If you follow the legislative process much, you have probably heard that the state government is headed into another highly unusual budget year. Last week, the Governor laid out her plan for allocating unprecedented federal dollars as well as far-better-than-projected state revenues.

Before sharing thoughts on the proposed budget, two distinctions are critically important: federal funds vs. state funds and one-time spending vs. ongoing spending.

First — over a billion dollars of federal “stimulus” money was allocated to South Dakota. These federal dollars have tight and complex strings attached. We can’t send them back to pay down federal debt or use them to rebate/cut taxes. We have to use them as the Feds say, or the Feds will send the money to California, Minnesota, or Illinois for their state to use.

Second — I cannot overemphasize the importance of the term “one-time.” This revenue should be thought of as a lump-sum windfall rather than operating revenue. That means we can’t use the one-time funds for ongoing expenses like salaries, programs, or operations, since we’d be creating an expense without knowing whether we can pay for it the following year.

The most important budget decision each year pertains to the state government’s ongoing, core responsibilities: education, state employees, and meeting our Medicaid obligation. This year, the Governor proposed a 6% increase in those areas. 6% is a big increase — bigger than any proposal without a tax increase for decades. 6% is only possible because state revenues had unprecedented growth — up more than 10% from last fiscal year. So, the Governor says we can afford 6% and I know our schools, state employees, and Medicaid providers need it. At this point, I’m inclined to support the proposal.

The eye-popping one-time proposals, in terms of size, largely pertain to federal funds: $600M for water projects statewide, $100M for daycare provider startup or expansion, and $69M for a new health lab. In addition, $50M of the $200M going for a housing development program will be federal funds.

I’m more encouraged by the Governor’s proposals for state funds, which don’t have the same strings as the federal projects: renovating the Cultural Heritage Center, building capacity at our technical schools, expanding campsites at Custer State Park, and fixing the fountain feeding Capital Lake — as we wrote about in November.

Even if I see the merit in many of the Governor’s proposals, I am constantly cognizant of the fact that these are taxpayer dollars, not mine, and not the government’s. Even if DC is content to endlessly spend, we are not. We need to be as prudent when there is $500,000 available as we are when there is $500 million. Just because the budget year is unusual doesn’t mean we should apply any less scrutiny.

I hope you’ll help me keep tabs on the worthy projects — and the unworthy ones. If you have any advice or perspective, please drop me a line at Will.Mortenson@sdlegislature.gov.

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