Broadcaster Press 5 December 8, 2015 www.broadcasteronline.com Flat Economy And Zero Inflation Raise Challenges For Governor’s Budget Plan By Bob Mercer State Capitol Bureau PIERRE – With inflation hanging around zero during recent months, an unusual question occurs: Will Gov. Dennis Daugaard ask the Legislature for any increases in state aid to public school, or larger reimbursements to Medicaid providers, or higher pay for state government employees? And with South Dakota’s economy performing almost exactly as expected in generating tax revenue for the state treasury in recent months, there comes another question: Are the current somewhat softer conditions the new normal after the 2009 recession? On Tuesday afternoon, the governor delivers his sixth set of budget recommendations to the Legislature during a joint assembly in the state House of Representatives chamber. When he took office in January 2011, Daugaard inherited an economy that was staggering out of a deep slowdown. He called for 10 percent reductions throughout much of state government’s budget for the coming fiscal year, and legislators mostly agreed. The past five years have seen unemployment get back below 4 percent. Non-farm employment cracked past 430,000 for the first time in May, up by some 10,000 in two years. But Medicaid enrollments remained high heading into this fall, as did the number of youngsters in the children’s health insurance program. The most confounding statistic might be the consumerprice index that is one measure of inflation. The state Bureau of Finance and Management reports CPI was 0.0 percent in September compared to September 2014. It’s been at zero or below just one other time in the past 20-plus years. That was in 2009 when it sank past zero during the recession. The common practice for several decades has been to increase student funding to public schools by the rate of inflation, provided it is no more than 3 percent. The per-student allocation percentage often became the base for salary increase to state government employees and for increased compensation to Medicaid services providers. It isn’t clear what the governor will recommend with inflation in the zero range – nor what the Legislature will accept. The 2016 session of the Legislature starts Jan. 12. State law requires the governor to submit his budget recommendations to lawmakers no later than “the first Tuesday after the first Monday of December.” School funding likely will be a separate issue during the 2016, as the Legislature deals separately with the recommendations from the governor’s task force. The panel called for providing $85 million more to public schools for teacher salaries. That would require a variety of cuts in other parts of the budget, or repealing some large tax exemptions, or raising the state sales tax by one-half of 1 percent. The state Board of Regents, whose members govern the state universities, asked the governor to recommend additional funding so that tuition wouldn’t have to increase for resident students. The buy-down would likely be sought for the four public technical institutes as well. Together the tuition relief could take approximately $5 million. The governor might speak about the ongoing talks about South Dakota accepting an expansion of Medicaid services. He is willing to do it provided the federal government stops requiring South Dakota to pay for portions of outside services to Native Americans that the Indian Health Service is supposed to cover, and the savings offsets the additional cost of the expansion. Four of the five major sources of state tax and fee revenue produced more than estimated for the months of July through October, according to the state Legislative Research Council. Those four were sales tax, contractor excise tax, insurance tax and tobacco tax. South Dakota Lottery was the only of the five that wasn’t meeting expectations. But all five were producing more money through October than at the similar point one year ago. The Bureau of Finance and Management, also known as the governor’s budget office, hasn’t issued an economic update since Oct. 5 and only five so far in calendar 2015. In calendar 2014, the bureau published nine economic updates. The October update from BFM showed non-farm income grew 4.2 percent during the second quarter of 2015, compared to the second quarter of 2014. That was slightly behind the national rate of 4.4 percent growth for the same period. The budget speech is scheduled to start at 1 p.m. CT. Driving In Winter Weather it slow and allow yourself extra time to reach your desThere’s nothing like the tination. It’s usually a good first snowfall of the year. idea to leave cruise control When I was young, a heavy off. 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