More bad news coming. And it’s about time we shake it off.

Your criticisms are all just sour milk unless you can propose an alternative budget that gets the job done. Why don’t you publish that on your blog?

I think you’re referring to a previous post. This one is about the GOP standing for something again.

I’m shocked! You mean Mike Rounds has been dolling out contracts to family and friends the last 6 years!

Noooooooooooooo Waaaaaaaaaaaaaaaaay!!!!

Thank God for the MSM, otherwise we wouldn’t have never found this info out!

Geeeeeez!

This is from Mount Blogmore:

“Donald Pay Says:

November 24th, 2008 at 9:22 pm
I wonder what Joe might have to say about Powertech using Round’s brother-in-law to purchase influence with state government. Powertech is the company that wants to mine uranium and which will need state governemnt approval. Randy once was a DENR employee heavily involved in efforts to secure a nuclear waste dump.

http://www.powertechuranium.com/s/ContactUs.asp?ReportID=268390&_Title=Media-Relations

Don: I made a couple of inquiries on this. Randy Brich says he’s never mentioned the PowerTech issue to his brother-in-law, the governor. The governor says, according to spokesman Mitch Krebs, that he wasn’t aware of the contract Brich has with PowerTech. As I understand it, Brich and his wife, Michele, the governor’s sister, own the consulting company Diamond B Communications, which is working with PowerTech. It’s a connection worth noting, certainly. I guess the questions are: Is that on its face improper? Is there any indication that PowerTech is getting more from the state than it would if the governor’s relatives weren’t involved? K.W.”

Just guessing that Kevin has dug up some other work Diamond B Communications or Randy Brich is doing for the state.

A little off topic but am I the only one that has discovered that Rounds has not actually balanced the state budget once in the time he has been governor? I believe he has used reserve funds every year. It doesn’t take a rocket scientist to fiqure out what happens after he leaves office. He is beginnig to look like a Washington republican more every day.

Remember it is like your personal budget. If you cash in savings bonds and sell your stocks you have a balanced budget. If you borrow money and make payments it’s still a balanced budget. If you mortgage your future it’s still a balanced budget.

John, in other words the state is broke and deeply in the hole.

I can never understand the financials the Government uses to scare us all to death about debt.

Anybody would look hopelessly in debt if they didn’t list their assets, right?

Is there a real State “balance sheet” out there somewhere on line?

By John’s definition it is impossible to have an “unbalanced budget”. Looking at it in the opposite, if I have more income than expenses but put the money into savings bonds, I have a “balanced budget” as well.

Granted, many people in personal financial management do combine the two in practice. However, governments and businesses don’t. Budgets are projections of income vs. expenses. If the Revenue is a greater than Expenses, the Budget generates a surplus. If Revenue is equal to Expenses, the budget is balanced. If Revenue exceeds Expenses, the budget generates a deficit.

Accounting 101.

Troy, I’m not an accountant, but I think you meant for your final sentence to be “If Expenses exceed Revenues, the budget generates a deficit.

Troy–

“If Revenue exceeds Expenses, the budget generates a deficit.
Accounting 101.”

Must be the “New Accounting”…

No passing grade in accounting for you!

Damn you, Rich!

That’s what I get for stepping out of the classroom to get a cup of coffee from the teachers lounge before posting my smart-ass retort.

Of course the governor knew about the contract. Why else would he suddendly endorse nuclear energy after killing it the last 4-5 years. Koskan, you around to validate?

As far as the budget, I agree, a tax increase is a tax increase. There are lots of other ways to ‘lessen the pain’ as the governor would say. For example:
1) All state employers making less than midpoint are actually getting a 4% raise. That money should either fall to the bottom line or go to education. Most people ARE NOT getting a 4% raise in SD this year;
2) Rounds has been “finding” and transferring money around for years. That validates slush money within the agencies. Each agency could be cut 2% or 5% very easily. Just make them come up with the cut.
3) State contracts need to be purged.

This is a 3 billion dollar budget. There’s certainly room to find a few million for property tax payers and education.

Rounds is trying to get the legislature to raise taxes. He’s essentially daring them to. Will they bite?

If the leg had any balls they would cut the budget so the reserves aren’t used (up). But they don’t so the shell game will continue. The hopefuls for the gov chair in 2010 may want to reconsider. Rounds is pushing Deugaard so hard because he wants to have his a** covered and he fiqures Denny will do that for him.

I agree with the truth,,,,

and looking at the K-12 strategy, Rounds is really cutting 1.8 million from the States portion on top of the property tax increase, how ?

The budget calls for a 12.5 million increase on the base per student. Freezing the mil levy (tax shift) will squeeze 6.3 million from property taxes, that means the state has to come up with the 6.2 million balance. If repealing the sparsity factor is 2.3 million and repealing the increasing/decreasing enrollment factor is worth 5.7 million. Those cuts equal 8 million, 8 million minus 6.2 million the state has to come up with leaves an additional 1.8 million in Rounds back budget pocket !!!! nice move heh ?? He will look like he bent over backwards to fund k-12 when in reality he is plucking 1.8 million from k-12 revenue and spending it somewhere else.

Way to go Rounds,,,thanks for not disapointing me, enjoy the 1.8 million bonus,,,youve earned it.

One more thing from the budget speech that burns me,,,,

Rounds had a chart that showed the increase to k-12 from 2003-2008 to be 150 million.

The truth is, State funding for k-12 increased by 22 percent (74 million) between FY02 and FY09

during this same time,,,SD appropriated the following,,

Board of Regents funding increased by 41 percent(54 million)

Corrections funding increased by almost 60 percent(31 million)

Social services funding increased by over 82 percent(125 million)

Yet during his entire speech K-12 was his whiping boy, go figure.

I hate to be shy but…..THE FALL IS SKYING!!!!

Marion Michael Rounds would never engage in any sort of nepotism. Certainly not.

It’s about time we realized that video lottery and tobacco settlements can’t fund everything. We might actually have to start paying some taxes to enjoy the necessities.

Regarding K-12 funding, I have asked many times and never had this explained honestly. Example: $1,000 is allocated this year for K-12 from th state general funds, only $900 is used, $100 is left unspent. That $100 goes back into the state general fund. Then next year $1,000 is again allocated (including the $100 that went back to the general fund) so actually only $900 new money is allocated. So in reality the state is funding even less than it says due to the recycled money each year.

Why not return the unspent money to each school district based on a simple per student basis, and use that money as bonuses for teachers. The amount would vary each year, but the teachesr would get a little bonus and the state would be actually spending what it claims on K-12 every year.

I really would like someone to explain this little sleight of hand to me.

Wow, PP, you’re all over the map here. Count to ten, take a deep breath and ponder for a bit.
First…Democrats and everybody’s favorite whipping boy “The Media” didn’t FOIST anything on Republicans. Republicans in Washington gleefully assumed the “big spending, deficits don’t matter” cloak, all by themselves.
No-bid contracts and a full-employment program for the Rounds family have been the talk of Pierre for years. And i know you know that.
But it’s never been an issue until now has it? Why do you suppose that is? Party unity perhaps? What the people don’t know won’t hurt ‘em? Right?
And if someone (like, oh say, that commie rag the Argus) dares ask, the forces rise up to say it is none of the people’s business-just trust us.
And now…you don’t, as a party, practice what you preach.
All the railing (yes, PP, RAILING) about welfare, unions, handouts, government waste, etc. etc. etc., we hear in this state.
And not a peep on the annual AG trek to the pork trough for more farm subsidies.
Nothing about the ethanol industry’s dependence on the federal government teat for plush new offices, a jet fleet, and the opportunity for at least one nouveau riche ethanol magnate to have a new edifice at a Sioux Falls Hospital named after him. Thanks to your tax dollars and mine.
And overall, South Dakota’s status as a welfare state itself. Every dollar sent to Washington brings back two.
And we grouse about taxes.
C’mon. step back from your party cheerleading and take a look at the bigger picture.
I’m an independent, a libertarian and proud of it. That’s because, in this state, one party still thinks in terms of the 30’s and class warfare.
And the other indulges in self-delusion, declaring its contempt for Washington while its hand is out for the check.

And, as a libertarian, I do believe that government has several necessary functions. Reasonable defense, promotion and maintenance of infrastructure, and a duty to look out for the interests of the less fortunate.
Taxes play a role in this-Federal, State and Local.
Railing(there’s that word again!) against taxes in the Grover Norquist manner is irresponsible and intellectually dishonest.

I’m not an accountant, but I can sum up the state’s mess really quick; Greed, arrogance and dishonesty from 30 years of failed GOP leadership in SD. Maybe this will finally be SD’s wakeup call.

Rich Naser: Thank you for catching my inadvertent mistake in my previous post.
Bill, you ask a really good question with regard to balance sheet and concern for debt. I am actually quite excited to answer this because it allows me to provide relevant information that is seldom ever discussed in the public sphere and the absence often leads to misleading discussion of fiscal issues and policies. I will try to address it not from a technical accounting perspective on why governmental accounting is different from business accounting practices but a practical level. The way I am describing it isn’t technically correct on all levels from an accounting perspective. But brevity requires me to take certain short-cuts that don’t materially mislead.
First, with regard to a governmental balance sheet: Government has two basic “asset classes,” those items that generate direct revenue to government and those that do not.
Revenue Generators: College dorms are a good example. They generate rental income from students. These assets are usually financed via a “bonding authority” whereby the net revenue stream is dedicated to the repayment of the bonds.
Non-Revenue Generators: Roads are a good example. We spend $1 billion on a road. Accounting practices are generally that assets should be carried on the balance sheet at the lower of market resale value or a computation of future cash flows. Since roads w/o tolls generate no revenue and only cost money, upon construction of a road the valuation could actually be negative.
Now we all know that a road does has value and to say it is negative is not right. But what value do you carry the road on the balance sheet and what is the point? Should we feel good that we have a lot of roads on our balance sheet even if the roads go nowhere? Would it encourage us to build roads so we have a “healthy” balance sheet instead of spending money for education of kids? Would it be better to have more fire trucks not enough firefighters to use the trucks? The “balance sheet” would look better but are we really better off?
In other words, government balance sheets don’t say much about our real fiscal health. Government is a unique animal in that it generally gives away its “value” to the public. Businesses sell their value to the public.
But debt burden tells us a lot about our fiscal health. Unless the debt is associated with an income producing asset (i.e. college dorm), debt can only be repaid from tax dollars. And tax dollars used for debt repayment can’t be used for the provision of other governmental goods. Thus, the more debt we have the less flexibility we have to provide other services.
And, most importantly, we are making decisions that our children get to pay for. We didn’t ask them if they wanted to pay for it. They might in the future wish they had flexibility to reduce their taxes or spend the money on THEIR priorities but they can’t because we wanted things for us today. To me it is selfish and arrogant. If we won’t pay for it with our tax dollars today, we shouldn’t have it. We shouldn’t be burdening them with our wants. Doesn’t seem to be what good parents do to their children.
Now, we also know that to some degree it is appropriate to pass some of the cost of “investment” to future generations as they will get benefit from it. The Public Policy question is how much to pass on. In my mind, especially GWB, but all Presidents since Carter have been spending too much. When Carter left office, federal debt was about 10% of the Gross Domestic Product (power to repay and service the debt). By the time Reagan left, it was over 20%. By the time GHWB left, it was over 45%. By the time Clinton left, it was almost 60%. And by the time GWB leaves office, it will be in excess of 90% of the Gross Domestic Product.
One can justify to some degree Reagan’s growth and GWB’s (esp. early in their administration) as there have been bumps in the percentage during severe recessions like the early 80’s just after the tech bubble burst in 2001. But what is GHWB’s, Clinton’s excuse or especially the ballooning in the last four years under GWB?
Historically, governmental debt interest cost has averaged less than one half a percent (.5%) of the Gross Domestic Product. Now 5% of everything that Americans produce has to be used to pay interest on the debt. This is 4.5% that can’t be spent on other government programs or kept in the people’s pockets. This my friend is why we need to be concerned about debt.

TJ- Your long responses take the fun out of blogging. You must be self-employed.

This is why people talk about “the” creative finance of the feds and generally towards the states, as the federal is more complex to put a finger on.

So, Troy how about listing GAAP on schools? If school run under the GAAP and I would asume they have to.

1:14: There is standard governmental accounting standards that all governments that I know of operate under. These are different from government for generally the reasons that I described in my previous message. The mission statement of the Government Accounting Standards Board is:

The mission of the Governmental Accounting Standards Board is to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports and guide and educate the public, including issuers, auditors, and users of those financial reports.

The problem and confusion is not that they are creative is that too many people either say government accounting is like our personal budget (John above) or business accounting. They are different animals that require different standards to be useful. And to talk intelligently about it basic understanding of this is required. I’m shocked at how many politicians and those covering government oftentimes don’t understand these basics which causes confusion and misunderstanding in the public.

A public that doesn’t have the facts straight is likely to then form fundamentally flawed policy positions.

Detroit: If one is committed to good government, one must be committed to good factual information. Bill asked a good question (which I think he really knew the answer intuitively) but knew it would goad me into an answer. Some things aren’t partisan like accounting standards.

I’ll need to make my sarcasm clearer in the future. I watch part of Round’s budget address this week. Over and over again he kept saying that state government was the same as our personal check book. He said that there is only so much money and when times are tough cuts have to be made.

My point was that cuts needed to be made years ago. Rounds keeps spending reserve money to “balance” the budget.

My post merely pointed out that just like my personal finances I can only take money out of savings for so long until there is no more.

Unlike state government that can spend savings until its gone and then raise taxes. Rounds’ has spent all of our savings over the last six years and now wants a tax increase so he can continue to spend more.

He even pointed out during the budget address that the legislature could cut all of the executive branch employees and it wouldn’t amount to 5%. So how does eliminating travel and new furniture say enough to make a difference.

Symbolism over substance. Thanks Mike.

Good answer, Troy. Thanks.

The short version is that we’re never really as broke as we might be led to think we are. It’s a cash flow thing. More a P&L than a balance sheet, right?

I wonder what the pigtail bridges on Iron Mt. Road are worth.

Or the stuff in the SD History Museum in Pierre.

Or Mt. Rushmore. Or the Half Dome at Yosemite.

What am I bid for the Statue of Liberty?

(I’m assuming none of these assets are ever used as collateral?)

I have a good friend who refuses to list all his assets on his loan apps.

Just enough to get the loan. Smart of him.

Who owns the walleyes in Oahe? Ok, how about the suckers?

Actually, Bill, I think America hasn’t been this broke since just after the Revolutionary War when both business and our government owed substantial debt to European mercantile houses (merchant banks) and foreign governments (mostly France).

Thirty years ago, total American debt (personal, corporate, and govermental) was about 100% of our annual Gross Domestic Product. And most of that debt was held by Americans (we were a net lender nation) so most interest was just a transfer within our economy.

Now, total American debt (personal, corporate and governmental) is 400% of our Gross Domestic Product and about half that debt is held by Non-American entities (We have become a net debtor nation). The net effect of this is we are transferring about 10% of our Gross Domestic Product to non-Americans in interest (personal, corporate, and governmental).

Part of this is offset because America is still a net equity owner (we own more of non-American business than non-American’s own of our business) so the interest transfer is offset by equity growth and dividends we get by our equity ownership in their companies but it probably reduces the transfer to foreigners to about 8% of our Gross Domestic Product.

Bill, this is a serious problem. One that I don’t think was considered when we did the financial system bail-out and isn’t being considered when we talk about further “stimulus” packages. The biggest short-term and long-term threat to future prosperity is this excessive debt.

Personally, corporately, and governmentally, we have to deleverage our nation. It is a pretty general consensus that we need to reduce our total American debt to under 200% to no longer be a net borrower nation. This will be painful for us personally, corporately, and governmentally and will take time. It took us 30 years to get here and I’ve heard that the fastest we can deleverage w/o causing severe unintended dislocations is 10-15 years. But failure to do so will cripple our children.

Here is where a personal budget item is appropriate for illustration purposes.

I have a mortgage debt of $200,000. I can choose to amortize it over 15 years where the interst rate is lower (say 6%) or 30 years with higher interest (say 6.5%).

15 years: Monthly payment is $1,687.71. Over the term of the loan, I’ll pay $103,788.46 in interest.

30 years: Monthly payment is $1,264.14. Over the term of the loan, I’ll pay $255,088.98 in interest. A loss of $152,000 in “wealth” by paying over a longer term or nearly doubling the total cost of my house.

This is why looking at it from a cash flow perspective gets us in trouble. While our monthly payments are $400 a month lower, in the end, we are more broke than if we’d have made the sacrifices to pay it faster.

But you are right about your examples. Is Mt. Rushmore worth a million or a billion? What is the difference as we aren’t going to monetize (sell it) anyway. We have it and most are glad we do.

But make no mistake we have it because we didn’t leave the money in the people’s hands to buy food and we didn’t use it for another governmental purpose. And this is why all of us should be diligent to insure that every governmental expenditure is used on the highest priorities and spent with due diligence and care.

What I fear is that is as a nation (personally, corporately, and governmentally) is that we have become to cavelier about spending because we’ll just borrow the money. It has a cost that just keeps getting bigger (ala having a home mortgage paid over a longer time).

Well true Troy up to a point. But the one thing Obama can do that you and I can’t (legally anyway… I do know how though) is to print us up some new money. Just like that. House paid for. Let’s go fishin’.

BF, I don’t know who owns the walleyes in Oahe, but you can have all the carp.

Bill, it is sometimes good to just be Pollyanna and go for the easy answer. Seriously, Obama has a pretty solid economic team: Sumners, Romer, Guethner, and Volcker. These people understand the long-term debilitating effect of inflation (result of printing money). While Guethner is relatively unknown regarding positions, the other three are well known. I’m glad that printing money will not be pursued while they are advising Obama. He is going to get solid advice.

On a side note, I’m getting dang incensed that Frank and Dodd and Rubin seem to be getting off scott free for their role in this fiasco while Bush, Greenspan, Paulson et. al. are getting pilloried (rightly so I might add).

Frank is still a spokesman for a solution, Dodd still has his chairmanship, and Rubin hasn’t been fired from Citibank. Disgusting. Everyone listed here should be put in stocks in the public square and wear a scarlet letter for the rest of their life.

Nick: Ssssshhhhh. I think those Norwegian Lutherans think carp are valuable as they use it for Lutefisk. Don’t give them reason to think they aren’t eating the good stuff. More for you and I.

Troy as Bill talks about “just printing money” there has to be consquences to just printing. We use to have to back our money with gold. I hate to ask this out of stuipidy, but I must. What in the heck do we back our money with now. Dang, that is one bad question! I am really red faced!

Troy, thanks for some of the accounting class here, even if it is not the GAAP that people and business use.

NICK N: If you cook carp right it can be good. THough I agree it has to many bones!!! I had it once years ago and they scored it somehow and gezzzzz, then deep fried it. It was however they scored it to remove most of the bones. I have no clue.

ISH Lutefisk. That stuff is gross. How can people call it fish.
GAG

As with deer, I would say the state owns all the fish and the rest of the wildlife. However, if we hit a deer or I like to say if the deer runs into us, we can not sue the state.

On another side note: Even though prairie dogs are cute, they cause a lot of havic, however the feds might put them on the protected list.
You know where ever there are lows numbers maybe we could gather them critters up and let the states that want them come a truck them back on to their states. Sorry, this is off topic.

Troy, thanks..zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

I love how this thread is going.

Kind of like my physics and chemistry classes all went.

No… really… I’m learning a lot.

Especially about carp (…is that the real name for “suckers.” Who knew?)

But seriously Troy (as serious as I get, anyway) no brand assets listed on government balance sheets? How come? Don’t the government accountants believe in brand equity?

Bill: Principles of accounting usually reflect the ability for them to be monetized (turned into direct revenue/profits). With governments this is difficult as they “give” away their services.

And then you have to ask yourself the value of spending the money to figure out the value. How will it affect future decisions, etc.?

If you could give me an example, I might be able to address the matter. Not that it might not be interesting, it will be a conceptual conversation w/o a great deal of real world value.