View Count: 183 |  Publish Date: December 03, 2012
Getting richer? Yes in South Dakota, on average

SIOUX FALLS | South Dakotans are moving up in wealth.
Several indicators point to growth in income for state residents, including one that puts them in the middle nationally, at No. 26, for personal earnings. Another shoots South Dakota up to No. 13 in comparing states and the District of Columbia.
The numbers show growth for all states as the nation recovers from a recession that hit many of them harder than South Dakota. And, in South Dakotas case, the growth on one scale shows a widening gap between rich and poor.
Taken together, though, the numbers suggest that a perception of South Dakota as a state of below-average wealth no longer is valid.
Relative to the rest of the country, it is a cliché to say that we are a poor state, said Joy Smolnisky, director of the South Dakota Budget and Policy Project, a Sioux Falls agency that analyzes public resources.
While many say South Dakotas increasing income level is a sign of the states prosperity, others argue that the recent boom years for agriculture have skewed the states per capita personal income, which is an average, not a median.
In South Dakota, farmers had a great year in 2011, said Reynold Nesiba, associate professor of economics with Augustana College. I would suspect that that plays a significant role. You need to remember, one-eighth of the population of South Dakota continues to depend on food stamps for their daily bread.
Last year, South Dakota farm income rose 102 percent, while nonfarm income rose 5.7 percent, said Ralph Brown, a retired economics professor with the University of South Dakota, explaining how the bountiful years in the agriculture industry have played a part.
And while the state has diversified its economy, farm income last year accounted for 13.2 percent of total personal income, highest in the nation, Brown said.
A federal report shows South Dakota with per capita income of $44,217 in 2011. That is 13th place and close behind neighbors Wyoming, North Dakota and Minnesota. Washington, D.C., led the way at $73,783. The report lists South Dakotas income at 106 percent of the national average of $41,560. The data are from the Bureau of Economic Analysis at the U.S. Department of Commerce.
If you told somebody our average was above 100 percent, most South Dakotans would not be shocked, but pleasantly surprised, said Ken Blanchard, professor of political science at Northern State University.
The bureaus report says South Dakota income was $27,865 in 2001 and increased at a compound annual growth rate of 4.7 percent the next 10 years. It shows South Dakota steadily below average, in the 90 percentile range, until passing the 100 mark last year.
The numbers have both good and bad ramifications in South Dakota, said Dusty Johnson, chief of staff for Gov. Dennis Daugaard. While more income typically means people pay more taxes, it also will cost South Dakota millions when it comes to Medicaid.
Starting July 1, 2013, the state will have to pay 45.8 percent of its Medicaid costs, almost three percentage points more than the current year because the states personal income is increasing faster than other states. It will cost the state an estimated $20 million next year.
But Johnson also said the perception has historically been that South Dakota is a poor state, though the recent report indicates that is changing.
The reality is were not a poor state, and that is an important change in our perception, he said.
Personal income growth, the low unemployment rate and other indicators are helping to change that perception, which is integral on many levels whether its a college student who might choose to move back home for a job or a business owner who decides to move his business here or invest to expand a current one, Johnson said.
South Dakota can be a destination for people to live in, not just a default, Johnson said.
And while the state doesnt have a personal income tax, growing income does bring in more money to the state coffers, because when people have more money, they tend to pay more taxes, Johnson said. That means increased sales and property taxes, for instance.
That should allow the state to invest more in areas such as education and public safety, and its a sign that the states system is effective, he said. South Dakotas model has been to have more taxpayers than simply to have people pay more taxes.
The nice thing about a growing economy is you really get your cake and youre able to eat it too — South Dakota may be able to afford higher taxes but part of the reason thats true is we dont tax them much to begin with, Johnson said.
Tax increases arent likely anyway, even if South Dakota residents are making more money, unless its brought to a public vote, said Rep. Bernie Hunhoff, D-Yankton.
Its never been popular, he said. I dont think any one figure or set of figures is going to change that. Were just not inclined to raise taxes in South Dakota. Neither party wants to.
The state has labored for decades under a harsh climate and remote conditions of the Northern Plains, dating to the Dust Bowl and Depression and earlier. Population peaked in 1930 and didnt reach that level again until 1990. It reached 814,180 in the 2010 census and was listed at 824,082 in 2011 for this study by the federal bureau. Thats near the bottom among all states but also a factor that would lift South Dakota in per capita comparisons with fewer people here to share the wealth.
Blanchard, 55, grew up in Arkansas and studied in California before joining the Northern State faculty in Aberdeen in 1989. He said its difficult to gauge whether South Dakotans have a lingering mind-set about living in a poor state.
Thats a tougher question than it sounds, he said. Most South Dakotans are a little nervous about the state image of being backward — Americas outback. I suspect that contributes to a perception of the state being economically disadvantaged. On the other hand, most South Dakotans think we have a pretty high standard of living and that its a pretty easy place to live.
Thats particularly true for people with jobs.
Its a great place to live and work. My family is doing just fine, said Becky Smith, manager of the Cookie Jar, a downtown restaurant in Sioux Falls.
With the gains, however, income data also show South Dakota moving into a wider gap between haves and have-nots, Smolnisky said.
The agriculture industry, for example, has had several good years and that has skewed the personal income per capita, experts say. Farm income more than doubled from 2010 to 2011 to $4.6 billion, according to Bureau of Economic Analysis figures. In 2010, it was $2.2 billion. The ag economy means per capita income can vary greatly by year. In Sully County, for instance, in 2006 per capita personal income was $35,332, then jumped to $63,167 the next year and to $108,694 in 2008.
If you have a few people who are making a lot more money, that average goes up. Thats deceptive, I think, Nesiba said.
The family median income last year, by comparison, was $62,059, according to U.S. Census Bureau figures. For one earner, it was $37,299.
Johnson said other numbers such as the jobless rate indicate the states economy is doing well even if agriculture skews per capita income numbers. Hunhoff said hes not sure personal income numbers would be accurate for the small-business owner or typical family.
I expect that a good share of this is a result of a number of good years on farms and ranches, which were thankful for, Hunhoff said, adding that investment income also may play a part. Im not sure that the working man and woman or the small-business folks up and down the street are doing as well as those figures suggest.
Hunhoff pointed out that not long ago South Dakota was among the lowest in the nation in per capita income.
If it doesnt rain soon, we may be 43rd again real soon, Hunhoff said, referring to the lingering drought.
Per capita income of $44,217 would compute to almost $180,000 for a family of four. Most families are below that, indicating that wealth is disproportionately higher in the hands of others. The report says 65 percent of earnings came from wages and salaries. Another 20 percent is from dividends, interest or rent, with the final 15 percent from transfer receipts such as Social Security payments. The numbers are neither good nor bad but may be are useful in discussing how the state looks at resources and public needs, Smolnisky said.
While Hunhoff said the states progress is good, he added that the state continues to have some of the poorest counties in the nation and that many of the states workers continue to be underemployed.
The farm and ranch economy is something we can build on, he said. But we need a strong entrepreneurial culture to back it up. We cant expect agriculture to carry the whole load, either on the local or state level.
Smolnisky points to a second study, from the Data Source Center for Budget and Policy Priorities, showing how different income levels have suffered or prospered. That study divided South Dakotans into five groups of equal size, according to household income. It said the bottom 20 percent of households had income that fell 12.5 percent in purchasing power from 1998 to 2000 to a second period of 2005-07. The middle 20 percent had an increase of 7.9 percent. The top 20 percent enjoyed an increase of 25.7 percent. The study used 2009 dollars as a benchmark to adjust for inflation.
At the same time, a U.S. Census Bureau report offers a new index indicating fewer South Dakotans in poverty. The official poverty rate for the state was 14.5 percent, about 1 in 7 residents, from 2009 to 2011. The Census Bureaus new supplemental poverty measure, released Nov. 14, adjusts for housing, geographic differences and other factors in revising South Dakotas rate to 11 percent, about 1 in 9 residents.
What happened? Did South Dakotans suddently get richer? No, Smolnisky said.
She said the new poverty measure more accurately reflects social and economic realities and government policy.
Eleven percent is just a number, but when translated into human beings, it means 88,000 South Dakotans are in poverty. They cannot afford basic needs, Smolnisky said.
Its interesting to compare numbers on poverty with taxes, she said. A report from the census bureau and Commerce Department, using 2008 data, shows the state with $38,289 in per capita income, 26th highest in the nation. It shows state and local taxes at $3,107 per capita, ranking 48th. Those numbers together show state and local tax at 8.1 percent of income, below the national average of 10.9 percent, and placing South Dakota at No. 50 for relative tax burden.

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Time: 19:11  |  News Code: 16000  |  Site: Rapid City Journal
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