2011 State Business Tax Climate

For the second year in a row, South Dakota is ranked 1st in the Tax Foundation’s 2011 State Business Tax Climate Index; followed by Alaska and Wyoming.  New York has the worst state business tax climate with Minnesota (43rd) and Iowa (45th) also in the bottom 10.  The eighth edition of the Index, released Tuesday, represents the tax climate of each state as of July 1, 2010, the start of FY 2011.  This report illustrates why my commitment to protecting our low-tax and business friendly climate is so important.  Click here for the complete report.

The report validates principles that South Dakotans have believed in for decades—“Taxes matter to business; and states do not enact tax changes (increases or cuts) in a vacuum.”  South Dakota’s 4% sales and use tax reflects the report’s standard – “Good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same.”  They emphasized a critical point to consider especially in today’s budgetary situation-- “State lawmakers are always mindful of their states' business tax climates but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state's competitiveness.”  (Padgitt, 2011 State Business Tax Climate Index)

Hot off the Press…

Check out my 8^th edition of Just Give Me the Facts, my campaign newspaper filled with information that affects us all.  Where does the money come from in our budget and where do we spend it? Why do Sioux Falls and South Dakota consistently rank at the top for entrepreneurs and business development? Where do our property taxes go? What’s a neutrino....and why do we care? Where are the jobs? How is South Dakota reacting to federally imposed ObamaCare? What are the 30 million reasons to keep the Trust Funds solvent?  What’s the status of the education lawsuit against the State? …..and lots more!!

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Sobering Statistics On States’ Revenue

The June* 2010 Fiscal Survey of States offers a sobering look at the 50 States 2010 and 2011 budgetary conditions and predicts that,  “states are expected to take up to several years after the recession to fully recover and begin expansion.”  While there has been great political attention as to who is to blame for South Dakota’s structural deficit and whether it is a “crisis” or not, this Report clearly shows that the “crisis” nationwide is much more threatening.  Compounding the national economy’s steep decline are policies coming out of Washington which are creating great business uncertainty and further job loss. While South Dakota has challenges ahead, our low tax, conservative, and business-friendly environment provides us a buffer from some of the harsher realities other States face.

Here are just a few of those realities from the *Report which was prepared by the National Governors’ Association and the National Association of State Budget Officers.  The full report can be found at: www.nasbo.org.

1)  The number of States experiencing revenue shortfalls increased in fiscal 2010 with revenues from all sources below projections in 46 States.

2)  States’ total fiscal 2011 budgets are reflecting an 8.4% decline in revenue from FY 08 (South Dakota expects a 1% decline).  FY 08 (July 1, 2007-June 30, 2008) was the last full year prior to the national recession.

3)  In the 2011 budgets 34 States are either reducing or freezing provider payments for Medicaid patients. (S.D. froze provider payments)

4.)  In the 2011 budget, 31 States will cut K-12 spending; 31 States will cut Higher Ed spending.  (In FY 2011 S.D.’s per student allocation will remain at last year’s level, but the legislature did change the manner in which it counts students resulting in increasing state aid for growing schools.)  35 States had already cut K-12 spending in the current FY 2010 budget. (South Dakota did not.)

5)  32 States expect FY 2011 “rainy day” balances to be less than 5% of their expenditures; 15 of those States’ balances are below 1%. (S.D. budgeted for a 9.2% “rainy day” balance) South Dakota’s relatively larger fund balance reflects the concern stated in the Report, “because states recognize that this economic downturn may last at least in 2012,  they are reluctant to deplete balances.”

6)  States are recommending an average increase of 3.6% in 2011 spending over 2010. (S.D. budgeted for a 2.9% increase, all of which is Medicaid.  In South Dakota’s FY 2011 budget, total state expenditures will increase by $32.5 million; Medicaid and Social Services alone will increase by $35.9 million.)

911 Response is a Credit to our Community...

Rural Metro, Sioux Falls’ exclusive provider of 911 emergency medical transportation services, has just completed their 3^rd national accreditation review.  As required by their exclusive contract with the city of Sioux Falls, Rural Metro has been accredited by the Commission on Accreditation for Ambulance Services (CAAS) since 2004.  This accreditation assures the citizens of Sioux Falls that the ambulance responding to their 911 calls will be meeting the “gold standard” in pre-hospital patient care.  Rural Metro in Sioux Falls is the only accredited ambulance service in South Dakota and one of only 135 nationally.

I have the privilege of serving on the Regional Emergency Medical Services Authority (REMSA), the citizen’s board that monitors compliance with all contract provisions. It has been a real education as I have learned all that goes into Emergency Medical Services beyond the flashing red lights we see speeding to the hospital. The working partnership among all the EMS providers: Metro Communications (medical dispatch), Police, and Fire (first responders) and Rural Metro (ambulance); as well as the medical community, is truly a credit to Sioux Falls. 

It is a goal of REMSA to continue to allow Rural Metro “to remain profitable locally without a government subsidy so they can continue to provide high quality services.” (2009 REMSA Annual Report)

When does the madness end?

The Wall Street Journal analyzed the $190 billion in new spending now being considered in Congress. While the goal of this House bill, (titled the American Jobs and Closing Tax Loopholes Act), is supposedly job creation, its allocation for small business loans comes in at the bottom of the priorities at $ 0.5 billion.  The remainder is a variety of payments to Medicare, Medicaid, unemployment, welfare, etc. Although most of this $190 billion simply adds to the deficit, some of it is paid for with additional taxes on business, furthering draining their ability to create jobs.  This is a “jobs” bill???

Tax Policy Matters!

Tax policy matters!! We believe that in South Dakota.  The U.S. Chamber of Commerce affirmed the value of South Dakota’s low-tax and business-friendly environment in its report, Enterprising States, ranking South Dakota 3rd in the nation for job growth.  They described South Dakota in this way, “as a national leader in corporate tax and small –enterprise friendliness, South Dakota has made a concerted effort to work with and for small business to accelerate job retention and job growth.  The State has put in place an extensive array of tax and regulatory statutes aimed at lessening the tax burden on doing business and invested in extensive infrastructure to promote research and technology development.”  The Chamber ranks South Dakota as the Top Performing Tax and Regulation State. (Joel Kotkin, Enterprising States, U.S. Chamber of Commerce, May 2010.)

 Tax policy matters!  You can be assured, I’ll never forget that.