Rainy Day fund — Budget stabilization or “rainy day” funds allow states to set aside excess revenue for use in times of unexpected revenue shortfall or budget deficit. — Tax Policy Center
If “rainy day” funds are set up for anticipated tough times, why do so many of us in South Dakota hope and pray for rainy days?
It’s one of those quirky aspects of language. Crops won’t grow without rain, but most of us tie our outlook to sunny days and not rainy ones.
Gov. Dennis Daugaard recently sounded positively “sunny” about the state’s economic prospects, a far cry from the “overcast” and “gloomy” outlook of three years ago.
Included in the governor’s proposal was using $27 million in “rainy day” money to help repay debt and freeze tuition. So, what is a “rainy day” fund in South Dakota? Actually, the state has two such funds:
— The Budget Reserve Fund was created in 1991 to address revenue shortfalls resulting from unforeseen circumstances. The fund was started with $20 million in unused general funds. Money comes from appropriated general funds unspent at the end of the previous fiscal year or general fund revenues in excess of the amount anticipated in the budget. The fund can be no greater than 10 percent of general funds appropriated for the prior year in the General Appropriations Act. The only way to spend budget reserve money is through a special appropriation, which requires a two-thirds vote of each house of the Legislature. Estimated amount in fund: $127 million.
— The General Revenue Replacement Fund was formerly the Property Tax Reduction Fund created in 1995 to help pay for state aid to education. Money flows into the fund from video lottery machine income, the telecommunications tax, a percentage of tobacco tax revenue exceeding $30 million, and money still in the general fund at year end after the Budget Reserve Fund has been fully funded. Money can be transferred to the General Fund by a simple majority vote of the Legislature. Estimated amount in fund: $44 million.
There are those who believe that the state has been far too conservative by squirreling away excess money for a “rainy day.” They would like to see the state spend down those funds even more, particularly in light of education and health care needs for the poor.
Given Daugaard’s record, and the makeup of the Legislature, the forecast for that proposal would be “strong headwinds and a possibility of hail.” However, as we know all too well in South Dakota, the weather can change at any moment.
Jan. 6, 2016