Committee on Appropriations A/V — 2019

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Revenue Projection Subcommittee Announcement00:01:21
Mr. Jeff Mehlhaff, Senior Fiscal Analyst, Legislative Research Council, met with the Joint Committee on Appropriations to present FY19 and FY20 ongoing revenue projections.00:02:41
Legislative Research Council Revenue Estimate Model Explanation - Holt-Winters Model - Graph - Page 100:04:45
Auto-Regressive Integrated Moving Average (ARIMA) Model - ARIMA uses historical data to create a fitted model by adjusting the correlation, differential, and moving average components within the data. - Page 200:07:54
ARIMA Model Fitted to Base Sales & Use Tax - Graph - Below is the ARIMA model for base sales & Use tax fitted to actual values. The half-penny increase has been removed to show an equivalent comparison. - Page 300:10:24
Senator Cronin - question - are results of sales tax policy changes considered in the ARIMA and Holt-Winter models.00:12:06
Mr. Mehlhaff said the average of the ARIMA Model and Holt-Winters Model at times can be the best revenue projecting forecasting model.00:14:22
Senator Cronin - question - when do you decide to use the average of the ARIMA and Holt-Winter model for revenue projections.00:16:05
Senator Cronin - question - how many years have you used each model.00:16:15
Mr. Mehlhaff responded that he previously only used the Holt-Winter model and decided to add the ARIMA model and has had even better success. The ARIMA model was added in the past year.00:16:33
Representative Gross - question - does the Bureau of Finance and Management use a different forecasting model than the Legislative Research Council.00:17:32
FY19 General Fund Revenues - Legislative Research Council - FY19 Ongoing Revenue is $1,647,503,471. This figure does not include online marketplace sales tax revenue and includes remote seller revenue. - Page 100:18:02
Senator Nesiba - question - how many months are included in this data.00:19:12
FY20 General Funds Revenues - Legislative Research Council FY20 Ongoing Revenue is $1,715,790,304. This figure does not include online marketplace sales tax revenue and includes remote seller revenue. - Page 200:22:00
Senator Partridge - question - what did the effect of the FY17 1/2 penny sales tax.00:23:27
Senator Partridge - question - would the 1/2 penny sales tax increase have an effect in FY18.00:24:53
Senator Greenfield and Senator Wiik commented when the 1/2 penny sales tax went into effect.00:26:00
Senator White - question - have you run the data with the 1/2 penny sales tax included.00:26:39
Mr. Jim Terwilliger, Secretary, Department of Revenue, aka as State Economist for Bureau of Finance and Management, presented South Dakota and United States Economic Outlook - Page 100:27:45
Mr. Terwilliger indicated 12 members selected statewide are on the Board of Economic Advisors. This board contracts with IHS Markit and meets quarterly to review the economy.00:28:56
IHS Markit's Forecast for US Economy - January 2019 - Chart - Page 200:29:51
Mr. Terwilliger indicated the Consumer Price Index has an impact on sales tax.00:31:21
Senator Partridge - question - how does IHS Markit forecast the Consumer Price Index.00:31:59
Mr. Terwilliger indicated IHS Markit has an optimistic and pessimistic CPI forecast.00:32:47
Senator Partridge - question - does IHS Markit predict when the next recession will occur and requested additional information.00:33:24
Monthly Nonfarm Employment Levels - Graph - United States and South Dakota - Year 2001 to 2018 - Page 300:35:40
Senator Cronin - question - how many recessions have occurred over the past 30 years.00:37:30
Senator Cronin - question - does Mr. Terwilliger or Mr. Mehlhaff think a recession is imminent.00:38:45
Senator Cronin - question - are the effects of U.S. tariffs having a negative impact on the economy.00:39:43
Representative Post - question - do you have a reasoning why jobs were flat in Years 2016 and 2017.00:40:46
Representative Koth - question - does the nonfarm unemployment rate influence the economy and expressed concern for the lack of workforce.00:42:00
Nonfarm Employment Growth - U.S. Economy versus South Dakota Economy - Graph - Years 2001 to 2019 - Page 400:42:30
Growth Rates of Nonfarm Income - U.S. Economy versus South Dakota Economy - Graph - Years 2001 to 2018 - Page 500:44:16
Unemployment Rates - U.S. Economy versus South Dakota Economy - Graph - Years 2001 - 2019 - Page 600:45:30
South Dakota Farm Income & Spending on Equipment - Chart - Years 1998 to 2018 - Farm Income and Estimated Tax on Farm Equipment - Page 700:46:05
Most Recent South Dakota Economic Forecast - January 2019 - Page 800:48:25
Senator Wiik - question - does the brick and motor retail slump influence revenue forecasts.00:50:47
Bureau of Finance & Management - Revenue Forecasts - Page 100:52:30
FY19 and FY20 General Fund Revenues Pie Chart - Page 300:52:50
Sales and Use Tax - Five Different Equations- Econometric Model - Page 500:53:03
Sales and Use Tax - Estimate for FY19 and Estimate for FY20 - Page 600:55:03
Lottery - Page 700:56:30
Contractor's Excise Tax - Page 8 and Page 900:58:10
Insurance Company Tax - Page 1000:59:01
Senator Nesiba - question - why is the Legislative Research Council and Bureau of Finance and Management revenue estimate for the insurance company tax so different.00:59:35
Senator Nesiba - question - would a recent error affect the LRC model in insurance company tax.01:01:00
Representative Hunhoff - question - is there an outstanding legislative bill that affects insurance company tax.01:01:21
Governor's Revised FY19 versis February Revised FY19 - Ongoing Revenue is $1,642,389,739 - Page 2401:02:25
Governor's Recommended FY20 versis February Revised FY20 Ongoing Revenue Projection is $1,695,493,081 - Page 2501:03:00
Senator Partridge - question - how did BFM determine lottery revenue.01:03:30
Senator Partridge - question - does precision agriculture influence FY19 and FY20 revenue estimates.01:05:15
Representative Hunhoff - question - what year did South Dakota Lottery expand multi-state lottery options.01:06:25
Senator Cronin - question - how does BFM model use the 1/2 penny sales tax into consideration when determining revenue projections.01:07:33
Senator Cronin - question - is Mr. Mehlhaff concerned about a recession and how does he determine this from his data.01:09:13
Adjourn Bartels/White01:12:05

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