May 11, 2011

How to dig a hole

By Lorraine Collins

The Black Hills Pioneer is the only newspaper in western South Dakota that benefits from a fulltime, year around reporter in Pierre. This is Bob Mercer, who works for the Aberdeen American News and also provides reports to independent newspapers in Mitchell, Watertown, and Pierre in addition to the Pioneer. Mercer has been covering the Legislature since 1985 though he took a few years off when he was Gov. Janklow's press secretary. By now he must be the most knowledgeable journalist in the state when it comes to knowing what goes on in the capitol.

Mercer's report published in the April 18 Pioneer offered an insight as to one cause of our state's deep budget hole. It's not all that different from the federal government, actually. Just keep adding new programs without figuring out new revenue sources to pay for them. Folks in South Dakota keep complaining that Washington does this, but they could look a lot closer to home. Mercer pointed to four programs that have added millions to the budget in the last 15 years with no new funding sources named.

Two of the programs that Mercer says are now "politically untouchable" are subsidies for ethanol plants and financial paybacks to big business projects. He points out that Republican governors and legislators were big promoters of these programs which have both grown rapidly over the years, including more and more beneficiaries and spending more and more millions of dollars.

 The ethanol program started in 1995, providing $1 million annually per producer for up to 10 years. It was supposed to expire in 2005 but it's still with us. The amount budgeted has grown from $4 million in 2003 to $7 million currently, although this amount will drop down again in fiscal years 2012 to 2016 before bouncing up again. There is a new deal providing $3.5 million over five years for ethanol distribution and retail systems. All this is so complicated that it's hard for the average citizen to keep track of and there is considerable disagreement about whether the program was ever a good idea in the first place.

The same could be said of the construction tax refunds for big business. In 2006, refunds totaled $1.9 million but the amount grew rapidly and by 2009 was $18 million. The criteria was so broad that projects could qualify whether they needed incentives or not. The program is supposed to expire in January, 2013 but Mercer points out that Gov. Daugaard and the Legislature replaced it with a new program to start on that date that is expected to cost $15 million a year.

 These two budget items demonstrate how easy it is for a program to start out modestly, with limited duration, and then grow and grow. They exist because those supporting them said they would benefit our state's economy. But to pay for them we are cutting support to our schools and to social programs that provide care and services to the elderly, the sick, the impoverished. Everyone talks about the cost of social programs, but few mention the cost of economic programs which may be of dubious benefit to our citizens.

The other two programs on Mercer's list could be said to benefit at least some South Dakotans. The Opportunity scholarship program was promoted by the Board of Regents to encourage high achieving high school kids to go to our state universities. In the Rounds administration, the criteria was changed to allow students to go to private colleges in the state as well and now one-seventh of the state funds are spent in private schools. This would seem to defeat the original purpose of the fund.

In 2003 the South Dakota Retirement System raised the mandatory contribution of employees and employers from 5 percent to 6 percent. Mercer says that extra penny per salary dollar has added millions of dollars of costs to the state, and to the hundreds of counties, cities, and school districts that are members of the state retirement system.

It's good to have subjects like this discussed outside of the feverish legislative session so I'm glad we have our man in Pierre.

Lorraine Collins has published a collection of her Pioneer columns called "Gathering My Wits."

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