PIERRE, S.D. (KELO) — The two agencies that guide state government’s budgeting process delivered very different forecasts Wednesday.
Neither one sounded promising.
The governor’s Bureau of Finance and Management cautiously predicted only 0.4% growth in state general fund revenue for the budget year that began July 1.
The Legislative Research Council meanwhile was more optimistic at 2.5%.
Those outlooks, given to the Legislature’s Appropriations Committee, came in the wake of state government last week reporting a record surplus of nearly $114.5 million for the budget year that ended June 30.
All of that money went into budget reserves.
Representative Chris Karr, R-Sioux Falls, chairs the joint House-Senate committee. On Wednesday, he asked the two economists at the other end of the long table, “What’s the acceptable difference or delta between your projections and actual?” “What is that number for you?”
BFM economist Derek Johnson went first. “That’s a tough question to answer. The last two years have been extraordinary times,” he said.
Johnson noted that the two agencies had been within 1% of one another prior to the past two years. “Going forward our goal would be to get back to close to that,” he said.
Karr interjected, “We make a pretty big decision here in the Legislature that affects the whole state.”
LRC’s chief budget analyst Jeff Mehlhaff said he wants the difference to be as small as possible, preferably within 1%.
“It was an outlier year,” Mehlhaff said. He looked back 12 months. “We were all off by more than ten percent,” he said. “But that was such an uncertain situation. We didn’t expect inflation. We didn’t expect stimulus.”
Representative Taffy Howard, R-Rapid City, asked how BFM picked $40 million of revenue from unclaimed property. “Why not pick a higher number and stop having the reversions every year?”
Johnson pointed to unclaimed property receipts dating back to 2014. The trend line was headed downward toward the $40 million mark. But the actual final amount for fiscal 2022 came in at $65 million. “We’ll continue to monitor that,” he said.
Howard also noted that BFM expects 2.2% growth in sales and use tax while LRC forecast 3.9%. Sales and use tax revenue rose 12.2% in 2022. The 20-year average growth was 4.7%.
Representative Linda Duba, D-Sioux Falls, asked whether the forecast for contractor’s excise tax reflected the stimulus spending coming on infrastructure projects. Johnson assured her said the estimate reflects the ARPA projects, which he noted will occur over multiple years.
“I think everywhere is struggling to find contractors to do these types of projects,” he said.
State government’s five largest sources of general fund revenue
Sales and use tax: 2022 actual 1,356,844,793. Latest estimates for 2023: BFM 1,387,086,556; LRC 1,408,168,687.
Lottery: 2022 actual 171,609,682. Latest estimates for 2023: BFM 173,474,011; LRC 175,951,443.
Contractor’s excise tax: 2022 actual 155,823,772. Latest estimates for 2023: BFM 160,388,197; LRC 162,732,483.
Insurance company tax: 2022 actual 103,995,420. Latest estimates for 2023: BFM 106,992,280; LRC 104,902,861.
Unclaimed property: 2022 actual 65,097,628. Latest estimates for 2023: BFM 40,000,000; LRC 55,619,750.
Total ongoing receipts: 2022 actual 2,126,409,366. Latest estimates for 2023: BFM 2,135,163,037; LRC 2,180,459,192.