Governor Daugaard staunchly opposes raising taxes to solve South Dakota's budget deficit:
I... believe that the worse [sic] time to raise taxes is when you're trying to climb out of a recession. I think that will have every bit of dampening effect on the economy and more so than these cuts, which might produce efficiencies and cut waste [Governor Dennis Daugaard, quoted in Jill Fier, "Daugaard Makes Local Stop on 'Budget Tour,'"Brookings Register, 2011.01.28].
Rapid City economist and politico Don Frankenfeld argues that Governor Daugaard's budget cuts could sink our economy with significant job losses:
"In Rapid City, by my analysis, at a minimum there would be 300 or a few more than 300 jobs lost," Frankenfeld said.
But let's say one of those jobs is a nurse or a teacher. That person now doesn't have money for food or gas, creating a ripple effect making that number much, much higher.
"That means that the potential for the job loss under the Daugaard proposal, as it currently exists, is 1,000 jobs lost just in the Rapid City, the greater metropolitan area of Rapid City," Frankenfeld said.
He said that number is difficult to measure and is subject to argument, but Frankenfeld also said it's a good indicator of what could happen state wide.
"Rapid City has about 11 percent of the population, that means state wide there would be about 9,000 jobs lost," Frankenfeld said [Austin Hoffman, "Budget Cuts, Lost Jobs," KELOLand.com, 2011.02.04].
I welcome commentary and data showing Frankenfeld's numbers are whacked. I especially welcome such debunkal if Daugaard's 10% budget cuts pass the Legislature!
But if he's right... 9000 jobs?! Ouch! For perspective, according to state Department of Labor numbers, from our state job peak in April 2008 to our lowest job count in March 2010, South Dakota lost just over 10,000 jobs. If 9,000 jobs disappeared from our current total, unemployment in South Dakota would jump to 6.6%---an enviable number nationally, but a rate higher than any seen in South Dakota during any of the last three national recessions (worst recent South Dakota unemployment rate: 5.0% in May 2009).
I would be curious to see an analysis of how many jobs would be lost for each uptick in gas tax, sales tax, or other tax that we might use to fix a decade's worth of lazy budgets from Pierre. Some smart folks (like these folks and especially these folks) argue that, dollar for dollar, state budget cuts may do at least as much damage to your state economy as tax increases... and you get crappier schools, roads, and parks to boot.
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Tangentially related: Otto Doll, the 16-year commissioner of South Dakota's Bureau of Information and Telecommunications whom Governor Daugaard did not hire back, has found a new job. He's the new chief information officer for the City of Minneapolis. High taxes in the People's Republic of Minnesota did not scare Otto away from a job suited to his professional skills.
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Update 14:13 CST: David Lias in Vermillion tackles the Medicaid side of the equation, showing how budget cuts lead to indirect "taxes" via increased health care costs.
Just thinking out loud - rather than lost jobs for increased taxes, should we not also be considering retarded growth? If a farmer's fuel bills go from $70,000 to $80,000, he may decide not to hire that extra hand, or may decide to go with generic herbicide rather than Round-up, which means Monsanto doesn't hire more folks, etc.
I'm sure it's not easy to measure lost opportunity, but I imagine we'd see greater impact from the trickle of increased taxes on job growth, rather than job loss.
Perhaps also warranted is a discussion about how many jobs ~should~ depend (directly and indirectly) on state and local funding.
What everyone is missing with this budget crisis myth is those areas where spending is up. For example, look at what the fed is giving the Board of Regents. In 2010, they spent $100 million in federal money. Now their 2012 budget is $244 million. How many jobs will an extra $144 million create?
Steve, what do you mean by giving the board of regents $244 million?
Oh sure Don...put a damper on the good work of our dedicated public servants. I am sure that everyone in Pierre is looking at what the consequences of their action will have on the rest of us.
Why is it that our best and brightest are so far away from Pierre.
Hello...Pierre...get your faces out of the free food and drinks and into figuring out what we can do to have a high quality of life and a balanced budget at the same time.
Figure it out legislators...party platitudes don't necessarily make good policy. Not to mention, it is your name on everyone of these draconian cuts to kids and the elderly. Your gifts to big business and state contractors may keep you funded, but they won't go unnoticed any more.
Our state, along with Illinois, will provide an excellent comparison laboratory.
The Illinois state government has chosen to address budget problems largely with tax increases.
The South Dakota state government has chosen to address budget problems largely with spending cuts.
Let's see what happens in each case over the next year, two, or three.
The key that Governor Daugaard needs to realize is that we need a balance plan of targeted reductions (especially at the State Government level), minor tax or fee increases and the backside growth of our economy to provide more sales tax revenue. It can't be one year, it has to be two or three years so it doesn't disrupt our economic recovery, which the State desperately needs. It can't be funded on the backs of our children or our elderly.