Gov. Daugaard blames sales tax for budget shortfall

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PIERRE, S.D. - Gov. Dennis Daugaard addressed the state legislature on Tuesday and outlined his proposed solution to the South Dakota’s $33.7 million shortfall.

But before his address, legislators honored the late Craig Tieszen, who served as a state representative. WATCH

Tieszen drowned last month. DETAILS

In his presentation, the governor said the budget shortfall can be attributed to lower than expected sales tax revenue in the 2017 Fiscal Year.

He said farms around the state saw lower revenue, much in part to drought-like conditions.

South Dakota also missed out on sales tax because of the rise of e-commerce sales, some of which do not collect sales tax.

Daugaard also said inflation and increased health care costs have all led to diminished sales tax earnings.

In his proposed budget, Daugaard included the sale of the former Star Academy facility in Custer. Some lawmakers, like Rep. Timothy Goodwin of District 30, have contested the sale of the facility and said academy is still a needed resource.

“We haven’t solved juvenile delinquency we just passed it on,” said Goodwin. “Right now, kids are getting drug tests. When they have a positive drug test, nothing happens to them. We need to start Star Academy back up and have something for the drug problem we have, whether it’s opioids or heroin.”

The governor also called for $109,000 to help Pennington County create a mental health court program, the first of its kind in western South Dakota.

Representatives from Rapid City welcomed the idea of treating the mentally ill.

“Mental health has a long history in this part of the state," said Lynne DiSanto of Ward 35. "I think it is time for it to be addressed. I’m glad to see the governor is taking a good look at this. Sometimes ... it seems like everything is about Sioux Falls. I’m glad to see Pennington County is being looked at, and I hope this is something that can be moved ahead on,” she said.

READ MORE: Residents propose West River mental health facility

Other cuts include more than $11 million to the Department of Social Services and a $3.5 million cut to the Department of Human Services. Daugaard also said the cuts to the Department of Social Services will limit the availability of Medicaid.

The governor also proposed spending $7.2 million of the state's reserves to help cover the shortfall. Currently, there is about $165 million in the states reserve.

Daugaard concluded his address by stressing the importance of balancing the budget and how South Dakota sets an example for other states.

“Every year, our continued prosperity is never guaranteed,” said Daugaard. “We must be ever watchful and not take that for granted. Many other states find themselves in dire straights today because they fail to maintain that discipline that I am proud to say South Dakota has historically maintained."

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