“This pandemic cannot be an excuse to grow bureaucracy, or the scope of government.”
“The future of South Dakota is going to be in the hands of the people, not the government.”
Thursday, Gov. Kristi Noem continued her vehement opposition to the idea of creating new government programs to spend the $1.25 billion South Dakota received as part of the $2.2 trillion CARES Act.
Noem has repeatedly said the effects of COVID-19 are crippling South Dakota’s economy, thus, devastating the state budget. Without flexibility in the ability to use the federal funds, Noem warns of significant funding cuts for:
Education, specifically teachers;
Health care, specifically nursing homes; and
Transportation, specifically roads.
How Did We Get Here?Amid the COVID-19 pandemic, Noem has never forced any business to close via a “shelter-in-place” order, such as those used by the Democratic governors of New York, New Jersey, Michigan, Wisconsin, Illinois and California. Republican governors in Ohio and Maryland also instituted the mandates.
Nevertheless, many businesses throughout South Dakota are struggling to stay open, while others have had to close due to poor sales.
For example, on Thursday, South Dakota Labor and Regulation Secretary Marcia Hultman said 5,131 state residents had filed initial unemployment claims during the week of May 3. That continues the average of more than 5,000 new claims per week for the last seven weeks.
Noem said that prior to the COVID-19 pandemic, South Dakota typically saw 150 to 180 initial unemployment claims per week. That means unemployment claims are about 30 times greater than they were prior to the outbreak.
How does this impact the overall economy?
Whether regularly employed by hotels, movie theaters, meatpacking plants, ranches, farms, restaurants, bars, department stores, trucking companies, automobile dealerships, government, or in some other field, the number of out-of-work South Dakotans continues to rise.
Let’s consider the example of someone who manages a hotel in Pierre, Sioux Falls or Rapid City losing his or her job because there are no bookings. Even if they collect unemployment benefits, that person will have less money to spend at the grocery store, at the hardware store, at the car dealership, etc.
The decline in economic activity not only directly hurts businesses and their employees, it also hurts state and local governments that depend on those businesses to generate tax revenue. This is the root of Noem’s dilemma. However, the problems go far beyond South Dakota. According to the U.S. Bureau of Labor Statistics, the national unemployment rate is now 14.7%, the highest ever officially recorded.
Unofficial unemployment estimates for the height of the Great Depression in 1933 are around 25%.
Help from a former S.D. governor
In Washington, D.C. this week, U.S. Sen. Mike Rounds, R-S.D., introduced legislation intended to help Noem get the flexibility she needs for the $1.25 billion.
The legislation endeavors to allow up to 25% of funds already allocated through the CARES Act to cover lost tax revenue needed for education, law enforcement, fire departments, road construction and Medicaid.
“Every sector of our economy has been impacted by the COVID-19 pandemic,” Rounds said while introducing the legislation. “By allowing states to use part of their previously-appropriated COVID-19 relief funds to recoup lost state, local and tribal tax revenue, we lessen the chance that South Dakota communities will have to make difficult decisions to raise taxes or cut essential services – such as education and road repair – in the future.”
Part of the problem in Washington seems to be the hesitation among Republicans to “bail out” Democrat-heavy states that have large public pension debts, such as Illinois, California and New Jersey.
“South Dakota is a fiscally responsible state, but COVID-19 has hit our state sales tax revenues hard. Senator Rounds’ bill will give us the flexibility we need without bailing out fiscally irresponsible states,” Noem stated as Rounds introduced his new legislation.
“We should not provide any additional funds to bail out states who have spent recklessly,” Rounds added.
Noem continues making the grade
Through it all, Noem continues receiving high marks from the pro-business Committee to Unleash Prosperity. She is one of only a few governors graded “A” from the committee, which consists of three well-known conservative philosophers:
Art Laffer, founder and chairman of Laffer Associates and former member of President Ronald Reagan’s Economic Policy Advisory Board;
Stephen Moore, who serves as the committee’s chairman and has worked as a senior economic adviser to then-presidential candidate Donald Trump in 2016; and
Steve Forbes, chairman and editor-in-chief of Forbes Media.
Moore offered strong criticism of New York Gov. Andrew Cuomo, New Jersey Gov. Phil Murphy and Illinois Gov. J.B. Pritzker, all Democrats.
“These states will pay a high price in the year ahead for the decisions by Govs. Cuomo, Murphy, and Pritzker to keep their small businesses shuttered and their workers without paychecks,” Moore said.
Meanwhile, Noem presses forward, continuing to make regular appearances on national television.
“I’ve just trusted our people,” Noem said this week during a Fox News interview. “We did not mandate that any businesses close. We gave our employers an opportunity to protect their employees and their customers.”