This interview originally aired on "In the Moment" on SDPB Radio.
On Tuesday, Gov. Kristi Noem laid out her proposals for the next state budget.
Jon Hunter is publisher emeritus of the Madison Daily Leader and a member of the South Dakota Newspaper Hall of Fame. And Michael Card, Ph.D., is professor emeritus of political science at the University of South Dakota.
They analyze the politics behind the proposals.
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The following transcript was auto-generated and edited for clarity.
Jon Hunter:
It felt like a farewell address. We've had several governors in recent years who served eight years, which is term limited. And their last budget address, or at least their last State of the State address, would tend to focus a little bit on accomplishments.
And of course, Governor Noem has served six years and presuming that Lieutenant Governor Rhoden will take over that she did treat, I think, this budget address as, "Here's a lot of the things that I did that were good for South Dakota."
And there were a few campaign things in there just because I think she's a little bit used to campaigning, kind of saying bad things about the Biden-Harris administration, even though a lot of her successes, as she described, came from federal funding like water projects and so forth.
So yes, it was very much the tone of, "These are the things we've accomplished," and a little bit less so on the upcoming budget. There's of course a budget book that is the critical document that goes into this. So the budget address typically is a summary of that, but I think it did have that farewell feel.
Lori Walsh:
Mike Card, she quotes former Governor Bill Janklow in here for a good amount of time. It's a longer quote. She says, "There's wise words from a strong leader."
I thought that was interesting. I haven't heard her evoke Bill Janklow's name before too often, at least.
Michael Card:
No, nor have I. Bill Janklow was a strong personality and commanded attention. He did not use notes while giving either his budget address or the State of the State address and had sort of a force of personality that was difficult, if not impossible to ignore. So a strong politician.
Lori Walsh:
A complicated one.
Michael Card:
And a complicated one.
Lori Walsh:
Yeah.
Michael Card:
And wise words with respect to South Dakota's political culture regarding budgets. We've got in our Constitution that two aspects, a required balanced budget, but we've also got a section dealing with state revenues, that if the state legislature determines that it doesn't have the funds to finish the fiscal year, it shall impose a statewide property tax.
So that makes it easy to have 136 consecutive budgets that have balanced in terms of revenues and expenditures, planned revenues and expenditures.
Lori Walsh:
Planned revenues and expenditure. I'm not sure that Governor Dennis Daugaard comes across very well in this when she talks about how when she came, this is what was happening. And she did come before the pandemic.
So Jon, does that resonate with you at all, the fact that there were governors before her that she basically says, "The state was a mess when I took over"?
Jon Hunter:
Yeah, I think it's unfortunate and I don't think our previous governors deserve that. South Dakota has been a great state for a long time.
And so yeah, some good things have happened certainly in South Dakota in the last six years, but there've been a lot of great things from previous governors as well.
Lori Walsh:
Yeah. All right. So then, she lays out her principles of government, how government should work. She says, "The Great American comeback will soon take off." She quotes Governor Bill Janklow, and then we get into the revenues.
So the economy is softening a bit, and a lot of that federal output from those pandemic days are wrapping up. So what stands out about the revenue that you want to talk about or the economy in general, other than what perhaps she has said are her accomplishments? Let's move beyond that.
Michael Card:
Well, something that wasn't mentioned in the budget, as you noted, Lori, were the financial dollars that came into the state from the federal government. As recent as 2020, 2021, we were getting over $3,000 per person coming into the state of South Dakota on a per capita basis more than what taxpayers paid to the federal government. And now we're down to about $1,260. The most recent figures available are from 2022.
So we've been heavily dependent upon the federal government as you mentioned. Many of the programs that are highlighted in the budget address were federal dollar-funded programs. We've had growth in our state revenues, but 40% of the state's budget is still federal money. And we have about 20% that is user fees, which is individuals paying for services, a user fee and the like.
Jon Hunter:
If I may, the budget projections for the year that we're currently in, we're a little stronger than what reality was. So they talk about a softening, and Mike used that term softening economy. It is not declining. It just didn't increase as much as they expected. Now this probably returns us more to normal years, kind of pre-pandemic and back when we had ups and downs and we had to deal with those.
Lori Walsh:
Right.
Jon Hunter:
So that's not a bad place to be. The question really is, here's this pie of money, how do you slice pie? How do you prioritize? And every governor is different, every legislature is different. And so, I think what we need to look at in the governor's budget is what is she increasing, what is she decreasing that makes relevance for South Dakota? And I think all sorts of citizens are going to have opinions about this. Hopefully they'll relay this to their legislators and they can have input into this process, and we can get a budget that slices that pie as South Dakotans would like.
Lori Walsh:
Yeah. All right. So just to that point, everything that she cuts or adds or recommends being cut or added has a constituency. And every constituency has a legislator. They're all going to send notes and make phone calls and ask questions. You go into the budget as a whole and really look at the details of it.
And then, the legislators get together and do a whole lot of talking between now and then. How involved now and then being when the actual budget is approved at the end of the legislative session, how involved will the governor be in this if she's off to the next job? She lays out her priorities. Are they Lieutenant Governor Larry Rhoden's priorities?
I didn't hear her say that. I heard her say her priorities a lot. I didn't hear her necessarily welcome him in and say, "I'm getting ready to transition this to Lieutenant Governor Rhoden. And he suggested that..."
It was not a collaborative budget address. It was very much hers.
Michael Card:
Right.
Lori Walsh:
So Mike Card, what happens next with her presence in Pierre, even?
Michael Card:
Well, I think a lot of it depends on things we don't know at this point. We're speaking shortly after the budget address. We don't know how involved the lieutenant governor was in many of these decisions.
The budget process starts at the end of the previous legislative session actually. The agencies are looking for what law changes were made, what changes there are in demand for their services, what federal money might be available. And then, they're preparing their budgets that go to the Bureau of Finance and Management. They take a look at them and make recommendations again to eliminate most of the waste, fraud and abuse that could exist; maybe not so much fraud as we've found out, but in terms of waste. And then, usually in late October and through November, the agency secretaries and the finance officers are meeting with the Bureau of Finance and Management and with the governor.
Well, what we don't know is was Governor Larry Rhoden there during this time period? And how much involved was he in determining some of these priorities? And we also don't know, as the legislature takes this, the Appropriations Committee will start meeting shortly after individuals take their oath of office. And the Appropriations Committee will start listening to agency present their budget.
Lori Walsh:
And they all come in with their own priorities. And there's a good crop of new legislators this year, Jon. They're going to come in with their own ideas and priorities. So it'll be an interesting session.
Jon Hunter:
Yes.
Lori Walsh:
We say that every year.
Jon Hunter:
But I think this has a possibility of being very good. And part of this is, again, it's likely by the time this budget gets presented to the governor, it will be a different governor than who spoke yesterday.
And so, I think the idea of constituent participation is probably higher. I think the new legislators, of course, some of them will be trying to get on board as far as how the process works. It's a complicated system in Pierre, and the result of it, usually it favors those who have been around a little while.
But I think there's a possibility of the legislature having a bigger role this year than most because of this governor transition thing that's going on. So I think as far as this address, this might be, yes, the final swan song for Governor Noem and what she would like to prioritize. But I think it's up to the legislature. And I don't think Governor Noem will participate much in this legislative session.
Remember, the lieutenant governor position is a part-time position. Lieutenant Governor Rhoden is a rancher and has a custom welding shop.
And so, I don't think he probably has participated as much in a lot of those things as governors normally would do. So again, that shifts more to the legislature or to the agencies, really, so it's going to be the Board of Regents, it's going to be the Department of Social Services. All those people are going to be presenting their budgets and testifying before Appropriations. So I think it has a chance to be a very democratic process because there'll be broader participation. It won't be a strong voice down that says, "Pass this or else."
Lori Walsh:
Yeah. She does say she would like the permanent tax cut for the people of South Dakota. She said that last year, and she's reiterating that today.
And then, we move on to education. And there's a big announcement, I would call it, I would characterize it, for education and this idea of education savings accounts with $3,000 per student.
Help us understand, Mike Card, what an education savings account for South Dakota students might be. Because she's saying, "I am setting aside $4 million in ongoing dollars to stand up the program and start providing support for South Dakota students," with a big look to the future on what that could be in the future.
Michael Card:
That's right. And surrounding states have dealt with these sorts of issues differently. Iowa has authorized what they're openly calling a voucher program. Nebraska voters turned it down largely because they believe that the state should determine what a minimal education is, and then if you want a different education for your children, then you would pay for it.
So this is essentially a voucher program as I understand it at this point. There aren't very many details in the budget address about this, but it says that a certain amount of money is available for either a private school or for alternative educational materials available to parents. So we don't know what those are other than private school tuition.
Lori Walsh:
Curriculum for alternative education, so presumably homeschooling curriculum of some kind that you could buy into.
Michael Card:
Right. And what we have is a real geographic problem, is that where private schools are located in South Dakota, then we assume that others who might live in the northwest part of the state, which is 1/35th of the land area with not that many people in it, about 25,000 people in the northwest corner. So there aren't very many private schools up there. So that I think is the inclusion of the alternative curriculum materials to what the public school is providing.
Lori Walsh:
Sure.
Michael Card:
It's about parental choice, but then the state guarantees an equal education, equitable education to its children.
Lori Walsh:
So one of the things I don't understand is she said again and again, "We're not cutting anything from public schools to create this. This is on top of this."
But Jon, who is it for? If families take her up on the education savings account and remove their kids from a public school to a private school, that decreases the number of children that are in public school and therefore it affects the funding. Or do I not understand this at all?
Jon Hunter:
No, you clearly understand it.
Lori Walsh:
Okay.
Jon Hunter:
Remember, the deal with public education funding in South Dakota is that the legislature and the governor determines a per student cap on spending. And that is a loose cap. There's things that can increase, especially for low enrollment districts. Some of that money is collected at the local level and that's collected through property taxes. And the state agrees to fill in everything else to reach that education cap. So yes, if you have 100 students in your district or 500 or whatever the number is, you get a certain amount per student times that 500. If you have fewer students than that, then yes, it would be reducing.
In addition, I think it's fair to say that if for every million you spend on a new program, if you have a balanced budget, you're taking a million away from someone else. So are you taking away from roads? Or maybe this 1.25% increase that you're proposing for education could be 1.35 or 1.55 or whatever those numbers are if you don't start any new programs.
Lori Walsh:
So in plain language, instead of raising teacher pay, you are providing alternatives for families to go somewhere else.
Jon Hunter:
Well, it doesn't actually go directly to teacher pay. That 1.25 is state aid to education.
Lori Walsh:
Sure.
Jon Hunter:
And so, school districts use that as they need to and see fit. Most of them, of course, 80% of school budgets go to teachers. And so, if you have more state aid to funding, then you would tend to raise teacher, and that tends to be a goal of ours. So yeah, every district has to deal with their own budgetary things based on what the state does. And if the state provides less funds, they have to deal with that.
Lori Walsh:
Yeah. Mike, what would you add to this when it comes to the educational savings accounts or vouchers?
Michael Card:
It really depends upon whether we are subsidizing people who already send their children to private school or whether we are subsidizing the purchase of alternative educational materials for homeschooling. And I think the other part that we're dealing with is are these children already enrolled so that we're just subsidizing the parents? But again, we are likely reducing the amount of per capita students in a school district, so the funding would decrease. It might be the same total dollars across the state, but for any particular district that loses someone new to a private school or new to a homeschool, then there are fewer dollars available for the school district for its operations.
Lori Walsh:
Yeah. Can we talk about the prison? Because this was also a thing, the devotion to fully funding the prison and paying for in advance. Jon Hunter, tell me a little bit about why that is important versus spreading out the payment of this over a number of years.
Jon Hunter:
Well, clearly there's a diverse opinion on what should be done for projects like this. So I think most homeowners, if they had a choice, would say, "Look, I'd like to save up enough to buy a house and then buy it for cash." And that's an admirable goal. Not taking on a lot of debt I think is an admirable goal.
In some cases, especially as this has been touted as the biggest single construction project in the history of the state of South Dakota, I don't see why you'd really need to save a billion dollars in advance for this kind of thing. So especially if you have a year now where maybe revenues won't be quite as strong as other years to dedicate another $182 million in funds, that can be used elsewhere, don't need to go to this prison project. So remember, the prison will benefit. And it's hard in corrections because it doesn't feel like a benefit, but having a modern good facility is going to benefit.
Lori Walsh:
Yeah. Let's make an argument for how it benefits the people of South Dakota. Yeah.
Michael Card:
Well, the first part is there are a number of people that we need to keep away from the public to protect public safety. There's a number of other individuals for which we're hoping there is a deterrent. There is a number of other individuals that we are hoping to provide opportunity to get an education, whether it be a trade skill, whether it be a GED; that because of their status in life before they committed a crime for which they were sentenced to incarceration in the state penitentiary, they weren't able to get that education. And so, we've got truly a captive audience. I'm sorry, I didn't mean the pun. But we've got a chance to get them ready to be more successful in society. So that's the real benefit, too.
Lori Walsh:
Yeah. I don't know the percentages, but most, I think most of these people will be your neighbors again someday.
Michael Card:
Yes. Most everybody gets released.
Lori Walsh:
Yeah, almost everybody is going to get released.
Jon Hunter:
A good facility and a good programming at the state penitentiary can benefit the citizens of South Dakota for a long time, and it will benefit the next 50 or 75 years. It doesn't help anyone from the past. So I don't see any problem with having some of the prison construction costs paid by the future citizens of South Dakota. It's just like, again, your home mortgage. Yes, we can put 80% down on this prison in cash and we can borrow 20%. It seems like a reasonable trade-off in a tight budget year. If there was money flowing everywhere, it's a different story.
But if you have a tight budget year, let's use that $182 million in ways that can help citizens today.
Lori Walsh:
Yeah.
Michael Card:
I believe it was last year that we paid off the last of the time when we sold off our state buildings in order to get revenue from those. We now own them all again. Our balance sheet looks really good. We would get the lowest interest rate possible. On the other hand, that means we're still going to pay interest.
But who's benefiting? And right now, you could argue that, "Well, those of us who are current taxpayers should be paying for this prison construction projects, and therefore we need to take it out of current tax revenues." But it brings up a larger question that we'll probably talk about a little later. What aren't we doing while we're spending money on this particular project?
And the second aspect is, is these economists are kind of funny. They like to say, whoever benefits from an expenditure by government should be paying for it. And that's included in the future taxpayers of South Dakota.
Lori Walsh:
Yeah. All right. Well, let's move in that direction and look at some of the ways that she suggested, she being Governor Kristi Noem, that we make some cuts. And one of the words, one of the catchphrases is to right-size places like the Department of Social Services and the Department of Human Services, and then, assist the Board of Internal Controls by adding two new employees to the department and adding some statewide training for employees to deal with fraud issues or training to help state employees understand that they are public servants.
Michael Card:
Well, I hope we're not waiting until the next fiscal year for the training and fraud prevention and whistleblowing and things of that nature. I'm hoping that's coming out of the current year's budget rather than waiting until July 1st of 2025 to begin.
Lori Walsh:
So give me some perspective on that, because as a state employee, I certainly have an awareness of my role of public service.
Is training going to help prevent somebody from creating false titles?
Jon Hunter:
Well, I have an opinion on it, if I may.
Lori Walsh:
Yeah, please. That's why you're here.
Jon Hunter:
I think it's a culture thing rather than particular training.
Lori Walsh:
Okay.
Jon Hunter:
And that is a reminder of the responsibilities of state employees. We've had at least three high-profile cases recently of state employees abusing their positions for personal financial gain. And so, I've said on this program before Lori, that it needs leadership by hopefully the governor or the attorney general or the state auditor that said, "Look, we've had these problems, and for the sake of the morale of the rest of state government, we need to clean this up. We need to make ethical behavior a top priority."
And I appreciate actually, the things that Governor Noem has issued in her executive order. I appreciate the things that Rich Sattgast is proposing for this legislative session, really to put this culture of, "We're going to be just right in this." There are states other than South Dakota that have cultures that are far from that, where they consider state government to be the gravy train, where you can go and line your own pockets. And we don't want that. And so, I appreciate saying that. And so, I think the training is just another word for, "We're going to be talking about this culture and we're going to put systems in place that hopefully prevent this."
Michael Card:
Yeah, a dozen cases of fraud relative to 12,000 employees isn't bad. Unfortunately, the 12,000 employees are probably being looked at with askance because of these few bad apples. So I think you're exactly right. Part of this is to help the people that are there to make sure that this is what we're trying to do and to be consistent with how we operate the duties of our office that we hold.
Jon Hunter:
State employees want to be proud of the organization that they work for. And to have other employees take advantage of it for personal gain is hard, I think, on the vast majority of ethical employees. So having an organization you can be proud of is important to most people.
Lori Walsh:
Let's talk about Department of Social Services and Department of Human Services. "To match utilization" she said, "they'll be right-sized," which is an implication that they'll be cut because they're turning money back at the end of the fiscal year and saying, "We were not able to use it all, distribute at all." So their budgets are going to be cut. But these are small departments with not very many employees. So where is that line, Mike Card, between saying, "Are the people of South Dakota getting the help they need from these state government programs? Or do they not need it?"
Because, as the governor positions things, it is as if people don't really need those services. If South Dakotans are doing so well because they're at work and they have jobs, that they do not need some of these services and therefore we're going to cut them back. Is that the case?
Michael Card:
Well, it's a complicated situation because we do have some of the lowest wages in the country relative to the cost of living, but the cost of living is a little bit lower here. So we don't know if it's because of a shortage of employees that we're turning money back or there's a shortage of need from our constituents, from our state residents who may need a little bit of assistance to live the life that they would like to live and that would be consonant with what we hope South Dakotans all live by.
So is it a lack of applicants for services? Are they able to get the services that the law provides that they are able to have? We know that we've closed a number of job service offices. That's an old label that I grew up with. But we also know that there is low unemployment in our state, but we also know there's high numbers of people with second jobs in our state. And what does that do to the family values that we espouse as one of the great aspects of living in South Dakota is, is that you can work and have a family. And it's a lot easier to do here than it is other places.
So I can't really answer that because there are so many variables. It's not a simple question. It's a simple question, but it's not a simple answer. I'm sorry about that, because we don't know. We don't know if it's federal money that's going to be turned back and then the federal money might require a state match.
Lori Walsh:
Sure.
Michael Card:
And whether it's people needing services that aren't able to get them, or whether there's not a need for those services in our population. Or there's an administrative burden that, as Senator Hunhoff noted, the 18-page application for supplemental nutrition programs that expects our recipients to have access to the data to fill out an 18-page form.
Lori Walsh:
Yeah. What else could we fund? That's the final big question. Lawmakers will come in with their ideas. South Dakotans will contact their state legislators with their ideas of what other problems need to be solved and what other priorities there should be. We have heard the governor's set of priorities on behalf of the people.
What else do you think should be on this list, Jon Hunter? What comes to mind for you?
Jon Hunter:
Well, the two things that strike me right off-hand from yesterday's address were, one is, and I don't know which department it's in — it's the Department of Human Services, I believe — is the Yankton facility, which has been understaffed. And frankly, I think there's a huge opportunity for progress in South Dakota on mental health. And I would love to see more money devoted to all aspects of that. That's just not throwing money at Yankton, but encouraging more students to take on mental health careers to help people most in need to help. I don't know all the answers, but I would love to see us take advantage of, I think, a huge opportunity in South Dakota to improve mental health.
Second thing, I think is the 1.25% seems inadequate to me for additional funding for education. Most of us feel inflation pressures still. And I just don't think a one and a fraction percent increase is enough. Certainly, in health care facilities, when you talk about closing nursing homes in South Dakota over the last number of years. I'd love that to stop and turn the corner. So if I were a legislator — which I'm not, I've never been elected, I won't be elected.
Lori Walsh:
You're not running.
Jon Hunter:
I'm not running, but I would love to see those two areas in mental health opportunities in South Dakota and in the Big Three, as they're loosely called.
Michael Card:
Yeah, I want to second that, that need for nursing home care. I've been assisting somebody trying to find nursing care for a close relative that's within 60 miles of where they live. And I live in southeast South Dakota. So there's a definite problem there for skilled nursing care for people that literally can't live on their own anymore.
We also have a housing problem in South Dakota, that there isn't enough affordable housing. We need more skilled trade training. Now, we have apprenticeship programs, which is a great first step towards that. But if we want younger people to get involved in those professions, we probably need them to have access to more trade programs and skilled trades, especially.
We've got lots of issues that we're trying to deal with. As you noted, we need healthcare providers. We're also not necessarily dealing very well with our public safety employees, and we could use more assistance. And we've got a real problem with bringing people into the state who may need both housing, which has raised the price of the housing, especially given our low cost of living. That also means that people moving in are likely to come from states where they are bringing more money with them. That has inflated the price of housing.
It's one of those plus and minuses. It's great that new people are coming here, but they're bidding up the price of real estate, which is, as I've seen two 19% increases in my property taxes. And I'm sure that I'm fortunate that it isn't making me destitute, but there are people that can no longer afford those. And I expect the legislature to have to deal with that issue sooner or later, that is the high property taxes that people can't pay. And I didn't hear anything about that in this address.
Lori Walsh:
Didn't hear much about business. I didn't hear anything about agriculture.
Michael Card:
No.
Lori Walsh:
So there's lots of things that were not discussed, not that they can all be squeezed into one budget address. But certainly, we look forward to the legislative session and all that is to come.
