Let's Talk about the Economy

During times of recession, businesses cut back because of a lack of demand for their products, but not so for state governments. As states are losing revenue and having to make do with less—residents hit hard by the down economy often need government services more.

That’s according to South Dakota Gov. Mike Rounds, 2010 President of CSG. And although his state has weathered the recession better than others, the states aren’t out of the woods yet.

In South Dakota unemployment rate is now 4.7 percent but it’s normally at 2.7 percent, Rounds said.

So how was South Dakota able to weather the recession a little better?

State policies have been critical, Rounds said. His state doesn’t have personal income tax or corporate income tax and therefore has not had large swings in income taxes.

“Like most states, we cannot deficit spend,” Rounds said. “Since 2008, we haven’t touched our reserves in large part, because we used the federal (stimulus) money to replace the dollars that we were losing.”

This year the state made some additional cuts in higher education for the first time and state employees didn’t get a raise for the second year in a row, for example, according to Rounds.

“We’ve been able to live within our means so far.”

Rounds said states should look at how they stack up in key areas against other states and then strive to be number one in the rankings.

“Determine what you must do to improve in those rankings, then … make it happen.”