Making Sense of the Proposed Cuts to Education & medicaid

There is much concern over the proposed cuts to education and Medicaid, and with good reason, and what it will mean to our schools and assisted living facilities. All of the Legislators have been receiving email messages, phone calls and comments at cracker barrels about this.

As a new Legislator, I am doing my best to sift through the myriad of information and make some sense out of all of this in order to give you, the constituent the best answers.

A $127 million deficit cannot be addressed without looking to the largest tax dollar expense, which is education. Nearly half of every tax dollar is spent on K-12, Higher Ed, Tech Schools, and the Dept. of Education.

A 10% cut to state aid to education does not mean 10% less money to schools. It's only 10% of the state aid amount, which is $4,804.46 PSA ( per student amount) - $ 480. 46. Schools also receive funding from Capitol Outlay, Special Education and receipts such as fines, bank franchise taxes and gross receipt taxes. The average school will see a cut of 5.4%. This does not push education costs back on to property tax payers. Because the state's share of state aid is cut, the share is paid by property taxes, also goes down.

The schools make the final decision as to how that money will be allocated after receiving the funding. Cuts to education will mean that schools take a closer look at how they do business and seek to be more efficient. It does not have to mean that vital programs are ended.

Medicaid is the second largest portion of the state budget. Medicaid funding is extremely important to helping the mentally ill in this state live a life outside of the Human Service Centers. These residents often require assisted living services once they are living in our communities. Families that can not afford insurance, also depend on Medicaid for their children as do the elderly.

There are primary factors that affect South Dakota's Medicaid contribution. An increase or decrease in any of these factors changes cost.

South Dakota's Medicaid costs are increasing as more and more people are enrolled. Poverty has increased in South Dakota as a result of the national recession. Statewide, 14.2% of South Dakotans are poor and 18.2% of children are poor. South Dakota partners with the Federal Government to provide healthcare to this increasing number of low-income children, elderly and disabled citizens.

In FY10, 13.66% of all South Dakota residents were eligible for Medicaid or CHP- the Children's Health Insurance Program. This is an increase from a four year average participation rate of 12.89% of residents from FY06 to FY09. More enrollments mean more cost.

Eighty percent of the new enrollees in Medicaid during the past two years have been children from families whose household income is less than 200% of the federal poverty level. One of three South Dakota children is insured by CHP/Medicaid.

Under Medicaid, the Federal Government contributes $1 for every $1 a state spends on its Medicaid program, whatever the cost will be. The fixed percentage paid by the Federal Government, known as FMAP ( Federal Medical Assistance Percentage), varies from state to state. Poorer states receive a greater federal amount for each state dollar spent than do wealthier states. The FMAP is adjusted quarterly to reflect changes in the total personal income received by the citizens of each state.

For the first quarter of FY11, the Federal Government will pay about 71% of all Medicaid costs in South Dakota - leaving the states general fund paying 29%. However, by the first quarter of FY12, the FMAP will only be 59%, raising the states share of expenses to 41%, or a loss of 12% federal funding.

So the cuts to Medicaid is as a result of lost federal matching dollars and an increase in enrollees. So to say that there will be "cuts" made in Medicaid is probably not as accurate as saying that there is a "loss" of federal matching dollars to Medicaid.

I realize that this is only a bird's eye view of the picture, but hope that I was able to help you understand the reasons behind the cuts that will be coming. Remember, the Governor's proposal is for one year, at this point, the Legislators are looking at what will come after that year and how we can increase revenue to our state's budget to ensure additional cuts do not occur.

If you have any questions, please feel free to contact me. You can either email me at my state address rep.stricherz@state.sd.us or my personal email address pastricherz@gmail.com.

Sales Tax on Food

Legislative Bulletin
Issue Number 2    February 2, 2011

A proposal to eliminate the state tax on food has been rejected by the House Taxation Committee on a party-line vote of 11-4.

HOUSE BILL 1131 would have offset the drop in food tax dollars by raising the general sales and use tax rate to 4.35 percent.

SDRA joined the South Dakota bureau of Finance and Management and the South Dakota State Chamber of Commerce in opposing this bill.

Here are some of the arguments made for keeping the tax on food in place, and against passage of HB 1131:

* South Dakota has a broad tax system. Taxing allows the state to keep the overall rate low, and also helps the state imposing a personal or corporate income tax.

* The poorest people in the state are currently eligible for the sales tax on food refund program.

* In 2004 the voters of South Dakota voted overwhelmingly against a proposal to eliminate the tax on food.

* SDRA lobbyist Ron Olinger told the committee that the plan would do nothing to address the current state budget crisis, and would in fact hamper the ability of the Legislature to raise the state sales tax if they determined there is a crucial need for additional revenue.