Proposed Budget - Fiscal Year 2024
South Dakota Governor Kristi Noem released her fiscal 2024 budget proposal on December 6. The recommended budget calls for $7.24 billion in total spending, a 25.4 percent increase from fiscal 2023’s budgeted amount. General fund spending is recommended at $2.19 billion, a 10.5 percent increase from the budgeted amount for fiscal 2023. Much of the increase in fiscal 2024 total spending is due to federal funds, which are recommend to increase 51.3 percent compared to fiscal 2023 budgeted levels. Additionally, when compared to the revised budget for fiscal 2023 instead of the budgeted amount for fiscal 2023, total state spending is recommended to increase a more moderate 6.2 percent while general fund spending is recommended to decline 3.4 percent. The largest categories of general fund spending are health, human and social services (38.0 percent); state aid for education (32.4 percent); higher education (12.3 percent); and corrections (6.0 percent). Total fiscal 2024 general fund increases are $207.7 million, with the largest increases going towards social services ($96.0 million), employee compensation ($46.0 million), state aid ($24.1 million), human services ($14.6 million), corrections ($12.0 million), and the Board of Regents ($10.9 million). General fund ongoing receipts are estimated at $2.20 billion in fiscal 2024, a 3.1 percent decline from fiscal 2023’s revised level. The total estimated reserve balance is $220.0 million, or 10.0 percent of fiscal 2024 general fund appropriations. The governor also noted that her number one priority for the 2023 legislative session is eliminating the 4.5 percent state sales tax on groceries.
Proposed Budget Highlights
In discussing her recommendations for the remainder of fiscal 2022 and fiscal 2023, the governor noted total general fund receipts for fiscal 2022 are up 11.4 percent over fiscal 2021’s historic numbers. Additionally, she said in addition to American Rescue Plan Act (ARPA) funds, there are $215.5 million in one-time general fund dollars available for fiscal 2022 and $157.6 million in ongoing general funds. The governor said the state will put those funds to use to address the state’s most pressing needs, and to make fiscally responsible one-time expenditures. The governor highlighted key funding initiatives to invest in South Dakota’s workforce, build infrastructure for the future, and strengthen public safety. Funding recommendations include:
Eliminating the Sales Tax on Groceries
- Calls for eliminating the 4.5 percent state sales tax on groceries, including the tax on candy and soda.
- The estimated amount of state taxes being eliminated under the proposal is $102.4 million in fiscal 2024.
- In November, South Dakota voters approved a constitutional amendment providing for Medicaid expansion.
- The governor said the will of the people will be implemented and recommended $12.7 million in ongoing general funds to address the costs of Medicaid expansion.
5.0 Percent Inflation
- The governor recommended including $90.68 million in ongoing general funds to provide a 5.0 percent increase for state aid to education, the state’s technical colleges, reimbursement rates for health and human services, and salary increases for state employees.
Targeted Provider Increases
- The recommended budget includes funding to raise reimbursement rates for targeted community-based health and human service providers to 90 percent of their target for Medicaid services.
- This will require $22.24 million in ongoing general fund dollars.
Enterprise Resource Planning System
- $70.0 million in one-time funding is recommended to implement a new Enterprise Resource Planning (ERP) System; the state’s current accounting system is 38 years old.
- $5.11 million in one-time funding to make cybersecurity upgrades across Board of Regents’ institutions.
Rising Construction Costs
- $6.75 million in one-time funding to address inflationary cost overruns in several construction projects within the Board of Regents.
- $341.6 million to support the replacement of the South Dakota State Penitentiary, which was constructed in the late 1800’s as a territorial prison. The funding allows for the first phase of the project to begin.
- $60.0 million in one-time funding to address overcrowding and lack of addiction services at the South Dakota Women’s Prison by constructing a 308-bed prison for women.