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tighten your belt financial discipline

Financial discipline message conflicts budget increase

PIERRE, S.D. – Gov. Kristi Noem is touting a doctrine of financial discipline at the 2024 South Dakota Legislature in Pierre, but there could be a budget reckoning down the road. 

The fact that the governor’s proposed Fiscal Year 2025 budget is $7.28 billion – nearly 30% higher than just two years ago – muddles her belt-tightening mantra. It also highlights uncertainty about the state’s long-term financial outlook, according to News Watch budget analysis and interviews with legislators and business leaders.

Lawmakers overshot Noem’s budget request last session while cutting the state sales tax rate from 4.5% to 4.2%, a dangerous mix in most times but considered palatable due to federal stimulus money still boosting state coffers.

The current fiscal year budget they passed, which runs through June 30, stands at $7.38 billion, an increase of nearly 35% from the previous year. If you go back four years to pre-pandemic FY 2020, it’s an increase of 57%.

Despite Noem’s public criticism of President Joe Biden’s stimulus strategy, federal money accounts for 47% of the state’s current budget, fueled by surplus from COVID-era initiatives such as the American Rescue Plan and the Bipartisan Infrastructure Law.

The rising tide and inevitable ebb of federal money is what concerns some lawmakers who see a budget reckoning down the road, most likely after Noem leaves office. The governor’s term ends in 2026, but it’s no secret that she covets a vice presidential nod from the GOP primary front-runner, former President Donald Trump.

Even if she stays, many of the budget-related decisions made today won’t germinate until 2026 or 2027, when stimulus money wends its way out of the state economy and the enormity of costs for new prison projects become clear. The sentiment among many stakeholders in Pierre is that it’s going to be somebody else’s problem.

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