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State sales-tax growth is under 2 percent: Gerlach

PIERRE — Gov. Dennis Daugaard continued to temper expectations Friday about his budget recommendations. The headline on his weekly column: "Preparing For A Lean Year."

Meanwhile state Revenue Secretary Andy Gerlach said at a meeting that state sales tax receipts saw real growth of less than 2 percent from one year ago.

He said the sales-tax revenue was up 2.2 percent, but some of the growth resulted from the rate increase on June 1 from 4 percent to 4.5 percent.

Gerlach said contractor excise tax rose 4.77 percent from the similar point one year ago while state government's share from privately owned video lottery machines increased 3 percent.

He told members of the state Lottery Commission those are the three largest sources of revenue for state government's general fund.

For comparison, Gerlach said Deadwood gambling houses have seen players spend about 3.6 percent less at the machines and tables.

"Slight growth or soft growth" was his description of South Dakota's economy.

Gerlach said agriculture income decreased each of the past three years in South Dakota and electronic commerce takes a bigger bite out of the traditional stores each year.

Remote sales accounted for 10 percent of all sales in the nation in the past year and continue "going up incrementally each year." He said on-line purchases increase about 15 percent each year.

Commissioner Jim Putnam of Armour, a former legislator, said remote sales are hurting South Dakota businesses.

"There's no sustainability if everything is done over their head and nothing is done for anyone," Putnam said. "We're losing the profit. We're losing the communities."

State government tax revenue is 3.6 percent below projections, Gerlach said. That's about $20 million in sales taxes.

"The Legislature is going to have to take a look at their projections for the year ahead," Gerlach said.

The governor's budget speech is Tuesday at 1 p.m. CT to a joint assembly of the Legislature.

Daugaard in his column said he hopes November tax receipts are strong but conditions overall remain difficult.

"We won't have much to support spending increases or take on new expensive projects. This will be a year to focus on our priority areas and maintain our commitments. I do not anticipate a need to make cuts," he wrote.

Daugaard said other states are feeling the slowdown too.

"Over the last few years we have maintained structural balance and adhered to conservative budgeting practices. We don't have unfunded liabilities or out-of-control spending problems," he wrote.

"If we remain vigilant this year, we'll continue on the right track," he concluded.