It’s January, and that means the South Dakota Legislature is back in session. The two proposals with the largest fiscal impact are proposed changes to the education funding formula and the Governor’s proposal to implement the Affordable Care Act in South Dakota and expand Medicaid.
The current education funding formula is a long-standing but complex mix of sales tax and property tax (referred to as state aid and local effort) based on a per-student allocation. The new formula would maintain the state and local mix, but instead target staff to student ratios and teacher salaries. In addition, it maintains local control over teacher salaries so school districts will still be able to adjust in the ways their specific needs require.
Under our current education system and salaries, we have about one applicant for every job opening, when averaged statewide. Any business owner knows that you are not attracting and retaining the top talent with that ratio, and to reach the target salary of $48,000 it will require $62 million in additional funding.
The Governor has proposed increasing the State Sales Tax rate from 4% to 4.5%, an increase of 12.5%, in order to make up the difference. This would put additional strain on low and fixed income citizens, and I believe there are achievable solutions using current revenue growth combined with cutting fraud and abuse in the healthcare portion of our state budget.
Voters have repeatedly rejected new taxes even when focused on education, which means they expect us to prioritize and economize just like they are forced to do with their own budgets. Every year there are numerous new programs, increases in state department budgets, money spent to “freeze” higher education tuition, and increases in state employee salaries. I believe these noble ideas should have been–and must be–put on hold while we focus on improving our K-12 education situation.
Which brings me to the Governor’s proposal on medicaid expansion. There are many health care interests that would like to see an increase in federal money flowing into the state, but there are some brief points of principle on this issue that I consider critical.
First, the proposal hinges on the Obama Administration giving us their word that they will finally honor their treaty obligations (which require them to cover 100% of the health care costs for Native Americans) if we implement the Affordable Care Act in South Dakota. This seems a little like bringing someone a helicopter because they promise to release a hostage. But if we resolved just this one issue without expanding medicaid, we would be able to fully pay for the new education funding formula.
Second, the expansion would create a new class of dependents in South Dakota–able bodied adults–and create a new incentive for people to move here not for work, but to have their healthcare paid for by the rest of us.
Third, the Federal Government does not have the money and would be printing or borrowing half a billion dollars from our children and grandchildren every year to pay for this new entitlement, further devaluing the U.S. dollar.
Lastly, South Dakota would become a state with a vested interest in not repealing the “Affordable Care Act,” which ironically, has led to an acceleration in healthcare costs. This has made teacher pay dwindle further as more is spent on health insurance. A new administration may change the law or change the agreement, leaving South Dakota stuck with the bill.
Rep. Latterell can be reached at email@example.com or by phone 368-1002.