A deal was reached with Sioux Valley wherein they are leasing the name for 30 years. Sioux Valley wanted assurance that if they contributed $10 million to the University of South Dakota Foundation, therefore they have a 30 year contract for the exclusive use of the name. Mr. Abbott said he had consulted with several attorneys, including the attorney for the Board of Regents, and they all felt that this licensing action was within the law. Dr. Jim Shekleton, Board of Regents, advised the committee that money coming into the foundation need not go through the general fund.

In the committee discussion that followed, Senator Drake commented that there is a difference between selling T-shirts that have the University name on them and selling the name of the University of South Dakota..

Mr. Gary Hoscheid, Legislative Audit, addressed the committee. He said a request for an Attorney General opinion has been filed.

Senator Apa asked about the University Physicians Clinics in Rapid City, Mr. Abbott responded that they were affiliated with the University of South Dakota and spend one-third of their time training third and fourth year medical students.

Revenue Projections

Mr. Dale Bertsch, LRC, provided the committee with a printed copy of FY2001 and FY2002 General Fund Revenue Estimate (Document #2).

Mr. Bertsch told the committee there are countless factors which affect the amount of sales and use tax paid into the state treasury in any fiscal year. These factors include economic variables that are quantifiable such as production, income, and consumer price data. Other factors are measurements of consumer confidence, natural occurrences such as drought, flood, blizzards, etc. Also entering into the mix are changes in consumer patterns and changes to the tax laws that may provide for tax exemptions or expansions to the tax base.

He reported that there has been a strong growth in total sales tax revenue since 1998: 1998-$388.5 million; 1999-$405.3; and 2000-$430.3 million.

Mr. Bertsch explained the method used to predict sales tax in any year based upon his regression analysis formula. His formula derived would multiply the previous year by 1.0486 (an increase of 4.86%, and add $3,577,400 to the result. The FY2002 projection is a result of increasing the FY2001

estimate by 4.86% and adding $3,577,400 to the result. This makes for a base estimate for FY2002 of $481.7 million, which is a projected increase of 5.64%.

Mr. Bertsch's estimates continue as follows:

Sales & Use Tax
Actual FY1999, including base and adjustments: $432,084,154; Estimated FY2001: $456,434,579; Projected FY2002 $482,082,015

Contractor's Excise Tax
Actual FY2000: $47,555,167; Estimated FY 2001: $50,800,000; Projected FY2002 $53,340,000

Alcohol Beverage Tax
Actual FY2000: $7,459,185; Estimated FY2001: $7,700,000; projected FY2002: $7,700,000

Alcohol Beverage 2% Wholesale Tax
Actual FY2000: $703,642; estimated FY2001: $700,000; projected FY2002: $700,000

Cigarette Tax
Actual FY2000: $19,081,853; estimated FY2001: $19,200,000; projected FY2002: $19,200,000

Bank Franchise Tax
Actual FY2002: $34,648,965; estimated FY2001: $35,000,000; projected FY2002 $35,000,000

Insurance Company Tax
Actual FY2000: $39,513,695; estimated FY2001: $41,200,000; projected FY2002: $42,436,000

Inheritance Tax
Actual FY2000: $25,554,053; estimated FY 2001: $31,300,000; projected FY2002: $22,127,500
The projection for FY2002 assumes 90% of normal collections through March 2002, and $1,000,000 from the federal pick-up tax for April-June.

Licenses, Permits, and Fees
Monthly patterns are not reliable predictors for revenues from this source. Revenue from this source is projected to be stable.

Actual FY2000: $27,722,213; estimated FY2001: $29,400,000; projected FY2002: $31,200,000
                

Investment Income and Interest
Actual FY2000: $11,617,014; estimated FY2001: $11,354,426; projected FY2002: $12,000,000

Net Transfers In
Actual FY 2000: $4,463,619; estimated FY2001: 5,200,000; FY2002:$6,400,000

Cement Plant Transfer
Actual FY2000: $12,000,000; estimated FY2001: $12,000,000; projected FY2002: $12,000,000

Mineral Extraction Tax
Actual FY2000: $1,661,813; estimated FY2002: $1,600,000; projected FY2002: $1,000,000

Energy Minerals Severance Tax
Actual FY2000: $525,526; estimated FY2001: $525,000; projected FY2002: $525,000

Unexpended Carryover
Actual FY2000: $251,834; estimated FY2001: -$0; projected FY2002: -$0

Lottery
Actual FY2000: $3,730,943; estimated FY2001: $3,700,000; projected FY2002: $3,700,000

Property Tax Reduction Fund
Actual FY2000: $87,300,000; estimated FY2001: $87,300,000; projected FY2002: $92,000,000

Sale Leaseback
Actual FY200l: $14,813,992; estimated FY2001: $14,272,436; projected FY2002: $13,701,941

CRP
Actual FY2000: $2,847,632; estimated FY2001: $3,000,000; projected FY2002: $3,000,000

Total
Actual FY2000: $781,665,203; estimated FY2001: $818,686,441; projected FY2002: $846,112,456

Mr. Jason Dilges, Bureau of Finance and Management, provided the committee with printed documentation of the U.S. & South Dakota Economies (Document #3). Included in the report are reasons determined by DRI for the slowdown of the U.S. Economy. These slowdowns include: unemployment rate jumped from 4.0 percent to 4.2 percent in January; employment cost index was up only 0.8 percent in the fourth quarter; consumer confidence dropped to 114.4, a 4 year low in January; durable orders rose 2.2 percent in December, shipments dropped 0.5 percent; purchasing managers index dropped to a 10-year low of 4l.2; index of leading economic indicators fell 0.6 percent in December; existing home sales fell 7.4 percent in December; the produce price index jumped 1.1 percent in January; industrial production fell 0.3 percent in January; $1.9 trillion in

wealth lost since stock market peaked in March; average hourly earnings posted no growth in January; light vehicle sales decreased 3.9 percent in January; retail sales increased 0.1 percent in the last 4 months; personal income increased 0.4 percent in December; and consumer spending increased 0.3 percent in December.

Reasons for the slowdown include: the decline in the stock market reduced household wealth; layoffs, especially in technology companies; rise in energy prices took dollars out of the economy; energy problems in California; and political uncertainty and administration change in Washington, D.C.

The slowdown of the S.D. economy: nonfarm employment grew 0.42 percent annualized in December, 1.5 percent for the year; average weekly earnings increased 2..23 percent for the year; building permits decreased 20.5 percent in November and 42.5 percent in December; value decreased $8.6 million in November and $3.8 million in December; and sales tax decreased 0.3 percent in November, grew 2.72 percent in December, and grew 4.06 percent in January.

Reasons for the slowdown include: the decline in the stock market; major layoffs at large Sioux Falls companies; high gas prices and heating fuel prices; consumers reaching dangerously high debt levels; and the weather.

In reviewing the revenue forecast,(Document #3) Mr. Dilges reported Sales tax collection for FY 2001: $452,765,807; audit collections; $4,531,878; FY2001 base estimate $457,297,685 less DOR indirect funding $2,748,421; refunds $817,488; FY2001 estimate $453,731,776.

Sales Tax collections for FY2002: Sales tax collections $476,695,821; audit collections $4,531,878; less DOR indirect funding $2,839,585, refunds $817,488; FY2002 estimate $477,570,626.

Contractor's Excise Tax
FY2000: $47,555,167; FY2001: $51,138,647; FY2002: $54,377,812
Alcohol Beverage Tax
The alcohol beverage tax is made up of taxes on malt beverages, spirits, and wines. FY 2000 $7,459,185; Estimated FY2001 $7,688,457; estimated FY2002 $7,776,839.

Alcohol Beverage 2 percent wholesale
FY2000 $703,642; estimated FY2001 $733,955; estimated FY2002 $752,843.

Cigarette Tax.
FY2000 $19,081,853; estimated FY2001 $19,112,402; estimated FY2002 $19,130,136.

Bank Franchise Tax
FY2000 $34,648,964; estimated FY2001 $32,476,692; estimated FY2002 $32,587,476.

Inheritance Tax
FY2000 $25,554,053; estimated FY2001 $28,753,668; estimated FY2002 $19,320,601.

License, Permits, and Fees
FY2000 $27,722,213; estimated FY2001 $29,565,752; estimated FY2002 $31,278,893.

Interest Income
FY2000 $11,617,014; estimated FY2001 $11,449,978; estimated FY2002 $13,980,800.

Charges for Goods and Services
FY 2000 $8,129,903; estimated FY2001 $8,190,935; estimated FY 2002 $8,243,520.

Net Transfers In
FY2000 $4,463,619; estimated FY2001 $5,263,619; estimated FY2002 $4,463,619.

Cement Plant Transfer
The State Cement Plant Trust fund will transfer $12.0 million to the general fund in both FY2001 and FY2002.

Mineral Extraction Tax
FY2000 $1,661,813; estimated FY2001 $1,000,000; estimated FY2002 $700,000.

Energy Minerals Severance Tax
FY2000 $525,526; estimated FY2001 $632,084; estimated FY2002 $597,443.

Lottery
FY2000 $3,730,943; estimated FY2001 $3,700,000; estimated FY2002 $3,700,000.

Sale Leaseback
FY2000 $14,813,992; estimated FY2001 $14,272,436; estimated FY2002 $13,701,941.

CRP Program
FY2000 $2,847,362; estimated FY2001 $3,000,000; estimated FY2002 $3,000,000.

Property Tax Reduction Fund
FY2000 $87,300,000; estimated $87,300,000; estimated FY2002 $92,000,000.

General Fund Receipts
Revised FY2001 $811,627,198;estimated FY2002 $838,898,549.