Sunday, May 21, 2017

Trump "Loves The Poorly Educated" So Much He Wants To Make More Of Them

   In its continuing crusade to weaken programs that help the poor,  President Trump's budget agenda wants Rapid City Area Schools to lose a significant chunk of  Title I funding. Title I of the
A Worthy Concept
It's Worth The Money
Elementary and Secondary Education Act, enacted in 1965 as one of President Lyndon Johnson's "War on Poverty" initiatives, provides direct federal money to schools and districts with significant concentrations of students from low-income families.  As Trump's proposed budget will cut Department of Education funding by about 14%, or about $9 billion, programs like Title I will follow suit, right down to the local level, with Rapid City public schools losing about $600 thousand from a $4.5 million annual grant.  This is in keeping with President Trump's budget, which will slash funding from 12 cabinet departments and increase it for three, Defense, Homeland Security, and Veterans Affairs.

      As a disabled vet I cheer the support for my brethren, but in the much bigger picture, I don't like this particular prioritization.  When it comes to veterans and defense, reducing support for our many economically-disadvantaged kids seems like a tough way to help our vets--and certainly a questionable method of paying for a Defense establishment that already spends more than the next 7 countries combined.  I wish the White House and our congressional reps would consider what we'd lose here in Rapid City (as well as every other school district in this state) if Trump's budget materializes.  Professional training and technology spending would be most immediately affected, taking away the extra attention and assets that are probably needed to give these disadvantaged kids an extra boost in school.
     Longitudinal (read:  follow-up) studies are probably impossible to find at a local level, but researchers have seen some correlation between Title I spending and individual achievement on a national scale.  Studies on academic success are a mixed bag, but a most interesting conclusion was reached in 2015 at the University of California, where researchers followed participants into their adult economic outcomes and found positive correlations between Title I funding increases and "higher earnings and work hours, reductions in incarceration" and reductions in poverty rates. The Trump administration, focused as it is on "jobs, jobs, jobs" should take note.  The link between poverty and poor academic achievement is a long standing reality in the world of public education, but as Trump, who "loves the poorly educated" should know, when it comes to economic success, the effects of good character are as meaningful as the effects of education.  If the UC researchers are correct, Title I and its strategies for developing self-motivation may have as much, possibly greater, impact on the former than it does on the latter.  
     The pedagogical magic of that connection seems clear enough to researchers.  It would be a shame to weaken an opportunity like that for South Dakota's neediest kids. 

Sunday, May 14, 2017

Some Dot-Connecting Between Fairness And Efficiency

   What, again?  Governor Daugaard last week ordered immediate cuts in state agency budgets because tax receipts this year have come up short by 10-15 million bucks.  In his typical
caretaker-like fashion, the governor is being re-active when what we need is pro-active leadership.
Daugaard
Banking On Tourists
The chronic problem with the falloff in sales tax receipts in this state isn't likely to get solved by doing nothing but cutting overhead, or, more to the point, by standing around and crossing our fingers that grain and livestock prices will reverse course, go significantly higher, and pull enough revenues into this state to get the cash streams flowing again.  This rather calcified process that masquerades as policy has been the bane of the Daugaard administration for years now.  In 2014, SD forecasts for sales taxes fell significantly short of estimates, much as they have this year, with no 2017 relief in sight beyond the hope of a strong tourist season bringing in a surge of cash to help the state pay its bills.  

     Even should that occur, we're continuing to rely on broad economic and market forces beyond our control to determine our state's fiscal destiny.  Twice now in the past 3 years, forecasters have gotten it wrong and there's no reason to expect their crystal balls to get any more prescient. Meantime, our sales tax revenues fluctuate with the whims of the commodity markets, which seems amazingly inefficient, considering that taxation based on personal income would probably be a much more stable alternative.  The ag sector in South Dakota now has 76% less money to spend than it did in 2011, to the tune of around $3 billion. That debacle, as noted by our elected officials, is probably the most responsible for our sales tax woes.  Meantime, I was startled to discover in a report from
Unfair
And Inefficient
the U.S. Commerce Department's Bureau of Economic Analysis that our  personal income--derived from a wide array of non-ag related businesses in South Dakota--during the decade from 2006-2016 grew at a compound annual rate of 4.2%, substantially faster than the U.S. growth rate of 3.5%. 

     We're too self-fixated on our status as a state with no income taxes, as I often hear, but I think some comprehensive tax reform that reduces sales taxes, puts a freeze on property taxes with strict limitations on annual increases, and initiates a progressive tax on income, both personal and corporate, merits consideration.  Ideally it would result in a tax shift, not a tax increase.  Using U.S. Census Bureau data, the financial information website 24/7 Wall Street reports that income growth in South Dakota households from 2011-2015 ranged from 5% in the middle levels to nearly 10% in the upper.  The story lists us as one of the 9 states in the country where the middle class is being left behind,  income growth disparity (definitely a subject worth pursuing in another post) being a good reason why. Given the trend, a graduated income tax seems like a reasonable way to expect people making good money here to bear their share of the burden, which they now escape given our regressive and bumpy sales tax-dependent system. The dots between tax fairness and smoother government revenue streams look connectable to me.  

Sunday, May 7, 2017

Repeal, Replace, Repent

      Giddy with the consequences of her recent vote to repeal and replace Obamacare, South Dakota's lone congresswoman, Republican Kristi Noem, was clear about what it meant to her.
Working?  Maybe
Thinking?  Um, I Doubt It
She said "it's a very significant day for me" because "I loved the fact that we repealed the mandates." Apparently, getting rid of those mandates was the main driver of her vote to toss ACA out altogether, circumspection about the full implications of her vote be hanged.  In their rush to create the appearance of a legislative victory for the Trump administration, Noem and her fellow Republicans in the House of Representatives abandoned all pretense of deliberation and put together a bill that even Noem acknowledges has its flaws.  She knows the House whipped up a batch of hasty pudding and even reiterates its pitfalls, particularly in the way it gives states so much leeway in developing requirements for insurers on matters like "essential services" and price protections for older and sicker folk. To questions about that, Noem plaintively responds, "I didn't get to shut the door to my office and write it myself."  Please.

     We South Dakotans have to hope that our GOP Senators Rounds and Thune can give this package a serious once-over before they go the Kristi Noem-esque rubber stamp route.  Besides the matters of making sure all of us get adequate and affordable health care, there are broader economic implications that seem to have whizzed right past the partisan heads in the House.  For one thing, the job-conscious Trump administration should consider that the growth in healthcare jobs (about 10% faster than the overall rate of job growth) in this country during the past few years has more than offset the loss of manufacturing and construction jobs.  Healthcare consulting firm Oliver, Wyman tells CNN "Obamacare was a de facto jobs program
Our Dynamic Duo
Rounds and Thune
whether it was intended that way or not." Researchers at Trump's alma mater UPenn say that the expected decrease in healthcare spending "will translate into a contraction in the healthcare sector."  


     Besides job losses, which are bound to hit South Dakota's 30,000 healthcare pros and technicians, there's the vulnerability of our rural hospitals to consider.  They've been having a tough enough time as it is, especially in states like South Dakota that have refused to expand Medicaid and bring more of its rural populations into that federal insurance pool, which would only add to the revenues of small hospitals. The National Rural Health Association notes that 70 rural hospitals have closed in recent years, with another 700 at risk as it appears that states are likely to get less federal money to treat the poor.  Can South Dakota make up the difference if that transpires? Given our perenially cash-starved fiscal status, I doubt it.  Maybe Rounds and Thune can explain what will happen to our poorer rural residents with the plan they have in mind.
     

Sunday, April 30, 2017

I Thought Being A Blogger Would Be Easier

     President Trump's public airing of his moment of self-examination was understandable enough.  He told Face the Nation last week that he "loved" his previous life and that he thought the
Did You Ever Have To Make Up Your Mind?
The Presidency Is No Lovin' Spoonful
Presidency "would be easier."  Who hasn't had the same experience?  In my case the feeling came over me during the first few hours of Marine Corps boot camp back in '66.  Lasted for three years, it did.  I have a feeling it will similarly linger for the President. But much as I can empathize, I wonder if Trump knows how his tenure in office has so far been anything but easy for us common folk.

     Here in South Dakota I get the sense that everything is on hold when it comes to matters that affect our state.  Trump's ambivalence about our trade relations with Canada and Mexico come immediately to mind.  Last Wednesday he said he was preparing an executive order to set a timeline for withdrawing from NAFTA after just telling a crowd in Kenosha, WI, that "NAFTA's been very bad for our country." Trump followed up by submitting a draft of the order for executive review.  The subsequent selloff in corn and soybean futures signaled to our agriculturally-dependent state that a continuation of ultra-low and economy-damaging grain prices would continue for a good long while as one of our best customers, Mexico, would probably start shopping elsewhere for their grain supplies.  So what transpired?  The very next day, President Consistency changes his mind and decides he wants to negotiate, after all.  Along with flip-flops on immigration policy, healthcare reform, NATO, marriage equality--the list goes on--Trump's vacillation has made presidential life for himself and the country a lot more difficult than it has to be
     And just where the heck has our trio of Republican congresspeople been during this waffling-in-lieu-of-government era?  In a pro forma recitation of political fealty, Senator Rounds
Congresswoman Noem
What, Me Worry?
last week in the RCJ proudly claimed that Trump is saving Americans billions of dollars via executive orders rescinding regulations. Right.  I wonder how much will be lost by Americans to financial brokers who no longer have to commit themselves to working in the best interests of their clients now that Trump has removed the "fiduciary rule" as part of his regulation-expungement program?  Meantime, all three of our GOP reps (Noem in the House and Thune in the Senate along with Rounds) have been mum about Trump's budget plan that would slash agricultural spending by 21%.   As consistency and coherence have been banished from the White House, it's no surprise that mum's the word.  Yeats' chilling vision seems to have materialized:  "the falcon cannot hear the falconer/things fall apart; the center cannot hold/mere anarchy is loosed upon the world."

     

Sunday, April 23, 2017

South Dakota's Fiscal Policy Is Based On Finger-Crossing

     It looks like there's no relief in sight for South Dakota's chronic fiscal problem, a shortfall in sales tax revenues.  As RCJ correspondent Bob Mercer put it in his report on a legislative board
SD Makes Projections On This?
Give Me A Break
meeting discussing the issue a few days ago, "the news is getting worse."  Mercer notes that Sioux Falls GOP Representative Mark Mickelson called the downturn in state revenues "the No. 1 issue" facing state government, adding that his concern is "the erosion of our ability to keep pace."  Rising expenses and falling revenues are a persistent reality for South Dakota government, which is headed for a second straight year of declining sales tax revenues, even as our state's population has increased by a bit over a percentage point since 2015.  Little wonder that Mickelson is concerned about our ability to keep pace.  

     Even more wondrous to me is that nobody in Pierre acknowledges the obvious, which is that our fiscal policy is based on finger-crossing.  South Dakota's agriculturally-dependent economy has suffered a three billion dollar hit in the past few years, seriously cutting down the flow of cash that streams through the state and surfaces as taxable sales.  For the government to base its cash-flow projections on any assumptions about commodity prices is folly, as we've seen the past couple of years. Our state's rigid dependence on sales and, more locally, property taxes for the lion's share of operating revenues is the stuff of gambling and hoping that lady luck will be with our commodity markets every crop year.
     A comprehensive review with an eye toward tax reform should be on Governor Daugaard's order of business for the remaining months of his term.  Our regressive sales tax-based system (4th most regressive in the nation) plants its burdensome feet most heavily on our lower-income residents, and our high property taxes (16th highest in the country at 1.4% of valuation--mine being closer to 2%) could stand some downward adjustment.  Taking those taxes down significantly and replacing the revenues with corporate and possibly individual income taxes
An Impractical Set-Up
That's Also Unfair
would smooth out the state's revenue stream and give property owners some long-needed relief.  It would also inject some equity into our state's financial structure.  It might even give our area ag producers some relief from the pain of paying the same property taxes every year whether they've made money or not.  The impracticality of the status quo is self-evident.  Fixing it would also be a way of having the word "fairness" applied more judiciously to South Dakota's tax system, which is profoundly indifferent to the equitable distribution of its burden.  

Tuesday, April 18, 2017

Commodity Trading Is No Way To Run An Economy

         South Dakota Governor Dennis Daugaard once told me that as a law student in Chicago he worked for a while as a clerk/runner on the floor of the Chicago Mercantile Exchange.  It might have been about the same time that I was there, getting a grip on the livestock markets as I prepared for my brokerage operation here in South Dakota.  The decades I spent trading stock options and ag futures, both in the Windy City and right here in the Black Hills, taught me a lesson that apparently was lost on Daugaard--don't bank on the commodity markets as the basis for making your financial decisions. 
     That truism is common knowledge in the culture of the trading world, but when it comes to South Dakota's financial governance and planning it's an axiom that has no relevance.  Just a
Trading Floor Madness
Or Budget-Planning In South Dakota?
few day ago, RCJ ran a story titled "State revenues come up short," which reported that various state tax revenues for the first two months of this year have missed their cumulative targets by about $10 million.  Some sales tax loss to e-commerce might be part of the issue, but I'd be amazed if planners haven't accounted for the relatively steady growth of internet sales when they made their budget projections.  If they haven't, they need to be fired.  In reality, State Economist Jim Terwilliger's explanation for the shortfall goes right to the heart of the problem inherent to commodity-based budgeting.  Noting that our state's farm income fell from $3.8 billion in 2011 to $800 million in 2016, Terwilleger fatalistically said, "you're seeing some adjustments going on in the ag economy.  It takes time to adjust to those lower prices."  

     A $3 billion hit, ratcheting steadily downward in 5 years to an economy the size of South Dakota's calls for an awful tough "adjustment."  But the fact is, swings in commodity prices have been the norm since the days when ancient Greek merchants haggled with Phoenecian traders over future prices for grapes and olives.  Modern day state officials held captive to those swings need to examine the concepts of risk management in order to avoid the pain of these endless and inevitable price cycles.  Ratcheting up their dedication to spreading out the state's economic base, mainly via
Yup.  That's What We Need
In South Dakota
manufacturing is probably first on the to-do list, but we've been hearing that for years with not much to show for it. A more practical and realistic approach is comprehensive tax reform, weaning the state away from from its dependence on the vagaries of sales taxes and spreading the tax burden out more equitably. By "comprehensive" I mean that everything--as that great Republican dealmaker Donald Trump likes to say--"is on the table." Space constraints intervene for now, so I'll explore the tantalizing concepts of "comprehensive, everything, and on the table" when it comes to tax reform next week.  

     

Monday, April 10, 2017

The Cat Came Back The Very Next Day

     We'll see if the rejection of Initiated Measure 22 by a combo of legislative and executive fiat during the just-ended legislative session will be a watershed event in South Dakota political
Blowback From I-22
Will They Quickly Forget?
(photo from Capital Journal)
history.  
IM 22 was a voter-approved (by 52%) package of campaign and governing reforms that put severe limits on campaign finance and lobbying efforts.  Unsurprisingly, it ran into unified resistance in Pierre during this Winter's legislative session, where it was trashed by Governor Daugaard as "unconstitutional," who went on to chastise voters by telling them they were "deceived" and "misled" into voting for the reforms. Our Republican-dominated legislature went along with Daugaard's de facto defense of our status quo:  A state government that gets an "F" grade from The Center For Public Integrity.  IM-22 was effectively repealed, posthaste.  Its replacement was a basket of bills that addressed some of the issues raised by IM-22, but lack the severity and scope of the defunct initiative, at least as far as I and many of its proponents understand it.

    So determined are those proponents that they have produced not one, but two, reform measures that they hope to get to the voters in 2018.  Represent South Dakota just sent the "Voter Protection And Anti-Corruption Amendment" to the state's Legislative Research Council for stylistic and substantive review.  Almost simultaneously, South Dakota Voter Protection sent the LRC 3 drafts of its Voter Initiative Protection Amendment.  Cory Heidelberger in his excellent Dakota Free Press blog provides the complete text and analysis of both efforts.  Complicated and comprehensive as they are, these initiatives represent the yearnings of a substantial (make that a majority, going by how IM-22 did at the polls last year) number of South Dakotans who are fed up with a government that they
The Very Next Day
And It Kept Coming Back
believe is hobbled by its inertia, its one-party domination, and its susceptibility to special interest influence.  

     A lot of South Dakotans were angered by the cavalier rejection of their will by Governor Daugaard and a huge Republican majority in the legislature.  People tell me that the voters will forget and that we'll go back to business-as-usual soon enough.  I'm not so sure. Government reassurances that watered down replacement bills have satisfied the will of the voters are probably not compelling enough to put this matter to rest. The reform movement showed its political muscle at the polls last year and there's no reason to think that voter attitudes have changed enough to forget about the reasons they voted for IM-22 in the first place.  Like the cat in that great old camp song, they came back the very next day.