Joshua Haiar/South Dakota Searchlight
Despite a $32 million dip in sales tax revenue, South Dakota has collected about $115 million more in total revenue this year than it did the previous July through April.
That news was shared with the Governor’s Council of Economic Advisors Tuesday by state Bureau of Finance and Management economist Derek Johnson. The council includes economists and businesspeople from around the state who review and critique the department’s forecasting.
Tax collection metrics begin in July because a fiscal year in South Dakota runs from July 1 to June 30 the following year.
The state’s unclaimed property fund is the primary reason for the revenue uptick in the face of sales tax declines The state has banked approximately $62 million more this year in abandoned or forgotten money from bank accounts, stocks, life insurance payouts, uncashed checks and the contents of safe deposit boxes. The holder of the money or items, such as a bank, tries to find the owners. After three years of dormancy, the property reverts to the state. The property represents a perpetual liability to the state, however, as the state is obligated to pay the rightful owner at any point.
“Kind of an unpredictable revenue source that we have in South Dakota,” Johnson said.
It is difficult to say what caused the unclaimed property uptick, according to South Dakota Bankers Association President Karl Adam, who serves on the council.
“I’m not questioning the sustainability of it, but that is something that I know the state relies heavily on, and I don’t know if there would be an asterisk next to that for future years,” Adam said.
Adviser Derek Johnson agreed.
“As it pertains to unclaimed property, certainly there should be an asterisk by that number.”
Earnings from the state’s investments have jumped by $35 million this year, as well. This includes returns from assets the state holds, like bonds and stocks. The income might come as interest payments or dividends.
“Certainly was a big boost to the general fund,” Johnson said, referring to the state’s primary budget.
Contractor’s excise tax revenues are also up about $24 million, referring to the tax contractors pay based on earnings from construction and repair projects.
The $31.9 million decline in sales and use tax revenue was largely due to a reduction in the state sales tax rate from 4.5% to 4.2%. That happened in July 2023.