Beware of ending tax cuts, local legislators told

Concerns that a pending bill could put the brakes on area wind farm development topped discussion topics at Saturday’s legislative cracker barrel session Saturday at Mitchell Technical Institute’s south campus.

The event drew nearly 50 people to hear reports from District 20 Reps. Lance Carson and Noel Hamiel and Sen. Mike Vehle — all Republicans from Mitchell.

The lawmakers were told by attendee Bryan Hisel that development of a 101-turbine, $300 million wind farm north of White Lake is a “critical issue for our area.” Hisel is executive director for the Mitchell Area Development Corporation.

Hisel and Ron Gillen of White Lake told the lawmakers that wind power is crucial to area growth and the state must honor tax incentive promises made to developers in 2005.

Hisel said he’s aware that the state is scratching hard for revenues, “but we’d like to believe we can grow our way out, and not try to shrink our way out of this recession,” he said.

House Bill 1060 was proposed by the House Appropriations Committee at the request of the state Department of Revenue and Regulation. The DOR estimates that dialing back incentives about 50 percent for new large agricultural and business projects will allow the state to keep about $3.5 million in sales tax, use tax and contractors’ excise taxes in 2011.

The House unanimously approved the bill Feb. 10 with a 48-19 vote and sent it on to the Senate.

The dual need for jobs, as well as cash to run the state, poses a problem for lawmakers, said Vehle.

“We’re not going to get out of this unless we get business back in to providing opportunities for people,” he said, “but the state has no more money than it takes from you.”

Early incentives for business may have been too lucrative and those formulas will get closer scrutiny, said Vehle, but he also believes the state must find a way to honor prior commitments.

Carson said that in 2002 the state had about 4 megawatts of wind-generated power and wind projects now generate about 314 megawatts. Another 309 megawatts-worth of proj- ects are currently under construction, bringing into question the need to pay out tax dollars for incentives.

But Gillen said the projects and financing were developed based on past assurances. He said the state needs to keep its word.

“Basin Electric had to make a commitment a year ago on these (wind) turbines and they put up a sizable amount (of cash) for that. … Now you’re changing the game on them. If I was a board of directors member of Basin Electric and I considered what the state is going to do to this deal, I wouldn’t bring any more (projects) to South Dakota,” Gillen said.

Carson said it’s likely HB 1060 won’t survive in its original form.

“There are negotiations going on right now,” he told Gillen. “When it’s all said and done, I think you’ll probably like it.”

In post-meeting comments, Carson said, “Quite often, it takes a bill to bring people to the table and get conversation started.”

The general theme of the discussion Saturday was that state government is scratching hard for cash and the search for budget balancing solutions has made for a tough legislative session, said all three District 20 lawmakers.

Vehle said constituents generally favor cost cutting measures except when those cuts will affect personal programs.

Hamiel explained that state finances are in their current predicament not only because of the deficits caused by the present downturn but because of ongoing “structural deficits,” or long-term fundamental imbalances in the state’s financial system that were present even during good years.

The state occasionally made up past ground by borrowing from reserves, but the local delegates do not believe the state should deplete reserves to deal with current shortfalls.

‘I don’t want to go down the road of the federal government,” said Hamiel, but he also acknowledged that finding $35 million to $45 million in program cuts will be a painful process.

He said that if the Legislature doesn’t achieve the needed reductions, it should take an agency-byagency look and ask department heads and secretaries to reduce their agencies by 2 or 3 percent.

“There isn’t a real lot of sunshine but I think if we can get through this without spending our reserves this year it will make things a lot nicer for us down the road,” said Carson.

Jim Jones, Plankinton superintendent of schools, spoke out against HB1150, which would revise the small-school aid formula for certain students who participate in open enrollment.

“Please be cautious about playing around with the small-school adjustment factor at any level,” he said.

“We’re going to have a fight on our hands with HB 1150,” predicted Carson, who said the bill pits big schools against small schools.

Some larger schools, he explained, want to repeal the state’s small-school factor, which provides additional funds to schools with an enrollment of fewer than 200 students.

Both Carson and Hamiel remained hopeful, but not confident, the bill could be defeated.

Hamiel emphasized that the small-school factor differs from the sparsity factor, which gives extra funds to remote rural school districts. Some western school districts receiving sparsity money will support HB1150, said Hamiel, and remain unaffected. But he feels the bill will harm small school districts in eastern South Dakota.

If HB1150 is passed, which is likely, said Hamiel, “the money saved — $500,000 at most — won’t go to the schools. It’s going to go back into the state general fund.”

Hamiel called the bill a lose-lose situation for small schools and said he and others will try to gather opposition for its defeat.

Davison County Auditor Susan Kiepke asked those present to support SB 65, a bill to delay the issuance of new license plates from the current five years to 10 years.

“It would save over the next five years approximately $5 million and would also bring a little over $3 million to the state’s counties and $32,700 to Davison County,” said Kiepke, adding the county will have zero percent growth factor for 2010 taxes payable in 2011.

“This is going to make budgeting for the county very difficult,” she said.

Vehle favored the spirit of the measure but said materials on the existing plates are guaranteed for the shorter time period. He remaines hopeful the state would be able to stretch a little more time out of the plates.

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