Legislative Budget Basics

Finding budget solutions through our shared values

Legislative Budget Basics

Mission: To promote responsible and equitable fiscal policies

through research and education

Joy Smolnisky, Director 808 N. West Ave., Sioux Falls, SD 605-367-9667 joys@sdbudgetandpolicyproject.orghttp://sdbpp.org

Funded through a grant from theNorthwest Area Foundation

Becoming fluent in budget basics

You might say government budgets are the ultimate policy documents…

• the components of the state budget,

• how it is created, and

• the priorities and choices it reflects.

download from sdbpp.org

…. a guide to understanding

In a balanced budget:

expenses = revenues

• increase revenue

• decrease expenditures

• combination of both

Balancing the Budget

A budget is born

Page 6, SD Budget Primer

Final budget

Challenges in our process

Part time citizen Legislature

Short legislative session

Final budget amendments are often not introduced until the

last days of session

Information to support decision-making

1. Governor’s budget and budget address http://bfm.sd.gov/budget/rec12/index.htm

2. Fiscal notes on legislation

3. Revenue estimates for upcoming year

4. LRC briefings on agency budget requests and other documentation available at legis.state.sd.us

LRC Website: legis.state.sd.us

Office of Fiscal Analysis

Appropriations Notebook

Revenue Estimates

Revenue estimatesmethodology

Amendments to general appropriations bill

Appropriations Notebook agency information

Fiscal tools used by other states

that could help inform South Dakota budget decisions

• Current services budget

• Revenue review

• Tax incidence analysis

• Tax expenditure report

Current services budget

Tax incidence analysis

Tax expenditure report

SD sales tax exemptions alone lower total state revenue by $500 million.

$500 million.

Getting Involved

• Inform yourself and your community

• Influence your legislators

• Make a difference

Where do the $ come from?

South Dakota - a low tax state not a low income state

South Dakota Per Capita Income

Dependency on consumption taxes is growing

60%

62%

64%

66%

68%

70%

72%

74%

76%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

% revenue from sales, use & contractor's excise taxes

The fundamental purpose of taxation is to raise the money needed to fund public services

BUDGET BASICS South Dakota Spending

How is the money spent…?

Where does the money go?

SPENDING: 1. General funds2. Federal funds3. Other funds

General fund expenditures

South Dakota spends less per-capita than other regional states

Two expenditure examples:

• K-12 Education

• Medicaid

K-12 Education Funding Concepts to understand:

1.School Funding Formula

2.Per Student Allocation (PSA)

School Funding Formulapage 19 of Budget Primer

SD State Aid to K-12 Education

How big is your districts Funding Formula Cup?(# students times PSA)

small

largemedium

How much local property wealth do you have?

(assessed value times mil levy)

Property-wealth rich district

Property-wealth poor district

Property-wealth average district

How much will the state provide?(enough to fill your “cup”)

Property-wealth rich district

Property-wealth poor district

Property-wealth average district

K-12 % of state general fund dropped by 25%

K-12 general fund spending as % of total personal income

dropped by 25%

SD share of Medicaid costs

The vast majority of South Dakotans on Medicaid are low income children

Average cost per Medicaid enrollee varies significantly between children, adults, elderly and disabled

SDMedicaid

enrollment changes

Impact of initiated measure raising sales tax

• Distribution of cost across population

• Utilization of new funds – the details matter!

(50% Medicaid/50% k-12 education)

• Change in k-12 funding formula

• increase revenue

• decrease expenditures

• combination of both

Balancing the Budget

18 sessions in 16 communitiesTotal Attendance 464 (average of 27 per meeting) Legislators attending 53 of 105

“South Dakotans Talking” sessions