Materials for ASBSD/SASD 2016 Convention Workshop
How will we know if the k-12 funding changes made this past legislative session are working (Powerpoint)
A few years ago we[i] published the detailed census estimates of how many low-income uninsured residents in each SD county would be eligible if the state expanded Medicaid.
Now, with Governor Daugaard’s success developing a strategy that makes sense for South Dakota at no increased cost to the state, we felt we ought to update that data to reflect the latest census figures.
⇒ Expanding Medicaid would cover 27,732 currently uninsured adults in South Dakota with incomes up to 138% of the FPL. Included in this number are the 13,000 individuals who currently fall into the coverage gap their income is too low to be eligible for tax subsidies on the exchange and too high for current Medicaid coverage.
⇒ Exchange subsidies. The 34,093 uninsured South Dakota residents with incomes between 138% and 400% are eligible for exchange tax subsidies if they choose to buy insurance on the Exchange.
⇒ Guaranteed insurability. The 7,670 uninsured adults in higher income households (over 400% of the FPL) are not eligible for subsidies but are guaranteed access to coverage without expensive medical underwriting if they have existing medical conditions.
Table 1 shows similar data for each South Dakota County.
There are links to graphics for each county below the table.
Aurora Beadle Bennett Bon Homme Brookings Brown Brule Buffalo Butte Campbell Charles Mix Clark Clay Codington Corson Custer Davison Day Deuel Dewey Douglas Edmunds Fall River Faulk Grant Gregory Haakon Hamlin Hand Hanson Harding Hughes Hutchinson Hyde Jackson Jerauld Jones Kingsbury Lake Lawrence Lincoln Lyman Marshall McCook McPherson Meade Mellette Miner Minnehaha Moody Pennington Perkins Potter Roberts Sanborn Shannon Spink Stanley Sully Todd Tripp Turner Union Walworth Yankton Ziebach
[i] South Dakota Budget & Policy Institute. County Specific graphs – uninsured eligible for health insurance under Medicaid expansion and federal exchange subsidies. 5-12-13 http://www.sdbpi.org/sd-county-specific-graphs-uninsured-eligible-for-health-insurance-under-medicaid-expansion-and-federal-exchange-subsidies
[ii] US Census Bureau, Small Area Health Insurance Estimates for 2014. Released May 2016.
[iii] We look at non-elderly adults—age 19-64—because they are the low income population covered by Medicaid Expansion. SD Elders (65+) are already covered by Medicare and low-income children (0-18) are covered by the Children’s Health Insurance Program.
Learning materials for Candidate Budget Basics Training Sessions provided throughout the state by SD Budget & Policy Institute
Questions? Contact us at the SD Budget & Policy Institute (firstname.lastname@example.org) and we will be glad to answer based on our research.
About 13,000 South Dakota residents have fallen into the coverage gap. This means their incomes are too low to qualify for tax credits through HealthCare.gov and too high to qualify for Medicaid. They are stuck in the middle with no affordable insurance options unless the South Dakota Legislature decides to accept the federal tax dollars that were set aside to help uninsured families in South Dakota afford coverage[i].
The cost of insurance for these individuals or families ranges from 31% of before payroll-tax income to over 100% of income, depending on their age and number of adults in the household.[ii]
[i] The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid – An Update Jan 21, 2016.Rachel Garfield and Anthony Damico. Retrieved from http://kff.org/report-section/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid-january-2016-issue-brief/
[ii] “SD Department of Labor, Insurance Division. “South Dakota 2016 Individual non-Tobacco Rates as of: 8/20/15 Exchange.” Retrieved from http://dlr.sd.gov/insurance/consumers/consumer_documents/sd_exchange_rates_individual_2016.pdf Calculated as average silver premium in of 4 geographic areas in South Dakota., calculations by South Dakota Budget & Policy institute
Last year, SD BPI testified against this concept.
Testimony: “As part of our non-profit, nonpartisan mission, the Institute has compiled South Dakota specific research on this issue and concluded a constitutionally mandated balanced budget does NOT MAKE GOOD FISCAL sense for South Dakota.
Our concern is that constitutionally mandating the ongoing balancing of the federal budget limits options for how the American People can respond during recessionary phases of business cycles or abrupt changes in social, international or environmental conditions.
Such a requirement would require significant budget cuts, substantial tax increases, or both in recessions, taking away vital help from South Dakota’s people and our state and local governments when, because of an economic downturn, we are least able to fiscally adapt.
South Dakota depends more heavily on federal spending than most of our neighboring states.
Approximately $1.50 in federal dollars is spent in South Dakota for every dollar South Dakotans’ contribute toward federal revenue.
Here is how federal dollars are spent in South Dakota:
These are the $8 billion in direct annual federal spending activities in South Dakota that would be at risk for unpredictable fluctuation under a constitutionally balanced federal budget.
You as legislators would have to decide, in a recession, would you be able to supplant lost portions of the $8 billion in federal funding that:
Where would you find revenue dollars to supplant such loses during an economic downturn? And if you did not supplant unpredictable cuts – how would those cuts affect South Dakota’s people and our economy during a recession?
The SD Budget & Policy Institute maintains fiscally responsible federal budgeting can and should be achieved through prudently balanced taxation and spending policies without a constitutional amendment requiring a balanced budget. A Constitutional Amendments takes away options the American people, including South Dakotans, may need to meet the unknown fiscal challenges of the future.”
The legislation that funds the Blue Ribbon Task Force recommendations to raise teacher salaries has passed the legislature.
Of this tax increase, $62.4 million will provide an average of an additional $481 per student – a 9.8% increase over current actual funding levels.
Governor Daugaard announced that with only 10 days left in the 2016 legislative session he has “concluded that to urge the legislature approval of the Medical expansion decision this session would not give the legislature adequate time to give fair and dispassionate consideration to the proposal.” The Governor went on to say, “This does not mean that we are done. We will continue to work on a plan to implement the federal policy and to determine if it will free up sufficient funds to enable South Dakota to afford Medicaid Expansion.”
Raising sales tax by 1/2 cent will raise about $107 million dollars. And decreasing property tax will cost about $40 million dollars. But how much will your agricultural operation pay to support the change? You can figure that out by answering two questions.
Question 1: What is my agricultural land evaluation? (this tax will decrease $10/$100,000 evaluation per year)
Examples for owner occupied residences:
Formula: farm/ranch A farm/ranch B farm/ranch C
+ Property tax decrease $100 $200 $400
– Sales tax increase – $250 – $500 – $1000
Farm/Ranch net tax increase/decrease $150 $300 $600
Farm/ranch A: This farm/ranch has agricultural valuation of $500,000 and equipment purchases of $50,000 per year. Their sales tax increase on ag equipment is $250 and their ag property tax decrease is $100. Their net annual tax increase will be $150.
Farm/ranch B: This farm/ranch has agricultural evaluation of $1,000,000 and equipment purchases of $100,000 per year. Their sales tax increase is $500 and their property tax decrease is 200. Their net annual tax increase will be $300.
Farm/ranch C: This farm/ranch has agricultural evaluation of $2,000,000 and equipment purchases of $200,000 per year. Their sales tax increase is $1,000 and their property tax decrease is $400. Their net annual tax increase will be $600.
Analysis and charts by SD Budget & Policy Institute. Data Sources:
Governor Daugaard’s 12% Tax cut Teacher Pay Proposal presented to Joint Committee on Appropriations, posted 2-5-15
Raising sales tax by 1/2 cent will raise about $107 million dollars. And decreasing property tax will cost about $40 million dollars. But how much will your household pay to support the change? You can figure that out by answering two questions.
Question 1: Do I own my home? If so – what is its current tax evaluation? This estimates how much you will save in property tax.
Examples for owner occupied residences:
Formula: Household A Household B Household C Household D
+ Property tax decrease -00- $45 $113 $225
– Sales tax increase – $154 – $212 – $267 – $390
Household net tax increase/decrease $154 $167 $154 $165
Household A: This household has an income of $34,000 per year and rents. Their sales tax increase is $154.00 They will not have any direct property tax savings (unless their landlord chooses to pass the commercial property tax savings on to the tenants). Their net annual tax increase will be $154.00
Household B: This household has an income of $59,000 per year and owns their own home, valued at $100,000. They will save $45 a year in property taxes and pay an additional $212 in sales tax. Their net annual tax increase will be $167.
Household C: This household has a household income of 89,000 a year and owns their own home, valued at $250,000. They will save $113 a year in property taxes and pay an additional $267 in sales tax. Their net annual increase will be $154.
Household D: This household has an income of $302,000 per year and own their home, valued at $500,000. They will save $225 a year in property taxes and pay an additional $390 in sales tax. Their net annual increase will be $165.
Analysis and charts by SD Budget & Policy Institute. Data Sources:
1Institute on Taxation and Economic Policy January 2016 analysis of 1/2 cent property tax increase, published in SD BPI “Who Pays increased SD sales taxes to raise teacher salaries?” 2-8-2016
There is broad consensus in South Dakota that teacher salaries need to be competitive to attract and retain good teachers – but who is going to pay for it? Two options have been floated thus far to fund the increase. Some in-depth fiscal analysis and charting helps clarify the difference between these options.
Option 1: House Bill 1182 Raises $107 million by increasing state sales tax by 1/2 cent. This option makes sales tax more regressive.
Option 2: Senate Bill 151 Raise $128 million by removing current 4 cent state sales tax on food and increasing state sales tax by 1 cent. This option makes sales tax less regressive.
Answer A tax system that requires low- and middle-income families to pay a larger share of their income in taxes than upper income families is considered regressive. Under Option 1 lowest income households would pay more while highest income households would pay less. For the rest of South Dakotans (those in households with incomes between $24,000 and $199,000) their tax increase would be nearly the same under both options.
Non-resident contributions are nearly twice as much under Option 2 ($46 million) compared to option 1 ($24.5 million). The amount of dollars raised under each option from South Dakota resident households is nearly identical at $82 million.
Answer: Non-resident sales tax payers include out-of-state visitors and in-state businesses that are not fully passing on their sales tax share to in-state residents. South Dakota businesses pay sales tax on many business infrastructure costs (utilities, manufacturing equipment, etc.) and pass the cost along to their customers in the price of their product. Some of their customers live outside South Dakota so these non-resident customers are actually covering some of the cost of the South Dakota sales tax increase on businesses.
Answer: Data source for tax analysis is the ITEP Microsimulation Model (see the chart displaying their findings below). Graphics and analysis by SD BPI.
Note: On 2/12/16 the author updated this article to include the bill number for Option 2 (SB151) and replace the term “Business inputs” with the more descriptive phrase “business infrastructure costs (utilities, manufacturing equipment, etc.)”.