|Time For A Revised Edition|
South Dakota Is Going Backwards
Terwilliger went on to call FY '17 a "trough" in ag spending in South Dakota. He added that it was the third consecutive year of "slumping crop prices." There's no question that crop and livestock prices have been in a prolonged slump, but I do wonder how Terwilliger concludes that we're in a "trough," which in econo-speak means a low turning point, suggesting that prices will soon be trending up. After reviewing price charts for corn and feeder cattle to be delivered a year from now, I see nothing particularly cyclical showing up in the futures markets that would make prices now look like they're in a trough and about to swing higher. It'll take a major natural or political cataclysm to make that happen. Otherwise, sentiment across the board is saying that 2018 is likely to be the same-oh, same-oh.
And that's where South Dakota's collective finger-crossing in hopes of strong commodity prices continues to come across as a poor alternative to more conventional forecasting and state financing methods. Noting that our state's 2018 budget is built on an assumption of 4% growth, Terwilleger says that "I don't know if we're going to get there." Nobody knows, but there's good reason to be pessimistic. More to the point, there's good reason to be fed up--South Dakota continues to be commodity-price dependent because so much of our state's revenues are gathered up by sales taxes, which account for about 83% of the funds that Pierre collects every year, more than twice the amount collected nationally. Facing facts that consumption taxes in our state are directly dependent on crop prices, Terwilleger notes that sales tax revenues from the sale of agricultural equipment were down $10 million in 2016, to levels that were about the same as they were 20 years ago. More broadly, lower crop prices, to the tune of about $3 billion annually from 2011 to 2016 reduce the flow of spendable, sales taxable, cash.
Betting on strong commodity prices year after year is a dumb and irresponsible way for South Dakota to do its budgetary planning. We need to reform taxes in a manner that will wean us away from agricultural market dependence, and that includes reviewing sales tax exemptions (about $1.1 billion--with a "b"--in 2015) and putting some progressive corporate and individual income taxes into consideration. As it is, we've been going nowhere fast of late. During the 5 years that ended in 2016, South Dakota's per capita GDP growth was a feeble .2% compared to a national number that exceeded 6%. We're stuck in reverse. It's time to shake up the status quo.