What did Governor Noem’s budget proposal include?
PIERRE, S.D. – Governor Kristi Noem has outlined her budget proposal for the 2024 fiscal year as well as updates to the current 2023 fiscal year. The governor outlined budget items pertaining to several high-profile policies she campaigned on, including a state-wide grocery tax cut, childcare, and combatting inflation.
The budget proposal of the governor is not legally binding, but the request of the highest executive authority in the state tends to push the legislature to address particular policies. This is particularly true of high-profile topics like the proposed grocery tax cut or the now-stalled $200 million housing development program passed last year.
The legislature will work out the details of the budget over the course of the upcoming legislative session, which runs from January to March, and the budget will take effect on July 1 along with almost all other bills passed during the legislative session.
SEE THE OFFICIAL BUDGET SLIDES PROVIDED BY THE NOEM ADMINISTRATION:
Major topics included:
The State of the Economy
South Dakota ended last year with a budget surplus of $115.5 million, the largest surplus in state history, and currently has $423 million in reserves.
Revenue from sales and use taxes grew by more than 12% in fiscal year 2022, and have already grown by another 14.1% this fiscal year.
Some of this increase can be explained by inflation. The nation saw an 8.5% inflation rate over the 2022 fiscal year, according to data from the Bureau of Labor Statistics (BLS), and while inflation has slowed as the 2023 fiscal year continued, it has not stopped. Inflation means that the public is spending more on goods and services, meaning more money is being collected in taxes on those purchases.
This does not account for all of the extra sales, however.
Noem said in her address that South Dakota’s population is growing at ten times the national average, which is technically true while somewhat misleading. From 2020 to 2021, South Dakota grew around 10 times as fast as the rest of the country, with a state population growth rate of around 1% compared to a national growth rate of around o.1%. The ‘ten times’ comparison is driven primarily by an unusually low national growth rate during that time and does not hold true for any other unit of time.
Noem also said that South Dakota had the highest rate of personal income growth in the country over the past year.
Crucial to the population growth, South Dakota also had the highest per-capita rate of new housing developments in the country, according to Noem. However, despite the constant construction, many cities and towns across the state struggle to keep housing affordable or even available.
The Grocery Tax Cut
Noem also included in her proposal the $100 million state-wide tax cut on groceries that she announced her support for earlier this year.
“Eliminating the sales tax on groceries is the biggest way that my budget helps South Dakotans tackle the challenge of Biden’s inflation and protect hard earned money. Unfortunately, food costs have risen by far too much. And families are struggling to make ends meet, as a result,” Noem said.
The governor said that she believes the permanent revenue growth over the past years will be sufficient to pay for the cut.
“We have $310 million in permanent revenue growth. And we still have $208 million even after we deliver this tax cut to the people. We have been exceeding estimates by about $25 million a month,” Noem said.
The proposal previously passed the state house and failed in the state senate, but has never before had the public support of the governor.
Even with the governor’s support, any tax cut would still have to pass through the state legislature, and there’s no guarantee that they would pass the measure.
The Big Three
Noem announced plans to provide a 5% increase in funding to state employees, healthcare providers, and public schools across the state.
While in the case of state employees this corresponds to a pay raise, the same is not true for healthcare providers and school districts, which are able to disburse this additional funding as they see fit.
Expenses in the Department of Corrections include the $60 million construction of a new women’s minimum-security prison in Rapid City which began planning and design last year. The facility will hold 300.
The costs for this facility will be covered by the $86 million put into the Incarceration Construction Fund last year.
$52 million is allotted to purchase land and design upgrades to the state penitentiary.
$27 million of that will come from the remaining dollars in the Incarceration Construction Fund, and $25 million will come from one-time general funds.
The budget proposal includes several measures related to children.
State employees would receive family leave at 100% pay after bringing a new child into their family. This is an increase over the previous 60% pay, and will cost $3 million per year.
“One of the biggest challenges facing our state overall is workforce. Too often, new parents have to leave the workforce when a new child joins the family. Those early days are so crucial to give moms and dads the opportunity to bond with the new child. By extending paid family leave opportunities, we can help workers and families.”
The proposal also includes $20 million in incentives for private businesses to buy in to a paid family leave system, as well as increased funding for adopting mothers and pregnancy and postpartum care for Medicaid patients.
The National Guard
Noem’s budget proposal included increased benefits for members of the South Dakota National Guard, paying 100% of their tuition at any South Dakota tech school or college under the Board of Regents.
Additionally, it would provide $8 million in federal funds to the construction of the Sioux Falls Readiness Center, and $29 million for a Field Maintenance Shop in Watertown.
South Dakota currently operates on a 35-year-old computer accounting system. Noem’s budget proposal sets aside $70 million dollars in one-time funding to replace the system with a modern one, particularly for cybersecurity purposes.
A fiscal year is a measure used in accounting that begins the year on July 1 instead of January 1. As such, fiscal years end on June 30, and do not line up with normal calendar years. For example, the 2022 fiscal year started in July of 2021, and ended in June of 2022.