Governor Kristi Noem: Cautiously Optimistic: South Dakota’s Finances and the Future
Earlier this week, the State of South Dakota closed the financial books for fiscal year 2022 with a record-breaking $115.5 million surplus. This historic surplus was a combination of revenues unexpectedly being $72.3 million above what was adopted by the legislature this past session and the general fund budget for state government operations having expenses $43.2 million less than budgeted.
For starters, the growth in our revenues reaffirms the strength of our state’s economy. South Dakota’s personal income growth led the nation again in the first quarter of 2022, and we have been a leader in this metric since the start of the COVID-19 pandemic. People continue to move to South Dakota as our net inbound migration was ranked second in the nation. South Dakota’s 2.3% unemployment rate is among the lowest in the nation and lower than before the pandemic. For their part, state agencies displayed tremendous fiscal responsibility throughout the year and, at my direction, brought state expenses in under the appropriated budget.
While this surplus may lead individuals to call for a reduction in our state’s tax structure, I offer a word of caution. Our state is in a great financial position thanks to our structurally balanced budget and strong reserves, but we must be prepared to weather any economic storm that may come our way. It will be difficult for our state to maintain the unprecedented growth as our citizens struggle with the highest inflation in 40 years.
Over the past few years, the national economy has been artificially supported by the trillions of dollars that Congress provided to states, businesses, and individuals because of the COVID-19 pandemic. The result was a predictable one: historic inflation. Until President Biden reverses the policies that have caused inflation to skyrocket, the strain of inflation will continue to be an obstacle to South Dakota’s fantastic growth. There will come a time when our economy is no longer boosted by these stimulus dollars, and we must be prepared for the impact that will have on our state’s finances.
In addition to an unknown economic climate, there are key investments our state needs to continue to make in education, healthcare, public safety, and our state workforce. As many of your wallets have felt the impact of inflation, our state’s budget will also feel this increase.
As always, we will turn these challenges into opportunities for South Dakota to continue to thrive. We will spend taxpayer dollars wisely and responsibly and save where we can. South Dakota is financially stronger than ever. I am committed to ensuring our state continues to invest in our people, workforce, and infrastructure while continuing to have as low of a tax burden as possible.