It may be months before there's a clear picture of the COVID-19 pandemic's impact on the state budget, South Dakota legislators heard on Wednesday.
Federal rules on the state's use of $1.25 billion allotted in the Coronavirus Aid, Relief and Economic Security Act continues to be refined, but then new pots of federal money become available and this will likely continue as Congress is looking at passing a fourth coronavirus funding package, state Finance Commissioner Liza Clark told the Legislature's Appropriations Committee on Wednesday.
The hardest part right now is determining the best use of the money, knowing more money could become available or rules could change, Clark said.
"Every time we have a plan, something changes," she said.
More: Map: Where is coronavirus in South Dakota? View data on ages, counties and gender.
The Bureau of Finance and Management is trying to determine which of the state's costs are eligible to be paid with the federal coronavirus funding, knowing the state will be audited on its use of the money in the next few years, Clark said. There's also fluctuating state costs associated with social service programs such as Medicaid as unemployed residents use the programs and the federal government is picking up some of the state's costs for Medical Assistance.
BFM is also working with small businesses and health care providers on funding, looking at what other states are doing with the money and attempting to determine the agriculture industry's eligibility for federal dollars, she said.
"That's really been the hardest thing. One minute, they're not eligible, the next minute, there comes an announcement that 'here's X million for this,'" Clark said.
The state received $1.25 billion from the Coronavirus Relief Fund created by the CARES Act, but it's also receiving additional funding for other items such as mass testing and school districts' coronavirus-related costs.
The state won't know the full picture of how much federal coronavirus money came into South Dakota because some is going directly to entities in the state such as hospitals, Clark said.
A question mark on revenue
Meanwhile, it's a wait-and-see situation with state revenue available to fund the budget.
The possibility of a special session in June to handle changes to the state budget has been discussed, but Clark said there won't be enough information next month to implement changes. She said a special session later in the year would be more beneficial because the state would have several more months of budget and revenue numbers.
Clark said she doesn't have a timeline on when more concrete information will be available because the rules on using the federal dollars keep changing. However, she suggested the Appropriations Committee meet in June and July to help the state close the books on its 2020 budget, which ends June 30.
If there isn't a special session in June, the 2% inflationary increases for state employees, education and community health providers will go into effect on July 1, Clark said.
State agencies are being cautious about their budgets at this point and some aren't hiring for open positions, Clark said.
The state had an $18 million budget shortfall in May, but the state's tax numbers have a two-month lag, so that represented taxes paid in March before the pandemic's impact on businesses was in full swing, Clark explained.
Next week's release of the June revenue numbers, which will be taxes collected in April, will be the first glimpse at the full impact of business closures, she said. There's also fluctuating state costs associated with programs such as Medicaid and the federal government is picking up some of the state's costs for Medical Assistance.
The state is still waiting to find out from the U.S. Treasury Department if it can use some of the $1.25 billion it received in the CARES Act as revenue replacement. Clark said she'd also like to use some of that money to fill in for lost money in the Highway Fund and the tourism tax, "where we're going to take a big hit," Clark said.
The state is trying to be as transparent as possible about the money it's receiving while ensuring residents have accurate information about the amounts the state is receiving, Clark said.
"It's just a lot of information coming at you really fast," she told legislators.
State coronavirus costs
State employees have been tracking their hours spent on coronavirus-related work. This includes state employees who have been diverted from their typical duties to instead work as contact tracers or handling the increased number of unemployment claims.
Their hours would typically be paid as salaries out of the state's general fund, but the state is waiting to hear whether those hours can be paid using the $1.25 billion in federal funding instead, Clark said. BFM is also hoping to use the coronavirus funds to pay the salaries of employees who were on administrative leave because they couldn't do their jobs remotely when Gov. Kristi Noem directed all state employees to work remotely, she said.
They're also trying to figure out how to handle the funding for the state's public health and public safety work because the federal government assumes that their duties are coronavirus-related and covered by the $1.25 billion, but neither of those departments are funded with state general funds, she said.
Cabinet secretaries are creating a plan of which employees should be receiving hazard pay based on definitions the U.S. Treasury Department announced. An employee doesn't need to work in a job where they could come into direct contact with a coronavirus-positive person to receive hazard pay. It could also be a state employee in an office who is experiencing a high level of stress and working long hours without being able to take time off because of their work on the state's coronavirus response, she said.
State officials are also trying to determine a way, possibly extra time off in the next couple years, to thank state employees who are enduring a significant hardship due to long hours without time off right now, Clark said.
Unemployment costs
The state is waiting on reimbursements from the federal government for administering the Unemployment Insurance program, which is called Reemployment Assistance in South Dakota.
The state typically receives $4.6 million from the federal government for administering the program. The state is receiving $2.5 million in supplemental funding.
The state is eligible to receive $500,000 for implementing the new Pandemic Unemployment Assistance program in addition to an amount that hasn't yet been determined to cover the administrative costs for the program. The state has also requested $90,000 to cover the implementation of the Pandemic Emergency Unemployment program and $66,000 to implement the additional $600 per week residents are receiving as a supplemental unemployment payment, Clark said.
The state plans to use some of the $1.25 billion to cover costs related to system upgrades to handle the large influx of residents applying for unemployment benefits, she said.
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Coronavirus' full impact on South Dakota's budget won't be known for months - Argus Leader
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