{"id":36732,"date":"2024-01-19T04:11:40","date_gmt":"2024-01-19T09:11:40","guid":{"rendered":"https:\/\/unitedresourceconnection.org\/cannon-ball-nd-58528\/budget-reckoning-looms-as-noem-talks-tax-cuts-and-discipline\/"},"modified":"2024-01-19T04:11:45","modified_gmt":"2024-01-19T09:11:45","slug":"budget-reckoning-looms-as-noem-talks-tax-cuts-and-discipline","status":"publish","type":"post","link":"https:\/\/unitedresourceconnection.org\/cannon-ball-nd-58528\/budget-reckoning-looms-as-noem-talks-tax-cuts-and-discipline\/","title":{"rendered":"Budget reckoning looms as Noem talks tax cuts and discipline"},"content":{"rendered":"
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Gov. Kristi Noem set the tone for the 2024 South Dakota Legislature not with her session-opening State of the State Address but with her budget message in December.<\/p>\n

The second-term Republican touted a doctrine of financial discipline and austerity, embracing a tradition of South Dakota governors relishing not the breadth of executive achievements but the fruits of their frugality.<\/p>\n

\u201cIt\u2019s a budget that prioritizes people, not programs,\u201d Noem told legislators gathered in Pierre, S.D. \u201cIt\u2019s a budget that shows what can be done with smart, conservative fiscal policies. And it\u2019s a budget that focuses on our core responsibilities of state government.\u201d \"\"<\/p>\n

The fact that the governor\u2019s proposed Fiscal Year 2025 budget is $7.28 billion \u2013 nearly 30% higher than just two years ago \u2013 muddles that belt-tightening mantra. It also highlights uncertainty about the state\u2019s long-term financial outlook, according to News Watch budget analysis and interviews with legislators, business leaders and current and former executive staffers.<\/p>\n

The Republican-controlled Legislature is, to borrow Noem\u2019s metaphor, keeping its foot on the gas. Lawmakers overshot Noem\u2019s budget request last session while cutting the state sales tax rate from 4.5% to 4.2%, a dangerous mix in most times but considered palatable due to federal stimulus money still boosting state coffers.<\/p>\n

The current fiscal year budget they passed, which runs through June 30, stands at $7.38 billion, an increase of nearly 35% from the previous year. If you go back four years to pre-pandemic FY 2020, it\u2019s an increase of 57%.<\/p>\n

Despite Noem\u2019s public criticism of President Joe Biden\u2019s stimulus strategy, federal money accounts for 47% of the state\u2019s current budget, fueled by surplus from COVID-era initiatives such as the American Rescue Plan and the Bipartisan Infrastructure Law.<\/p>\n

\u201cPull that out of our budget and see what happens,\u201d said Democratic Rep. Linda Duba of Sioux Falls, S.D., who entered the Legislature in 2019 and serves on the Appropriations Committee.<\/p>\n

The rising tide and inevitable ebb of federal money is what concerns Duba and others who see a budget reckoning down the road, most likely after Noem leaves office. The governor\u2019s term ends in 2026, but it\u2019s no secret that she covets a vice presidential nod from the GOP primary front-runner, former President Donald Trump.<\/p>\n

Other potential landing spots for Noem include a Cabinet role in a potential Trump administration or filling the leadership void left by longtime National Rifle Association chief executive Wayne LaPierre, who resigned Jan. 5 amid corruption charges.<\/p>\n

Even if she stays, many of the budget-related decisions made today won\u2019t germinate until 2026 or 2027, when stimulus money wends its way out of the state economy and the enormity of costs for new prison projects become clear. The sentiment among many stakeholders in Pierre is that it\u2019s going to be somebody else\u2019s problem.<\/p>\n

The governor\u2019s proposed Fiscal Year 2025 budget for state general funds is $2.39 billion, an increase of 8.3% over last year\u2019s proposal. That follows an increase of 11.3% from 2023 to 2024.<\/p>\n

Noem chided lawmakers in her budget address for going above and beyond her recommendations last session, resulting in general fund spending of $2.28 billion. Legislators also rejected her much-ballyhooed 2022 campaign promise to repeal the state grocery tax, choosing to lower the general sales tax rate instead.<\/p>\n

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Republican Rep. Tony Venhuizen of Sioux Falls, a former chief of staff to Govs. Dennis Daugaard and Noem, sees these budget trends as a positive reflection of South Dakota\u2019s economy. The general fund budget is tied to sales tax projections, the state\u2019s largest source of non-federal revenue.<\/p>\n

\u201cOne thing you have to keep in mind is that these (budget) increases accumulate,\u201d said Venhuizen, who also serves on the Appropriations Committee. \u201cIf you go up 12% one year, then you go up 9% and then the third year you\u2019re only going up 3 or 4, that\u2019s still on top of the previous increases. It\u2019s not as if we\u2019re going backwards. We\u2019re going back to a more normal growth pattern.\u201d<\/p>\n

That \u201cback to normal\u201d message is prevalent in Pierre these days, though abnormalities exist. Circumstances are unique because of pandemic stimulus and infrastructure funds, creating pools of uncertainty as the federal spigot slows.<\/p>\n

Most of the federal money is spent on one-time projects within certain parameters \u2013 housing, broadband, water projects, construction at universities. Its effect on the general economy is harder to predict, but there are warning signs that people could spend less money in 2024. The impact of stimulus checks on personal savings has started to wane and credit card debt is at an all-time high, according to the Federal Reserve Bank of New York.<\/p>\n

\u201cA year ago, many commentators were skeptical and calling for a recession, but the recession never came,\u201d Jack Kleinhenz, chief economist of the National Retail Federation, said in the January issue of NRF\u2019s Monthly Economic Review. \u201cWith each passing month, consumers kept spending despite inflation and higher borrowing costs. Nonetheless, those tailwinds are not necessarily sustainable.\u201d<\/p>\n

To put it simply, people spending less money means less sales tax revenue. So does lower inflation, though economists differ on where prices are headed in 2024. The overall Consumer Price Index in December was up 3.4% nationally over the last 12 months, compared to 3.1% in November.<\/p>\n

Jim Terwilliger, Noem\u2019s top budget official as commissioner of the Bureau of Finance and Management, told News Watch that these factors are outweighed by a state economy that the governor calls \u201cone of the strongest in the nation.\u201d<\/p>\n

South Dakota\u2019s real gross domestic product went up 5.2% during the third quarter of 2023, tied for 15th nationally in rate of increase from the previous quarter, according to the U.S. Bureau of Economic Analysis. Personal income rose 3%, tied for 35th in terms of percentage increase.<\/p>\n

\u201cAlthough federal COVID stimulus funding has been ramping down, I expect our economic growth to offset those impacts,\u201d Terwilliger said in an emailed response to questions. \u201cThe vast majority of COVID-related stimulus spending, such as direct checks to citizens and taxpayers in 2020 and 2021, has circulated through the economy and our economy continues to grow.\u201d<\/p>\n

Sales tax receipts are projected at $1.43 billion for FY 2024, down 3.1% from the previous year. Venhuizen noted that the downturn can be traced not to unforeseen factors but to the sales tax rate cut, which pruned about $100 million from annual receipts.<\/p>\n

\u201cThat\u2019s an artificial change because of the rate change,\u201d he said. \u201cLast year the sales tax (revenue) went up 9%, so the growth is slowing down, but it\u2019s also back to a more normal growth pattern. High inflation plays a role. If things cost more, then your sales tax (revenue) is going to go up. We\u2019ve felt the effects of those things over the last two or three years, and now they\u2019re baked into the ongoing budget.\u201d<\/p>\n

At Noem\u2019s behest, Terwilliger testified Jan. 11 in favor of House Bill 1001, which would remove the 2027 sunset clause from last year\u2019s sales tax cut and make the change permanent. The bill passed the House a day later on a 54-12 vote.<\/p>\n

A battle is expected in the Senate, which pushed for the sunset clause as a compromise last session and will likely resist making the cut permanent. Republican Sen. Lee Schoenbeck of Watertown, S.D., President Pro Tempore of the Senate, told News Watch that he does not support HB 1001.<\/p>\n

When asked if he thought it would pass the Senate, he responded, \u201cI\u2019ll leave to others to predict, but don\u2019t bet your lunch money on it.\u201d<\/p>\n

The post Budget reckoning looms as Noem talks tax cuts and discipline<\/a> first appeared on Native Sun News Today<\/a>.<\/p>\n

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\u00a0 Gov. Kristi Noem set the tone for the 2024 South Dakota Legislature not with her session-opening State of the State Address but with her budget message in December. The second-term Republican touted a doctrine of financial discipline and austerity, embracing a tradition of South Dakota governors relishing not the <\/p>\n

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