Governor Janklow presented his budget proposal for fiscal year 2003 in which he recommended using $36 million of the reserve funds to balance the budget. Also, he recommended using $11.5 million in reserve funds to meet the projected shortfall in the present budget.
This year's budget was passed with the assumption that sales tax revenue would rise by 5.2 percent, but it is now projected to grow by 2.3 percent.
South Dakota is in a sustained period of slower growth, as are all of the other states.
This downturn, although significant, is not anticipated to be as great as other states such as has been reported in Minnesota where they are faced with some of the largest revenue shortfalls in a generation.
In the December 2, 2001 opinion page of the Minneapolis Star Tribune, Peter Hutchinson addresses this "fiscal about face." Hutchinson points out that fiscal challenges bring opportunities. These opportunities are:
1. Control the price of government - raising the price of government is counterproductive to economic recovery.
2. The budget should provide results that citizens value - focus should not be on just the cost of government but on results. "We don't pay for higher costs, we pay for better results."
3. Separate the temporary shortfalls from the permanent - use reserves to address temporary shortfalls.
To address the permanent shortfalls Hutchinson recommends:
1. Clear the decks of all programs and activities not central to government's core purpose and give top priority to security, education and health.
2. Make services accountable to their customers through choice, standards, direction and e-government.
3. Give managers flexibility in return for accountability.
4. Cut the cost of mistrust and enforcing by government.
5. Divest some programs and then invest in results that matter to people.
6. Target subsidies to those who truly need them.
7. Connect taxes to the services they buy at the state and local level.
Although the impact of an economic down turn in South Dakota is anticipated to be much less than in Minnesota, the recommendations laid out by Hutchinson are still relevant to policy discussions in South Dakota. Governor Janklow has addressed the issues in his budget proposal and the Legislature will be faced with several decisions. These guidelines may be helpful not only to state government but also to local governments.
Peter Hutchinson is president of the Public Strategies Group. He has served as superintendent of Minneapolis public schools and as Minnesota's commissioner of finance.
The full text of his article can be read at: