Why a federal balanced budget amendment doesn’t make sense for South Dakota

Added March 6th, 2016 by

It sounds so reasonable to have a federal balanced budget amendment… Why doesn’t it make sense?

Last year, SD BPI testified against this concept.

Why did SD BPI testify against the resolution?  Read our testimony and find out!  (or read our research)

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: 

  1. Over 40% of our state government budget comes from federal money. This is a higher percentage than all our neighboring states and above the national average of 32%.  
  2. Individual South Dakota residents receive direct payments – Pell Grants for college students, Social Security for the aged – that, If spread equally across our population – amounts to $5,300 per year ($5,988 when adjusted for price parity/cost of living by state). That is 6% higher than the national average and higher than receipts in ND, WY,MN and NE when adjusted for price parity.   So, our State and Local government and our individual residents in South Dakota are receiving more federal monies than the national average.
  3. Federal Contract Spending in South Dakota is also significantly higher than all of our neighboring states except North Dakota who has a comparable amount.  In fact–South Dakota has the highest Department of Defense Contract Spending of all our neighboring states (think Ellsworth Air Force Base) – over $400 per South Dakotan.
  4. Finally – There are almost 20,000 South Dakotans employed by the Federal Government. Their earnings represent about 7% of all wages and benefits earned in the state. SD’s federal employment rate is 75% higher than the national average and significantly higher than all of our neighboring states except MT.

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:

  • Keeps local and state government running in our state?
  • Fund school lunches and Head Start programs?
  • Supports research at our Universities?
  • Keeps our National Parks and Monuments open for tourism?
  • Help agricultural producers purchase crop insurance?
  • Provide income for our elderly and disabled?

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.” 

Be Sociable, Share!

Leave a Reply