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Daugaard offers budget plan again limited by tight revenues

PIERRE | Gov. Dennis Daugaard outlined state spending priorities Tuesday that are limited for the second year in a row by disappointing South Dakota tax collections, proposing a plan that would fill an immediate shortfall this budget year and keep state employees' wages mostly flat over the next.

The $1.62 billion general fund budget proposal, which the Republican governor outlined in his annual address to the Legislature, includes roughly $32.4 million in state spending increases for the upcoming 2019 budget year.

The proposal for the upcoming cycle would add more than $20 million in education spending, nearly all from K-12 enrollment growth, but schools wouldn't see an inflationary funding increase per student under the plan. Most state workers wouldn't see raises under Daugaard's budget outline.

"It's just the way it is. I mean, if there's not money there, there's not money there," House Majority Leader Lee Qualm said after the speech. "There's some other people that are struggling as well with this whole economy, and so we just need to ride this thing out."

The GOP-controlled Legislature will reshape the current budget and approve the next one during the legislative session that begins in January — Daugaard's last as governor. Term limits bar him from running again next year, and he leaves office in 2019.

"South Dakota is working," Daugaard said. "We're working better than many other states."

State collections for the current budget year, which started July 1, are not meeting lawmakers' projections.

Recently released state figures show that revenues for the first four months of the current budget year are roughly $8.3 million, or 1.5 percent, below expectations due in large part to short sales tax receipts. Officials pin the weakness in sales tax, the state's main revenue source, on low farm income and inflation, e-commerce sales and increased health care costs.

The figures through October show that a tax imposed on construction contractors has brought in less than lawmakers had previously anticipated, while tobacco taxes and an insurance company tax are also among the state receipts down from projections.

The governor's plan projects that revenue for the current budget year will be about $20.3 million lower than previously anticipated, a nearly 1.3 percent decline. Increased expenses for education and other areas will add more than $10 million to state costs, serving up a total expected shortfall of nearly $34 million.

Daugaard would address the shortfall through a near split of reduced spending and cash sources such as budget reserves.

Qualm said officials have been expecting the projected shortfall. He said Daugaard has proposed to address the shortfall in a "fiscally responsible" manner.

The governor's plan for next budget year calls for spending nearly $1.7 billion in federal funds, over $1.3 billion in other state money and about $1.6 billion in general funds, totaling almost $4.7 billion.

Lawmakers also dealt with sluggish state tax collections in the 2017 legislative session. But South Dakota ended the 2017 budget year in June with a surplus built on state spending reductions after Daugaard asked agencies to cut expenditures in the face of weaker-than-anticipated revenues.

“We’ve been seeing this trend in low sales tax returns for quite some time,” Wade Pogany, executive director for the Associated School Boards of South Dakota, said in a statement. “It’s troubling and obviously having an undesirable effect on school funding.”

South Dakota Democratic Party executive director Sam Parkins said Daugaard and Republican majorities are to blame for what he described as policy failures and a lack of leadership.

“The continued weakness of our economy makes it more clear than ever that this is a time for new, Democratic leadership in state government and not the same old way of doing business that got us here," Parkinson said in a statement.

Replacing Tieszen

Meeting with reporters after the speech, Daugaard said some people have offered names as possible replacements for Rep. Craig Tieszen of Rapid City who was killed in a drowning accident Nov. 22 off the South Pacific island of Rarotonga.

"I have not looked at any list," Daugaard said.

He recalled tapping Rep. David Lust, R-Rapid City, last year to fill the vacancy caused by the death of Rep. Dan Dryden, R-Rapid City. Dryden and Tieszen came from the same legislative district.

Daugaard said some of those names might be considered again.

"We'll get after it fairly shortly," Daugaard said.

top story
Wooden toys bring Christmas joy

A few of Santa’s woodworking elves are making the rounds in Rapid City to deliver early Christmas presents to little boys and girls, and on Tuesday they stopped by the Youth & Family Services Head Start program.

“I want an airplane,” declared one child.

“I want a chalkboard,” said another, as members of the Rapid City Woodworkers Association showed the kids the different handmade wooden trains, planes and automobiles they could choose from.

The woodworkers association began making toys 10 years ago, and since then they have donated around 20,000 to youth programs across the region. According to association president Robert Buchanan, this year they made 2,400 toys — 662 of which went to YFS. 

The handmade gifts will also be distributed to the Club for Boys, Working Against Violence, Inc., the Hope Center and Ellsworth Air Force Base.

“The kids don’t have to open a package, they don’t have to put any batteries in it,” Buchanan said of the wooden toys. “They know what to do with them right away — they got their imagination working right away. I think that’s the best part of watching them play with these things.”

Legislators approve teacher compensation waivers

PIERRE | The Legislature’s Joint Committee on Appropriations unanimously approved waivers Tuesday for all 29 school districts that a board found had violated South Dakota’s teacher compensation law.

Fourteen are conditional waivers requiring school districts reopen contracts and put more money into compensation packages by Feb. 1.

Rep. Taffy Howard, R-Rapid City, told the panel her "yes" vote would be cast “under protest.” She said all should get outright waivers.

Sen. Larry Tidemann, R-Brookings, asked Howard what she meant.

“It means unwillingly," she replied. 

The districts faced the potential loss of half of the additional state aid they were supposed to receive.

The Legislature raised the state sales and use tax rate to 4.5 percent during the 2016 session to pay for the additional aid and provide more relief for local property taxpayers. The rate had been 4 percent since 1969.

The 2016 law set a process for determining whether school districts met two standards for increasing teacher compensation. The first step required that the state Department of Education review whether districts met those requirements. The second step established the state School Finance Accountability Board to review the department’s findings and make recommendations.

The final step called for the 18 legislators on the appropriations panel to decide whether to accept the board’s recommendations.

Howard said she listened to both days of testimony by school districts that appealed to the accountability board and was “very disappointed” the legislators can’t tell the board to go back and make further changes. “I don’t believe that was legislative intent,” Howard said. "They (state board members) were trying to guess what we wanted them to do.”

Howard called the 0.5 percent margin granted by the board for automatic waivers too strict and said 5 percent would have been more appropriate because it was the first time school districts were held to the standards.

“Most of these are small school districts. They are trying to be wise with the money they were entrusted with,” Howard said.

Tamara Darnall, the department’s finance director, said the accountability board’s operation provided “a learning experience.”

State education officials initially determined 36 districts missed one or both of the accountability standards. Two districts — Hoven and Lead-Deadwood — didn’t appeal because they don’t receive state aid.

Fifteen districts received recommendations from the board for outright waivers. They were Edgemont, Kadoka Area, Lyman, Pierre, Rosholt, Highmore-Harrold, Kimball, Henry, Gayville-Volin, Gettysburg, Faulkton Area, Bowdle, Edmunds Central, Summit and Sisseton.

Thirteen districts received recommendations of conditional waivers that require them to reopen negotiations with local teachers bargaining units and reinvest additional amounts of money in compensation for the current school year. They face recommended deadlines of Feb. 1 to complete the renegotiation process.

Those districts and amounts for additional compensation investment include: Jones County $11,180; White River $30,743; Wall $27,144; New Underwood $22,278; Faith $9,101; Newell $7,631; and McLaughlin $114,730.

Clarity sought in county pay raise system

Pennington County inched closer to completing a comprehensive compensation policy that would include an automatic step pay raise for county employees.

During the Pennington County Board of Commissioners meeting Tuesday, commissioners addressed five looming questions posed by the ahead of the 2019 budget hearing process. The policies, county department heads and commissioners hope, will prevent the hourslong debates about pay increases and cost-of-living adjustments that typically mar county budget hearings each summer and fall.

“What we heard from you during budget was you did not want to politicize this (step raises and cost-of-living adjustments) with a discussion every year,” county auditor Julie Pearson said of the committee's goal. “They (Rapid City Council) don’t discuss this. It is automatic. That is what we tried to bring back to you.”

At the discussion’s outset, county human resources manager Steph McCoy and chief deputy auditor K.J. Peterson presented commissioners with the five remaining questions that, once answered, would give the committee its necessary direction.

Those questions included if the board wanted to:

• Automatically incorporate cost-of-living adjustments into budget preparations.

• Give employees automatic step pay raises — one step is equal to a 1.25 percent pay raise — on their hire date anniversary instead of Jan. 1 or July 1.

• Start longevity pay raises at two, five or 10 years.

• Change the county’s current sick leave payout format.

• Continue with its current new hire policy of allowing up to seven step increases upon the hire date or give department heads the discretion to give the seven step raises over the course of the first year based on the employee’s performance and experience.

The board proceeded to make motions and vote on each issue separately, but not before discussion meandered and county auditor Julie Pearson raced to the lectern to scold the board about the lack of direction and clarity it was providing the committee.

“The problem is you guys can’t give us clear direction,” Pearson said. “We can’t do a policy unless we get direction from you, and we realize we’re not going to have a 5-0 vote. So kill the discussion, make motions, take a vote, and we’ll go back and make it.

"No offense, but you guys are stalling it. We’ve spent a lot of department head, commission and staff time on this, and you guys still can’t make a decision. We’re done spending time on this. We can leave it as it is.”

Ultimately, the board decided to include the state’s determination of annual cost-of-living adjustments in its budget preparations and give employees one automatic step increase and the chance at another one step increase at the department head’s discretion. 

It also decided to begin longevity pay raises — a $0.02 per hour raise for each year worked — after 10 years, and to give department heads the discretion to give new hires up to seven step increases in the first year based on the employee's experience and performance. A decision on the county’s sick leave payout format was delayed until the county hires a new human resources director.

After the meeting, board of commissioner’s manager Holli Hennies said she believed the committee would take the decisions and incorporate them into a final document for consideration at the next board meeting Dec. 19.

Regardless of a final decision, though, it appears the board will still be able to alter some of the step raises and cost-of-living adjustments during future budget hearings, even though avoiding that option was one of the main motivations behind the committee’s formation. That fact, it seemed, struck a nerve with Pearson given the time and discussion given to the topic.

“You can do anything you want in budget,” she said. “No matter what you do any year, we’re going to possibly have a different board and they can change it all anyway.

Later on, Buskerud, who initially pointed out the temporal and tenuous nature of the policy, took a jab at Pearson when asked by board chairwoman Deb Hadcock of his opinion on one of the matters.

“I’m not going to give my opinion anymore,” he said to a smattering of chuckles in the room. “I can vote right now. I’m afraid to give my opinion. Obviously, we’re not elected to do that.”

In other action, the board:

• Unanimously approved a resolution to support additional mental health services in western South Dakota. The resolution comes in response to an impassioned plea by former state representative Al Scovel to board members two weeks ago for their support in asking state officials to consider building a new mental health facility in western South Dakota. “Our state is in a crisis,” he said to board members at their Nov. 21 meeting. “It’s an insult that our state has handled this mental illness problem with abject neglect.” According to the resolution, South Dakota is one of just five states in America where state law allows people experiencing a mental health crisis to be held in a correctional facility without committing any offense. The resolution asks for “consideration of a second Human Services Center” to be located in western South Dakotas. The closest mental health facility to Rapid City is located in Yankton, approximately 350 miles away.

• Approved a resolution establishing the base annual salaries for the Pennington County sheriff, coroner, state’s attorney, treasurer, auditor, and register of deeds ahead of next year’s elections. The county typically reviews the salaries in the year before an election. Currently, the sheriff and state’s attorney are paid $100,000 each while the treasurer, auditor, and register of deeds are paid $75,000. The county coroner salary is $5,000. Those wages were left unaltered.

• Unanimously approved revisions to the county’s policies and procedures for the appointment process for county commissions, boards, committees and task forces. The most marked change is that applicants would be required to be interviewed by a “group” consisting of no more than two county commissioners, as well as the commission office manager, one county employee who works in the office/department associated with the committee’s purpose, and where applicable, a current member of the committee in question.