South Dakota budget: Noem’s spending plan totals $7.28 billion, down slightly from current budget

Despite tighter financial conditions, governor proposes 4% increases for schools, state workers, health providers


PIERRE — Gov. Kristi Noem unveiled a $7.28 billion budget proposal during a speech Tuesday at the Capitol, which would be a 1.33% decrease from the current budget. 

She said it’s time for state government to tighten its belt.

“Last year, the Legislature spent tens of millions of dollars that wasn’t in my budget recommendation,” Noem said during her annual budget address. “Clearly, I signed that budget, but this year will be different. I am committed to budgeting conservatively, spending within our means, returning money to the taxpayers and focusing on our priorities.”

The state’s income increased rapidly during the COVID-19 pandemic as billions in federal aid flooded into the state. Noem’s proposed balanced budget includes the last remaining portion of that aid.

To help offset the impacts of inflation, Noem is proposing 4% funding increases for K-12 school districts, state employee compensation, and reimbursements for health and human services providers. That would mean $46.5 million more for schools, $20.6 million more for state workers, and $26 million more for health and human services providers.

Noem’s budget is only a proposal. The next step for legislators is to meet from January to March and adopt a budget for the 2025 fiscal year.

Senate Majority Leader Casey Crabtree, R-Madison, said the budget address left him with a sense of optimism. 

“At a time when we’re seeing massive inflation across every aspect of life, a conservative budget address is smart,” Crabtree said. “It tackles the issue head-on.”

Rep. Scott Odenbach, R-Spearfish, was surprised to hear Noem say schools have been awarded 26% more funding since she took office, but teacher salaries have lagged behind.

“I want to make sure that we’re getting those funds to teachers,” Odenbach said. “I think we need to look into that.”

Meanwhile, a Democrat said Noem omitted an important issue. 

“Did you hear one word about our Native American population and how we’re going to lift up our poorest populations?” said Rep. Linda Duba, D-Sioux Falls. “Republicans continue to treat this state like a two-class system.”

Some revenue above estimates

While Noem said the budget will be tight, she also said some revenues are surpassing projections, with an additional $115.6 million expected in ongoing revenue for the next fiscal year and $208 million in one-time funds.

Sales tax, a major revenue source, is $2.5 million above estimates. Noem said she supports the idea of permanently cutting the sales tax from 4.5% to 4.2%, after lawmakers passed the cut last year but only made it effective through 2027. 

“Remember, every interest group has a lobbyist in this Capitol building who wants a piece of this budget during legislative session,” Noem said. “It is our job to be advocates for the South Dakota taxpayers.”

Noem said unclaimed property receipts are $76 million above expectations but did not offer a detailed explanation of why. She said State Treasurer Josh Haeder is exploring unclaimed property marketing strategies, like ads, to ensure residents reclaim their funds before they revert back to the state.

Unclaimed property consists of abandoned financial assets such as checking and savings accounts, unpaid wages, securities, life insurance payouts, uncashed checks, and the proceeds of safe deposit boxes that are without activity for a certain period of time.

Investments in education

Noem said despite state funding for K-12 education increasing by 26% since she took office, “average teacher salaries have lagged far behind.” 

“Why would we continue to send money to school administrators and school boards when they don’t pass it on to teachers?” she said.

Noem said she is working with the Department of Education to address that, but did not provide further details. 

The budget also addresses declining literacy rates with a $6 million proposed investment in a statewide literacy initiative, emphasizing phonics-based teaching methods. 

Additionally, Noem highlighted the success of the Jobs for America’s Graduates program in aiding at-risk students. She proposed expanding the program with two new positions and $500,000 in federal funds to enroll more students. The program provides participants with classroom and work-based learning experiences leading toward the goal of a quality job.

A ‘quantum’ workforce

Noem proposed a $6 million investment for a new Center for Quantum Information Science & Technology, which would be a collaboration among Dakota State University in Madison, South Dakota Mines in Rapid City, South Dakota State University in Brookings, and the University of South Dakota in Vermillion. 

Noem did not say whether the center would have its own physical location. The center would focus on using quantum computing in fields like cybersecurity, agriculture and health care.

“Our universities will be on the cutting edge of quantum computing,” she said. 

Additionally, the budget proposes $4.8 million in one-time funding for updating equipment at South Dakota’s technical colleges.

Health and child care

Noem wants to expand the Bright Start program, which offers nursing services to first-time mothers from pregnancy until the child’s second birthday. She proposed using $194,000 in federal funding to add two positions for the program.

The proposed budget would also fund “additional family treatment foster homes for kids that have more significant emotional or medical needs,” Noem said. “We will also provide additional support for families after they choose guardianship or adoptions.”

Noem also addressed Medicaid expansion, which South Dakota voters passed in 2022. She wants an additional $18.3 million to cover the continued cost of expansion.

“We will need to continue to address these funding issues in years to come,” Noem said. 

Water and infrastructure

The state has around $131 million in remaining federal American Rescue Plan Act funds, which must be allocated within the next year.

Noem recommended spending  $121 million on water projects, with the majority directed to Department of Agriculture and Natural Resources water programs. This follows a previous allocation of $600 million for similar purposes two years ago. 

About $25 million is proposed for state water and wastewater projects. 

Sen. Helene Duhamel, R-Rapid City, said she was disappointed to not hear Noem allocate funds toward an effort to build a water pipeline from the Missouri River to the Black Hills.

“We know we will need more water as the region grows,” she said. “So, I’m hoping we can address that this session. I’ve been asking about this for a long time.” 

For dam infrastructure, the proposed budget includes $9.7 million for repairs to Richmond Dam in Brown County, enabling the leveraging of federal funds for the remaining costs. Additionally, $2 million is allocated for repairs to the Lake Alvin dam in Lincoln County and Newell Lake dam in Butte County, with federal funding expected to complete the projects.

The budget also proposes $7 million in one-time funds for information technology modernization within state government systems. This investment aims to enhance security and protect citizen information against cyber threats.

“By funding all of these infrastructure projects, we avoid having to bond for those needs,” Noem said. “That means that we don’t incur debt – debt that our kids will be responsible for paying off in the future.”

Dodging prison debt

For the proposed new men’s prison near Sioux Falls and the women’s prison being constructed in Rapid City, Noem proposed setting aside another $262 million from a combination of federal and state funds. That would bring the total set aside for the projects during the past several years to $656 million, aimed at addressing space needs and enhancing rehabilitation services like behavioral support, substance abuse treatment and skills training. The women’s prison would be an additional facility, while the men’s prison would largely replace the antiquated penitentiary in Sioux Falls.

Noem said the upfront investment is expected to save over $600 million in interest and fees over 25 years.

Regarding the women’s prison, Noem said, “since we broke ground, we learned that there is a $27 million shortfall to build this facility with the space and programming that it needs.” She did not elaborate on the reasons for the shortfall but proposed covering it with $4 million in unused land and design funds and $21 million in new funds.

Noem also recommended establishing a statewide indigent defense commission, including a statewide appellate defender office. This initiative, with proposed ongoing funding of $1.4 million, aims to help provide legal counsel for defendants who can’t afford it, as required by the U.S. Constitution. That responsibility is currently shouldered entirely by counties, and Noem said the proposal, formulated by a task force, could save counties up to $600,000 annually.

“The people of South Dakota are strong. They are hardworking. And they inspire me each and every day,” Noem said as the address concluded. “I pray that we can deliver a budget that they can be proud of — a budget that puts them first.”