Proposed state sales tax increase takes easy way out

By Sam Kephart

America is facing another major financial crisis: Most states and many cities have high fixed costs, negative revenue growth, and are headed for broke.

South Dakota’s budget shortfall, while smaller in scale, is no less threatening.

Notwithstanding recent campaign blather that there would be “no new taxes”, some in our state House are surreptitiously plotting a “temporary” 1 percent sales tax hike for three years to help balance the budget shortfall.

These tax hike proponents, when asked privately about its necessity, avoid direct eye contact, shift their feet, wring their hands, and then say something to the effect “Look, we’ve just about cut everything we can… we’re down to the bone. It’s the only thing left to do.”

What a crock.

Our elected leaders in Pierre seem incapable of serious cost-cutting when it comes to state employees, the Board of Regents, many long-standing exclusive vendors, no-bid contractors, and various social service providers.

Generous political donations and lobbyists have turned their annual money needs into sacred cows we can no longer afford.

Here are three concrete ideas for saving money and cutting the state budget that I’d like to see implemented by Pierre before we, as taxpayers, have a “temporary” 1 percent sales tax increase shoved down our throats.

1. Moving forward, change the South Dakota Retirement System from a defined benefit plan to a defined contribution plan, which is the norm today. This eliminates taxpayer guaranteed rates of return and the under-funded costs of employees who retire and then go back to work for government.

Defined benefit plans are a surefire recipe for financial disaster; state and local budgets are being ravaged by unrealistic and unaffordable pension payouts and soft re-hiring rules that were created in fatter days.

2. Institute a ‘Furlough Fridays’ program for state employees, who’d get every other Friday off without pay.

They’d give up about 5 percent of their wages, however, they’d gain a reliable stream of scheduled 3 day week-ends for travel, education, or family time. South Dakota would save about 7 percent on payroll costs without having to fire or layoff anyone.

During the Rounds Administration, we added roughly 1,600 full time equivalent state employees.

3. Put all of South Dakota’s purchasing requirements (fuel, furniture, hard goods, social services, etc.) online using a reverse Dutch auction eBay-type system.

The purchase prices are bid down by interested vendors and everybody, including taxpayers, gets to watch the process, see the winning bid, and know the final price paid. Implemented with one of several affordable and commercially available software solutions, this would be a home run for financial transparency. This auction system could easily include all city and county spending.

Our legislative leaders should craft out-of-the box expense cutting ideas rather than generate out-of-pocket “temporary” tax increases.

Most of us have had to seriously cut back to make do. Why shouldn’t state employees, state vendors, and state contractors seriously share our economic reality?

Why are they untouchable while we pay more? Passing a sales tax increase to make up for lost revenue is a lazy way to take the easy way out.

EDITORS NOTE: This article originally appeared in the Rapid City Journal on1/1/2011.