PIERRE, S.D. (KELO) — To paraphrase Republican Governor Kristi Noem, tighter times are here again in South Dakota.
The message came through clearly in the numbers she used on Tuesday afternoon during her annual budget address to a joint gathering of the South Dakota Legislature.
For example, she recommended increases of 1.25% for state aid to public K-12 schools, healthcare providers and state government employees.
That’s significantly less than the 4% that lawmakers had approved for this year, or the 7% from a year ago, or the 6% of two years ago, or even the 2.4% from three years ago.
Her staff is telling her that there’s no money to do more.
They’re predicting that state government will fall short of collecting the $2,419,500,000 of general fund revenue that the Legislature’s Joint Committee on Appropriations had estimated for the current budget year.
They’re now forecasting that the state treasury will bring in $2,393,100,000 of general fund revenue.
That’s $26 million less.
Looking farther out, her staff is estimating that general fund revenues in the budget year that starts on July 1, 2025, will total $2,463,700,000.
That’s $70 million more than the revised forecast for the current year but just $44 million than the Legislature had estimated in February.
In percentages, her budget analysts are looking at general-fund revenue growth of 2.8% using their revised estimate or 1.8% using the Legislature’s budget.
Normal years have seen increases of around 4%.
The governor wants to compensate for this economic slowdown by recommending a variety of maneuvers. Some are immediate, such as using one-time funds to pay off $53.7 million of bonds. Others are ongoing cuts totaling $39.9 million.
Among items Noem has identified for the chopping block:
- $16.9 million from the maintenance and repair budget
- $5.3 million from Temporary Aid to Needy Families payments
- $3.6 million from South Dakota Public Broadcasting’s budget
- $2 million from the state Board of Regents budget
- $1 million from the State Library budget
- $1 million from the Governor’s Office of Economic Development marketing budget
At the same time, Noem is recommending making the 4.2% state sales-and-use tax rate permanent. The Legislature in the 2023 session cut the rate from 4.5%, but the reduction expires on June 30, 2027.
Republican Rep. Chris Karr pushed through the original tax cut. Lawmakers chose it rather than the governor’s proposal to remove the sales tax from groceries. He tried to make it permanent last year. The House adopted his proposal, but the Senate Appropriations Committee said no. Now he’s a senator-elect, and seven of the nine senators who were appropriators lost or didn’t seek re-election.
Karr said he’s watching the sales-tax receipts, which were below estimates for July through October. “We have to take care of our core services first,” he said after the speech on Tuesday. “After that, it should stay with the taxpayers.”
Karr said he would be willing to give up the sales-tax cut if a substantial program could be developed to cut property taxes, which he said is now the top topic that people talk about to legislators. A property-tax reduction was one of the suggestions that lawmakers considered two sessions ago but it didn’t go far enough, according to Karr.
“You’ve got to find a better, more meaningful plan that’s going to have significance for South Dakotans,” he said.
Noem has also proposed spending $4 million on an ongoing basis for education savings accounts that could be used to subsidize the cost for K-12 students to attend private schools or offset the cost of curriculum for alternative education, commonly known as home schools.
South Dakota’s public school groups issued a joint statement on Monday criticizing the idea of vouchers. Noem says she could fund ESAs without taking money away from public K-12 schools. This year, it would mean redirecting state aid that had been budgeted for public schools but went unused because enrollment was lower than expected.
Another place Noem wants to make cuts are the budgets of the state Department of Social Services and the state Department of Human Services. Social Services reverted $42.3 million that went unused in the budget year that ended June 30, 2024, while Human Services gave back $5.8 million.
The governor also is calling for $43 million to be placed into the state’s budget reserve accounts to pay future claims from any owners of unclaimed property. Governors have routinely treated unclaimed property as a large source of general fund revenue available for spending, even though it’s supposed to be kept available for rightful owners to claim.
Republican Rep. Tony Venhuizen previously served on the state Board of Regents that governs South Dakota’s six public universities and two specialty K-12` schools for the deaf and visually impaired. He asked if the regents can find $2 million to cut, after multiple years of zero or small tuition increases, Venhuizen said, “I’m sure they can. It will be interesting to see what they propose.”
As for another tuition freeze, Venhuizen said, “It will be pretty tough to do any new spending this year.”
Noem made no direct mention in the half-hour speech that President-elect Trump wants her to be Homeland Security secretary after he takes office on January 20. The Legislature opens its 2025 session on January 14, and there’s been no public indication so far that Noem won’t be delivering the State of the State speech that opens each session.
But her closing comments on Tuesday sounded like the start of saying farewell.
“South Dakota has been home all my life – and always will be. Thank you all for giving me the opportunity to serve you,” she said.
