As SD banks took recession hits, so did government coffersBank taxes withered across South Dakota in recent years, the financial impact on state and local governments reaches into the millions.
By: Bob Mercer, Republic Capitol Bureau
PIERRE — State records show that as bank taxes withered across South Dakota in recent years, the financial impact was much broader than commonly known.
State government suffered deep hits. But so did many local and county governments, school districts and other taxing entities, as millions of dollars stopped flowing into their treasuries.
The downturn came as many of governing boards and com missions sorely needed all the money they could find for their recession-crippled budgets.
The uncertainty now is whether the bad times are turning better.
State government saw a big bump upward from banks in the past year. State government’s considerable piece of bank franchise tax collections reached a modern low of $4.7 million a year ago, only to rocket back up to $29.7 million for the state budget year that just ended June 30.
In addition state government received a one-time boost of another $14.3 million for the just-ended budget.
Whether that kind of magical rebound could become true next at the county level isn’t clear yet. State Revenue Department officials won’t comment at this time.
The forecast is murky for several reasons.
There is, in most cases, a nine-month time lag between when banks must remit their final tax payments to the Revenue Department for a business year and when the department distributes the money back to county treasurers.
Banks also can seek extensions. And there’s also the complexity of the tax code. State government retains different shares of the two types of taxes — 95 percent from credit card banks and 26.67 percent from community banks – and the rest gets sent back to the counties for local distribution.
Those county shares are based on the taxes generated from the banks within each county. All of those moving parts mean the numbers for a county can bounce a lot year to year, and decreases or increases can vary widely among counties within the same year.
Another variable is how the banks within a county have been performing. Curt Everson, chief executive for the South Dakota Bankers Association, said the income trends and taxes due from community banks may have differed from that of the credit card banks.
The years of 2008 through 2010 had “extremely unstable conditions” that weren’t seen before, said Jim Terwilliger , economist for the state Bureau of Finance and Management.
Those impacts are still working through the system.
The quarterly estimated tax payments that a bank made in calendar 2010 would have been retained by the state Revenue Department until the bank filed its actual 2010 tax statement in April 2011.
Extensions could have been requested by banks through Oct. 15, 2011. After that Revenue went through the annual process of truing-up the amounts and prepared each county’s amount for January 2012 distribution.
“ It’s understandable things are going to be kind of erratic in those three years at least,” Terwilliger said.
In that respect the numbers speak for themselves.
In January 2010 the state Revenue Department disbursed more than $18.4 million to county treasurers as the local share of state taxes paid by banks. One year later, that amount was down to $9.4 million. This past January it was back up to near $11.4 million.
Just how widely the numbers can swing can be found in the example of two northeast regional centers.
The various school districts and local governments in Codington County shared $608,852 in bank taxes sent from the state in January 2010. One year later the total was down to $415,386. There was only a slight recovery this past January, to $440,162.
Brown County had a much different experience. The total went from $458,497 in January 2010, to $321,881 a year later. This January, however, there was a full recovery to $458,736.
The money is distributed within a county using a formula based on the old personal-property tax, which was repealed in the late 1970s.
The bank taxes are apportioned within a county in the same proportion as the average of personal property taxes assessed in each taxing subdivision, including the county, for calendar years 1972, 1973, 1974, 1975 and 1976 were distributed.
Using the Brown County example, the Aberdeen school district received $202,541 this year, while Brown County government got $80,829 and the city of Aberdeen got $79,296.
The remainder was spread among a long list of other government entities in the county.
Some counties felt almost no change during that three-year span. Davison went from $124,731 in 2010, to $117, 454 a year ago, to $129,962 this year.
Hughes County, a regional banking center much like Brown and Codington, was hit much harder. Hughes dropped from $646,631 in 2010, to $407,834 last year and $579,712 this year.
Lawrence County meanwhile experienced growth. The county received $170,062 in 2010 and fell to $137,583 for 2011. This year the county’s bank tax revenue climbed to $233,191.
The biggest plunge came in the heart of South Dakota’s credit-card sector. Minnehaha County dropped from $11,607,391 in 2010 to $3,908,963 last year and $3,948,179 this year.