For most state governments, including South Dakota, the chickens are coming home to roost.
For decades state and local governments have spent far more than they’ve received. They’ve funded the shortfall by borrowing and pushing the repayment out into the future, hoping against hope that somehow the money to repay the debt would come from increasing tax revenues.
Unfortunately, the increases didn’t materialize. In some cases, tax revenues actually fell as taxpayers’ incomes shrank or highly taxed individuals and companies moved to states with lower tax bases. Cities and states that overspent and over-promised are now seeing lenders begin to refuse requests for new borrowing. Now, they must make the painful decision to cut spending. This by necessity must include the programs most responsible for the overspending, which are the entitlement programs like education, Medicaid, Medicare, and public pensions.
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