Proposed Budget - Fiscal Year 2026
South Dakota Governor Kristi Noem released her fiscal 2026 budget proposal on December 3, 2024. The recommended budget calls for $7.29 billion in total spending, a 0.3 percent decrease from fiscal 2025’s budgeted amount. General fund spending is recommended at $2.46 billion, a 2.0 percent increase from the budgeted amount for fiscal 2024. Total fiscal 2026 general fund increases are $47.4 million, with the largest increases going towards human services ($26.4 million), state aid ($21.6 million), employee compensation ($6.8 million), corrections ($5.1 million), social services ($3.1 million), and education ($2.0 million). General fund ongoing receipts are estimated at $2.46 billion, a 3.0 percent increase from fiscal 2025’s revised level. The total estimated reserve balance is $288.8 million, or 11.8 percent of proposed fiscal 2026 appropriations.
Key Budget Highlights
The governor’s budget recommendation is focused on being responsible stewards of the taxpayers’ money, investing in core responsibilities, paying off debt, and making state government agencies more efficient. The governor noted the state continues to have no individual income tax, no corporate income tax, no personal property tax, maintains a AAA credit rating, has one of the only fully funded pensions in the country, and has delivered a balanced budget for 136 consecutive years. Highlights of the budget include:
Education
- Proposes establishing Education Savings Accounts to pay for a portion of private school tuition or curriculum for alternative education
- Invests one-time funds over five years to create school safety grants
- Supports the Science of Reading including through a five-year federal grant
- Continues to invest in higher education to meet workforce needs including through expanding training opportunities, supporting the growth of cybersecurity programs, providing full tuition for South Dakota National Guard soldiers, and helping high-risk students prepare for college or a career
Health
- Manages the increased demand on the state’s Medicaid system with fiscal responsibility including through funding the remaining cost of Medicaid expansion
- Provides additional ongoing funding for regional mental health facilities
- Invests in the Agency with Choice at the Department of Human Services to allow families to choose who is providing services in their homes and provide greater care for South Dakotans utilizing developmental disability services
Safety
- Uses one-time dollars to pay for the remaining costs of the state’s new men’s prison, saving the state future costs in interest, fees, and annual debt service payments
- Recommends additional funding to finish the Richmond Dam project
Workforce
- Provides 1.25 percent inflationary increases for state employees, healthcare providers, and schools and teachers
Fiscal Responsibility
- Maintains the state’s longstanding practice of having a minimum of a 10 percent budget reserve for a rainy day
- Recommends setting aside one-time revenue to pay future unclaimed property receipts
- Proposes budget reductions and discretionary changes to ensure the budget is balanced after providing funding for mandatory new ongoing expenditures
- Pays off debt with one-time money
- Right-sizes funding for programs in the Department of Social Services and the Department of Human Services to match utilization
- Reduces the state match in funds for Temporary Assistance for Needy Families due to the strength of the state’s economy
- Asks the Board of Regents to propose budget reductions of their own
- Reduces funding for South Dakota Public Broadcasting to bring it in line with the national average
- Proposes further steps to enhance fiscal fortitude including expanding resources to assist the Board of Internal Controls, support the Department of Legislative Audit and clarify the work they do, and strengthen the state’s financial systems to help protect taxpayer dollars