Outside group gives South Dakota solid grades on state government’s budgeting process

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PIERRE, S.D. (KELO) — South Dakota state government received grades of one A and four Bs for its 2018 budget process in a national set of state reports released Wednesday by the non-partisan Volcker Alliance group.

South Dakota’s graded somewhat better than neighbors North Dakota, Montana, Wyoming and Nebraska but somewhat behind Iowa (two As, one B and two Cs) and Minnesota (two As, two Bs and a D).

The annual report evaluates state governments on budget forecasting, budget maneuvers, legacy costs including public pensions, reserve funds and transparency.


South Dakota state government doesn’t publicly chronicle its deferred costs for infrastructure replacement. That absence hurt South Dakota in the transparency category.

There also seemed to be an oversight in the category on budget forecasting for South Dakota.

The report said only the state Bureau of Finance and Management — the governor’s budget office — generates revenue estimates “with no input from the Legislature.”

However, the state Legislative Research Council has a fiscal staff that plays a prominent role year-round and especially during the winter law-making sessions.

The two agencies annually present revenue estimates to the Legislature’s Joint Appropriations Committee in late February or early March.

The panel of 18 lawmakers then uses those numbers to revise the budget in progress for the current fiscal year that ends June 30, as well as to set the official revenue estimates for the next fiscal year that starts July 1.

The revenue-estimates documents used in the 2019 legislative session are online.

Paul Volcker was chairman of the Federal Reserve under U.S. President Jimmy Carter, a Democrat, and U.S. President Ronald Reagan, a Republican, from August 1979 to August 1987.

Volcker later chaired the Economic Recovery Advisory Board during the late-2000s financial crisis for U.S. President Barack Obama, a Democrat, from February 2009 to January 2011.

Volcker founded the alliance in 2013.

State Finance Commissioner Liza Clark said there are several statutes that outline that both the bureau she oversees and the council will provide revenue projections throughout the fiscal year.

“There are also statutes that outline the financial metrics that BFM shall provide,” Clark said. Those include:

Statute 4-8a-16 requires BFM and LRC to submit revenue estimates to the Joint Committee on Appropriations by July 30th each year. 

Statute 4-8-28 requires BFM and LRC to submit projections no later than the 38th legislative day of each legislative session. 

The South Dakota Constitution requires a balanced budget (Article 12-7).

Statues 4-7-48 through 4-7-51 (Chapter 4-7) require a plan outlining current debt policies, financial analysis, and metrics prepared and released by BFM no later than January 15th each year.  Those can be found online.

Bill Glasgall, who spearheads the report said the group uses a definition from the National Association of State Budget Officers for a consensus or conference estimate developed jointly by a governor and legislators and becomes a binding number the Legislature uses.

He said South Dakota uses a different approach of budget recommendations from the governor to the Legislature. “The estimate starts with the executive branch,” he said.  

Twenty-five states have a consensus revenue forecast process, according to a NASBO report. It says, “States vary in terms of how many years they project revenue beyond the current budget cycle, ranging from 0-10 years.” South Dakota doesn’t project beyond the coming fiscal year.

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