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(The Center Square) – South Dakota Gov. Kristi Noem said Monday she plans to us an $80.7 million budget surplus to offset prison construction costs.
The $80 million surplus includes $24.3 million, which was above the forecast for fiscal year 2024 and $56.4 million saved by reductions in state government spending, according to Noem.
“South Dakota makes common sense decisions based on small government, low taxes, and spending within our means. We don’t just talk about fiscal responsibility – we follow through!” Noem said in a statement. “We will continue to budget responsibly for the people, and we will avoid unnecessary debt by using this surplus for prison construction costs.”
The surplus was transferred to the state’s budget reserves, which now has $322.8 million or 13.3% of the fiscal year 2025 general fund budget,” according to Noem.
Noem proposed a $132.4 million one-time allocation in December for a new men’s prison in Sioux Falls. The prison would replace the state penitentiary built before South Dakota became a state.
The building is no longer suitable, the Department of Corrections said in a budget document.
“The prison houses almost 275 more high/medium custody offenders than is recommended by the American Correctional Association for a prison that size,” the document said. “The facility does not meet modern correctional standards and is not laid out in a way that is conducive for efficient staff supervision. Millions of dollars are spent annually to maintain and repair this facility, and it cannot be updated in a cost-efficient manner to serve the state’s current needs.”
A disturbance at the penitentiary in March led to charges against 11 inmates, according to Attorney General Marty Jackley’s office. The inmates pleaded not guilty and are scheduled for trial next month.
A women’s prison under construction had a shortfall of $4 million, the governor said in December. Federal funds were recommended for water, $4 million from the land design funding and $21 million in one-time funding to keep the state from going into debt.
Governor Noem’s slides from her Budget Address
Good afternoon, Lieutenant Governor Rhoden, Mr. Speaker, members of the House and Senate, and my fellow South Dakotans. I’m grateful my husband Bryon is here today. Would you all welcome him as well?
When most of us think about South Dakota, we think of our land, our economy, our assets, our natural beauty. But, when I think of South Dakota, I think of our people. “Under God, the People Rule.” That is not only our state motto, it’s our way of life. It’s my priority every day when I come to work.
Today, I am proud to present my budget for your consideration. This budget covers the remainder of Fiscal Year 2024 and all of Fiscal Year 2025. It’s a budget that prioritizes people, not programs. It’s a budget that shows what can be done with smart, conservative fiscal policies. And it is a budget that focuses on our core responsibilities of state government.
This year, national inflation has risen. That means family budgets are tighter and people have less discretionary spending. Every dollar in this budget is an investment in our people. This money belongs to them. They know what their needs are, and we are constitutionally required to spend it appropriately to meet their needs.
Our number one priority should be our kids and grandkids. They are our future. Hopefully, they are the reason why you come here to Pierre, why you take time away from your families, and why you take an oath to participate in public service. Every vote that you take, every dollar that we invest, and every policy that you support should be focused on making South Dakota safer, stronger, and healthier for our kids and our grandkids.
Our budget must be focused on the core purposes of state government as defined by our state constitution. My budget proposal today focuses on strengthening education, building a stronger workforce, keeping people healthy, investing in long term infrastructure, and avoiding debt so we can preserve our low tax, low regulatory environment that we are blessed with today.
These priorities are possible because of South Dakota’s economic strength. Our economy is one of the strongest in the nation. Clearly, we are feeling the impact of burdensome regulations from the Biden Administration. Inflation has risen, and people are still adjusting to increased prices of everyday goods.
We will embrace conservative fiscal policies to keep South Dakotans financially secure. We have no individual income tax, no corporate income tax, no personal property tax, strong reserve balances, a AAA credit rating, and one of the only fully-funded pensions in the country.
This will be our 135th year of delivering a balanced budget. We make it a priority to cut government red tape wherever we can. And we let taxpayers keep as much money in their pockets as possible.
South Dakota has reaped the benefits of conservative policies. Even during recent recessions and global pandemics, South Dakota has continued to grow. We are the backbone of this country. We’ve had record surpluses and sales tax revenue over the last several years – and we have been able to use those additional dollars to give back to the people. This year, I am encouraging the legislature to do exactly what families across America are doing every single day – stick to a tight budget.
South Dakota’s economy is strong. Since I took office in 2019, South Dakota has been second in the nation for personal income growth. Incomes have gone up by almost 30% for our people. As we move forward, South Dakota’s economy will continue to grow faster than the national average, and our jobs numbers will continue to grow. Our unemployment rate will remain far below other states.
Given the success of the Freedom Works Here initiative, we can expect that South Dakota’s economy will continue to thrive. People are coming to join our winning workforce because they believe in what we’re doing. They believe in it so much that they want to be part of it. They want to live and work in the Freest state in America. We have a responsibility to budget accordingly – to extend Freedom and opportunity for our kids and for all those looking to join our way of life.
I am not proposing conservative spending because our economy is weak. I am proposing conservative spending because we are strong – and I want South Dakotans to continue to thrive for generations to come.
South Dakota’s revenues have continued to exceed projections. We’re also projecting $115.6 million in available ongoing revenue for the next fiscal year. We also have $208 million in one-time dollars available. This is because our revenues have continued to exceed projections – and my administration found efficiencies.
Before we talk about how we’re going to invest dollars, I want us to have a quick family discussion. Last year, the legislature spent tens of millions of dollars that wasn’t in my budget recommendation. 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. I hope that you will agree with me on that approach.
Remember, every interest group has a lobbyist in this Capitol building who wants a piece of this budget during legislative session. It is our job to be advocates for the South Dakota taxpayers.
The biggest component of our state revenues is sales tax. Our sales tax dollars are running approximately $2.5 Million ahead of legislative estimates. Last year, the legislature chose to give the people of South Dakota a sales tax holiday to ease the burden of inflation, which I signed. It is still meaningful tax relief for the people, and I am hopeful that you will consider making it permanent.
A significant portion of our additional revenues comes from unclaimed property receipts – which are now $76 million above estimates. We are treating this as one-time revenue. Over the last 10 years, a typical year brings in between $45 and $65 million in unclaimed property to the State of South Dakota. This amount has dramatically increased.
Our State Treasurer, Josh Haeder, is looking at what other states spend to market unclaimed property to help return money to its rightful owners. He and I will be working together to create a plan that ensures South Dakotans know that their own money can be returned to them.
Our kids deserve the very best educational opportunities available. My budget addresses teachers’ salaries, invests in childhood literacy, and sets our kids up for the careers of the future.
4% to K-12
Let’s talk about the “Big Three,” our schools, our state workers, and our healthcare providers.
National inflation has continued to rise over the past year. State law requires that we increase funding to education at inflation or 3%, whichever is lower. I am recommending we go above and beyond that and provide a 4% increase for education, providers, and state employees.
We have to take care of our people first. We must address our responsibilities first before we consider special interest projects.
By investing 4% in our schools, we will give our school districts the money to pay teachers more. Our teachers are one of the most important factors to set our kids up for a lifetime of success. We’ve all seen the impact that a great teacher can have on our kids – on their lives – on their learning. Studies show that just one year with a great teacher can raise a student’s earnings potential by thousands of dollars a year, and even substantially increase a student’s self-esteem. Great teachers help make that happen. And we can retain great teachers by paying them what they deserve.
Every year when we invest in the Big Three, I advocate that schools put the money directly into teacher salaries. Two years ago, when I requested 6% for the Big Three, I asked schools to invest 6% into teachers. Last year, when we invested 7%, I said the same. Unfortunately, teacher salaries have not kept up. Since I took office, and with this 4% proposal, we will have increased state funding for our K-12 schools by 26.3%. But actual average teacher salaries have lagged far behind. Why should we continue to send money to school administrators and school boards when they do not pass it along to teachers? I am working with my Secretary of Education, Dr. Graves, to bring some ideas to the legislature about how to bridge this gap. Our teachers do incredible things for our kids – and they deserve a paycheck that reflects that.
I want to discuss a challenge that schools are facing across the country. Literacy rates are dropping. In fact, many kids aren’t even attending schools in cities and states around America and right here in South Dakota, too. My budget tackles these challenges head on.
One of the biggest ways that teachers can help a student succeed is by helping them learn how to read. If a child can read by the time they leave 3rd grade, they will have a much higher chance to succeed in their lives. Research tells us that there is a better way to teach kids how to read. We are going to trust the science – the Science of Reading.
My Department of Education has launched a statewide literacy initiative based on the Science of Reading. It includes an emphasis on phonics, which is the proven best way to teach kids how to read. I am dedicating $6 million in one-time funding to continue this effort. Let’s make sure that our teachers are equipped to deliver this proven model for our kids.
If our kids can graduate from high school ready for college or a career, we have set them up for success. When I first became Governor, I decided to make Jobs for America’s Graduates – Or JAG – a priority because of its proven model of helping at-risk students become better prepared for their future. JAG is working. It helps kids who are at risk of not graduating from high school. Because of the skills that these students learn, 94% of kids who participate end up graduating. When I took office, just a few schools in South Dakota were utilizing JAG. In 2020, we established a full-time facilitator to cooperate with schools to set up JAG programs. Today, 13 schools across the state have full-fledged programs with students thriving. These kids are completing high school, going to college, and achieving the career of their dreams.
So why would we stop at just 13 schools? Today, I am proposing that we target available federal dollars to invest in JAG. We will expand JAG to more schools and set many more kids up for a lifetime of achievement.
We educate our kids so that they can learn and be successful. We also educate them so that they can get a good-paying job in the career of their dreams. My proposed budget supports this priority in several ways.
DSU Quantum
First, we have an exciting new opportunity for the jobs of the future. For too long, our kids were moving out of South Dakota to access exciting tech jobs. We’ve changed that. We’ve made tech research South Dakota’s next big industry. Today, I’m announcing the next step in that effort. We will partner with several of our state universities on a Center for Quantum Information Science & Technology and invest $6 million in one-time funds to offer unprecedented opportunities for students at Dakota State University, the School of Mines, SDSU, and USD. Our universities will be on the cutting edge of quantum computing. Quantum computing uses the physical properties of subatomic particles to hold a charge. This new field can do exponentially more than regular computers can. Imagine a task that it would take regular computers 20 years to accomplish – quantum computing could handle that task in a matter of seconds. This Center will combine numerous fields to make tremendous advancements in cybersecurity, agriculture, healthcare, and more. South Dakota will be a leader in emerging technology. This is our fastest growing industry, and South Dakota is making it a reality.
Tech College Equipment
The jobs of the future are not just in cyber and tech. Our kids need good-paying and exciting jobs in a variety of fields. South Dakota has some of the very best tech colleges in America. They are setting our kids up for so many career opportunities. I am proposing $4.8 million in one-time funds for equipment at our technical colleges. This builds on the investments that we have made over the past several years. We are giving South Dakota students the job training they need on the best and most up-to-date equipment right here at home.
Some of our kids will want to join careers in our state workforce. They will be called to public service just like those of us here in this chamber. This budget supports our state employees who do so much for the people of South Dakota. They work every day to make this state safer, stronger, and healthier. My proposal gives a 4% raise to state employees so that we can continue to attract and retain the best and brightest.
If we want to give our kids the very best opportunity to succeed, we need to set them up for a healthy future.
The 4% increase for our providers is an important step to promote good health for our kids, but also for South Dakotans at every age and stage of life. This increase doesn’t pick winners and losers. Inflation is impacting all of our providers, so we should provide them all with relief. Nursing homes will get 4%. Community service providers will get 4%. Developmental disability providers will get 4%, as well. All of our providers are critical. I am sure that you’ll have discussions and debate throughout this budget process about giving more money to this provider or that group. Some of you might support more money for long-term care, or a program that would really help your district, or even a tuition freeze at our state universities, instead of helping some providers. Last year, we made those types of targeted adjustments and worked hard to make sure they were covering the needs of each specialized group. This year, an equal increase is appropriate because inflation increases are hitting all of our providers.
In 2022, we expanded Bright Start to every corner of the state. This program helps us take care of moms and their babies both before birth and after. Bright Start provides first-time moms with personal nursing services through pregnancy until their child’s 2nd birthday. Since that expansion, there has been such high demand for Bright Start that there have even been waiting lists in a few communities. My budget takes advantage of available federal funds to provide this opportunity to more South Dakota moms and their babies, which will reduce and hopefully eliminate these waiting lists.
Foster Care, Guardianships, & Adoptions
Every child deserves an opportunity to grow up in a safe and healthy home. For some, that isn’t possible in their current home. We must support foster care, guardianships, and adoptions for kids who need them. My budget funds additional family treatment foster homes for kids that have more significant emotional or medical needs. We will also provide additional support for families after they choose guardianship or adoptions.
I need to touch on one more aspect of public health. The voters decided that South Dakota public health will include Medicaid Expansion. We will continue to ensure that this program is funded responsibly and efficiently.
We still have one more full year of enhanced federal FMAP dollars, which are helping us to defer the total cost of Medicaid Expansion. But in fiscal year 2026, the full need will be about $64 million. Last year, the legislature provided $11.4 million to get us part of the way there. This year, my budget proposes an additional $18.3 million to cover costs of the program. We will need to continue to address these funding issues in years to come.
Every South Dakotan needs safe roads, bridges, dams, and water infrastructure to live their day-to-day lives.
ARPA Water
We still have about $105 million in remaining federal ARPA dollars from the federal government. As you all know, we didn’t ask for these dollars. The federal government sent them to us. Then they told us that if we sent them back, they’d just be reappropriated to other states. South Dakota has been more responsible than other states in how we utilize these dollars. We worked together to make historic investments in water and wastewater projects. We provided funding for sewer projects attached to workforce housing. We helped extend broadband access to every corner of the state. We replaced LIFEPAK devices in ambulances across South Dakota.
The legislature also set aside $30 million to administer these grants and initiatives. The Bureau of Finance and Management has been able to return $25 million of that in cost savings. They facilitated these efforts far more efficiently than we expected. The Department of Labor is also returning $1 million. With that additional $26 million in available dollars, we have a total of $130.6 million that must be allocated within the next year.
Today, I am proposing that we appropriate $10 million of those dollars to revenue replacement – that is what we are permitted under federal guidance. I am recommending that the remaining $120.6 million be invested into various water efforts.
The bulk of that money, just over $95 million, will go to the Department of Agriculture and Natural Resource’s water programs – the same as the $600 million two years ago. I also believe we should allocate about $25 million to state water and wastewater projects.
Dams
It’s time to improve our infrastructure by repairing dams that need it. Richmond Dam still needs about $20 million in repairs. If we invest $9.7 million in one-time state dollars, School and Public Lands can leverage FEMA dollars for the rest. Similarly, my budget proposes $2 million to repair the Lake Alvin and Newell Lake Dam. The federal government will provide additional funding to complete this project.
BIT
I am proposing $7 million in one-time funds to support IT modernization for our state government platforms. We have to keep investing in our technology to keep our systems protected. Our state systems are attacked by bad actors every day, and we have a responsibility to keep our citizens’ information safe and secure.
By funding all of these infrastructure projects, we avoid having to bond for those needs. That means that we don’t incur debt – debt that our kids will be responsible for paying off in the future.
I want to give a brief update on two projects that are major needs for our state: the men’s prison near Sioux Falls and the women’s prison in Rapid City. Both of these new, modern correctional facilities will keep our communities safer. But they will also address the space needs that we have now – space needs that prevent us from getting those in our custody the help that they need. With these new facilities, we will be able to address behavioral challenges, substance abuse, skills and jobs training, and other areas that will get these individuals out of our prisons and back into society.
Every dollar we set aside now for these projects ensures that the State doesn’t need to issue debt in the future. Between the past two legislative sessions and my proposal for this year, we will have dedicated more than $650 million to these important projects. This will save over $600 million in interest and fees over the next 25 years – that’s $50 million in savings to the taxpayers every year.
Setting aside resources now is the fiscally responsible thing to do. Together, we will ensure our state’s long-term economic health for our kids and grandkids.
Men’s prison
The new men’s prison in Sioux Falls is needed to replace the Hill, which was built before South Dakota was even a state. My proposed budget sets aside $228 million in one-time dollars for this project. We do that by utilizing the $95.7 million in reserves above 10%, as well as the remaining $132.4 million in one-time funds. We will place these dollars in the Incarceration Construction Fund to prepare for construction of this new, safer facility.
Women’s prison
As for the women’s prison in Rapid City, we broke ground at the completion of the design phase. However, 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. We will minimize this need by utilizing federal dollars for water, as well as almost $4 million in remaining land & design dollars. However, that leaves $21 million outstanding. I am proposing that we utilize one-time funds to complete this project.
A strong criminal justice system supports our American way of life. It upholds the rights of our people. That includes the Sixth Amendment right to legal counsel. South Dakota has not guaranteed this right in a coordinated way in the past. This makes it difficult for courts to obtain qualified and willing attorneys to fill this critical defender role. Chief Justice Jensen initiated a summer task force to analyze our current system and recommend solutions. They found a way to do this better – and cheaper.
I am recommending that South Dakota create a statewide indigent defense commission that will oversee a statewide appellate defender office to handle criminal appeals, child abuse and neglect appeals, and habeas appeals. This office would also provide training and mentorship to rural attorneys. If we invest $1.4 million in ongoing funding, we will save the counties a net of up to $600,000 a year.
CONCLUSION
To be sure, there are uncertainties in the world today, but I am excited about South Dakota’s future. We tackle challenges head on, and we do so united. When the COVID-19 pandemic hit us, we didn’t shut down. Rather, we did the exact opposite. We invited people to come enjoy our open spaces and beautiful state. No matter what uncertainties may lie ahead, one thing is certain: South Dakota will budget responsibly and conservatively.
I want to thank my family. I couldn’t do this job without them and their support. I also want to thank my team at BFM for seeing my vision for this budget – for understanding the importance of focusing on the responsibilities of state government and building a budget from that foundation. They’re sitting behind me today – would you all give Commissioner Jim Terwilliger and his team a round of applause for their fantastic work?
I am excited about this budget proposal. It’s a budget that invests in our kids and grandkids – the next generation; in their education, future careers, and health; in infrastructure that helps us avoid debt for the future. This budget proposal makes smart, conservative, common-sense decisions.
It is not the job of the government to do everything for people. The job of government is to empower people to do things for themselves. That’s the ideal that America was built on.
I am proud to present a budget that prioritizes our kids and puts people first. “Under God, the People Rule.” We do not come to work every day for ourselves. We come to work to serve the people that make this state great.
I hope that South Dakota can continue to be a shining example to the rest of the nation. We put people over programs. The people of South Dakota are strong. They are hardworking. And they inspire me each and every day. I pray that we can deliver a budget that they can be proud of – a budget that puts them first.
God bless you, and Merry Christmas.
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