This coming Thursday, February 13, is the 20th Legislative Day. It’s the day, according to legislative rules, when the Joint Committee on Appropriations (JCA) must adopt a revenue target for the coming budget year which starts July 1.
This part of the budget process is remarkable in that the committee is trying to look up to 18 months into the future and predict how well South Dakota’s economy will be performing. Legislative Research Council staff and the Bureau of Finance and Management each prepare independent revenue estimates for the remainder of the current fiscal year and for the following budget year. These two estimates are presented to the JCA, which selects the target it deems most likely.
After adopting a revenue target, the appropriations committee has slightly over two weeks to deliver special appropriation requests and property tax legislation to the rest of the legislature. These pieces of legislation must be either passed or killed by the full House and Senate before the JCA can finalize its budget proposal. The committee will work agency-by-agency, line-by-line to create the General Appropriations bill. This is typically the final bill passed in a legislative session. Key policy issues are addressed in the G-bill such as state employee salary policy, medical services provider inflation, state aid to public education, and maintenance and repair funding for state-owned facilities.
Each month, a report is issued showing state general fund receipts for the prior month and the year-to-date. The report for December showed ongoing year-to-date receipts are 1.74% above the target set last year. Part of this comes from capturing new sales and use taxes from remote sellers and marketplace providers.
While goods and services bought online are subject to sales and use tax, starting on July 1 South Dakotans will no longer pay state or local sales tax for internet access. It is estimated the Internet Tax Freedom act will lower the tax burden on state residents an estimated $20 million. (It would be interesting for you to note the difference between your June and July internet service bills – the July bill should be lower.) Revenue projections also estimate a drop in tobacco tax collections. These declines in projected ongoing revenue are important factors to consider as legislators discuss ongoing expenses such as teacher salaries, state employee wages, and medical provider inflation.
By the end of the Session, the JCA will have developed a balanced budget as required by our state Constitution, with one-time revenues used for one-time expenses and ongoing revenues allocated for ongoing expenses.
The LRC has comprehensive budget information on its website (sdlegislature.gov). You can also find extensive information about state spending on the Bureau of Finance and Management website (bfm.sd.gov).