Three weeks ago, Governor Kristi Noem threatened to veto the budget if legislators did not enact her number one priority of this Legislative Session, repealing South Dakota’s unusual food tax. When legislators ultimately rejected the food-tax repeal and instead approved a reduction of the general sales tax rate from 4.5% to 4.2%, she called legislators liars for calling that tax cut a tax cut and said the approved FY2024 budget, Senate Bill 210, “seems like a really irresponsible budget“.
South Dakota has long been a model of fiscal responsibility. Our taxes are low, we have a AAA credit rating, we balance our budget, and our fiscal reserves are strong. With Senate Bill 210, we continue this responsibility by providing a budget that is balanced and will improve the lives and wellbeing of the people of South Dakota [Gov. Kristi Noem, signing letter for SB 210, 2023.03.20].
The Governor thanks the Legislature for “funding the vast majority of my priorities” but chides the Legislature for certain deviations from her fiscal blueprint:
As is always the case, the legislature can make changes to my budget, as well. This year, the Joint Appropriations Committee estimated that our total revenues for FY2024 will be about $87 million higher than my Bureau of Finance and Management recommended in my budget. The legislature chose to spend this $87 million by increasing provider reimbursement from my recommended 90% to 100%, freezing tuition at South Dakota’s public universities and technical colleges, allocating an additional $11.4 million for future Medicaid expansion costs, and other items. I agree that our economy is strong, and I am responsible for ensuring that additional spending in our state’s budget is sustainable into the future. I’ve put significantly more funding into our reserves in recent years. Only time will tell if it was a wise decision to spend those additional dollars.
The legislature also deviated from a tradition of funding equal inflationary increases for K-12 education, healthcare providers, and state employees. While I understand the motivation behind this change, this sets a bad precedent and risks one or more groups being left behind in future years. I hope that the legislature will return to this longstanding tradition next year [Noem, 2023.03.20].
Noem’s letter does not mention her rejected food-tax repeal or the 0.3-percentage-point reduction of the sales tax. That tax cut, House Bill 1137, remains on the Governor’s desk. Evidently it was easier for her to spin the FY 2024 budget in her favor than it is for her to write up similar revisionism to cast the Legislature’s preferred tax relief as a victory for her administration and her agenda “to maximize freedom and liberty for the people of the state“.