Makenzie Huber, South Dakota Searchlight
South Dakota lawmakers ended the main part of their legislative session Thursday by approving a $7.3 billion balanced state budget for next fiscal year, starting July 1 – including a $27 million increase above what Gov. Kristi Noem recommended in December.
Legislators are scheduled to return to Pierre for one day on March 25 to consider vetoes, if Gov. Kristi Noem issues any.
Rapid City Republican Rep. Mike Derby is co-chair of the Joint Appropriations Committee, which drafted the budget.
“This is a budget that invests in the people of South Dakota and that will have a positive impact for generations,” Derby told lawmakers before the House passed it 61-9. The Senate passed the bill 32-2.
Among other things, the new budget includes:
- A 4% increase for state government employee pay, education funding and reimbursement to health care providers throughout the state.
- A third consecutive tuition freeze for students at South Dakota public universities and technical colleges.
- Over $226 million set aside for the construction of a future men’s prison in rural Lincoln County and a future women’s prison in Rapid City, in addition to money set aside previously.
- An increase to reach 98% cost reimbursement for nursing homes and other health care providers that have patients on government-funded care such as Medicaid.
- The creation and funding of a statewide public defender’s office and governing commission, to reduce some of the burden on counties for paying to defend criminal defendants who can’t afford an attorney.
- Over $20 million for Medicaid expansion, which continues to be implemented after voters approved expanded eligibility in 2022.
The Legislature also passed several bills appropriating nearly $120 million from the federal American Rescue Plan Act, which is the last remaining money from billions in federal pandemic aid sent to the state. Among the approved spending of those dollars is:
- $5 million in telemedicine grants to nursing homes and assisted living facilities.
- Over $100 million to water and wastewater projects for state government and local projects statewide (with authority to spend more if other approved ARPA uses aren’t spent by federal deadlines).
- Over $12 million for water and sewer infrastructure at the sites of the future men’s and women’s prisons.
The increase over Noem’s recommended budget is due to higher revenue projections despite cutting the state sales tax last session from 4.5% to 4.2%. That cut includes a sunset in 2027 when the tax is scheduled to return to 4.5%. Some legislators are worried about another impending tax cut in the meantime, with a citizen initiative potentially headed to the ballot in November that would eliminate the state sales tax on anything sold for human consumption, sometimes referred to as the food tax or grocery tax.
Gov. Kristi Noem cautioned legislators last session that the proposed ballot measure will likely pass, which could leave lawmakers scrambling for revenue. A statewide South Dakota News Watch poll released in December showed that 60.6% of registered voters support eliminating the tax.
“If that consumption tax passes on the ballot, you take all that money out of our budget and you’re going to train wreck,” Senate President Pro Tempore Lee Schoenbeck, R-Watertown, said during the weekly Republican leadership conference.
Democratic leaders agreed. House Minority Leader Oren Lesmeister, from Parade, said the state “cannot survive” both cuts.
“If this measure passes, they’re going to have a hard task of figuring out what they’re going to raise for taxes, whatever it is, because this budget will not survive that tax cut on top of of the one we already have,” Lesmeister said during the leadership conference. “That’s just a simple way to put it.”
If the food tax is eliminated, officials expect it’ll cost the state roughly $100 million.