hang for his readers. Mercer is a bit more forthright in his critique. He finds Governor Daugaard's economic proposals "totally out of step with his fiscal principles":

The Democrats' legislative leaders, Sen. Jason Frerichs of Wilmot and Rep. Bernie Hunhoff of Yankton, had good reason to blast this proposal as a slush fund a few days ago.

The state board is appointed by the governor and, since its creation in 1987, has always reached decisions in secret when making low-interest business loans from the state's REDI fund.

The justification for these proposed grants is job creation and general development of the economy. But these are precisely the kind of incentives that the Federal Reserve Bank of Minneapolis warned states against not too many years ago [Bob Mercer, "Tourism Tax Adds Asterisk to Daugaard's Principles," Mitchell Daily Republic, 2011.02.07].

Mercer is right on here. Business incentives for outside corporations do not provide clear benefits for rural communities. If you have money lying around to hand out, you get more bang for your buck funding infrastructure and education for your citizens, or at least investing in homegrown businesses instead of playing the Toyota lottery.

Now I've heard folks suggest Mr. Montgomery may have some liberal leanings. I've heard others suggest Mr. Mercer tilts the other direction. Read the two side by side, and any bias should cancel itself out. But if you lend any credence to suggestions these august journalists have their own political fish to fry, it is interesting to note that the perhaps more conservative journalist is riding on the governor harder than the less conservative one. But then maybe it's just a perk of seniority that Mercer gets to close with a line like this:

We heard a lot of promising things about fiscal principles during the first month of the Daugaard administration. We did not expect asterisks, fine print and loopholes [Mercer, 2011.02.07].

The governor's economic development fund proposal, HB 1230, gets consideration before House State Affairs next week. I look forward to the coverage from both Messrs. Montgomery and Mercer.