Governor Larry Rhoden is celebrating the fact the he took $69 million more of your money this fiscal year than the state needed:
Today, Governor Larry Rhoden announced South Dakota closed the state fiscal year 2026 budget with a surplus of $69 million.
“South Dakota’s robust economy is driving steady revenue growth, moving our budget in an even stronger direction,” said Governor Larry Rhoden. “We keep our taxes very low and ensure we have the highest return on each dollar invested. We’re setting an example for the nation of good stewardship of taxpayer dollars by doing things the right way, the South Dakota way.”
The surplus included $30 million in revenue above estimates. It also includes $39 million in spending reversions, meaning state agencies spent less than they were budgeted, a sign of strong fiscal responsibility.
Sales tax revenue growth accounted for $17 million of the surplus, a strong indicator of a growing economy. In FY2026, Sales tax grew 6.6% compared to fiscal year 2025, significantly higher than historical average growth of 4.7%. The largest area of unspent funds came from the Department of Social Services, totaling $32 million [Office of the Governor, press release, 2026.07.13].
Democratic budgeter Rep. Erik Muckey (D-15/Sioux Falls) is not celebrating:
Budget committee member Rep. Erik Muckey, D-Sioux Falls, is “heartened” by the sales tax revenue increase.
“But the message isn’t about the surplus,” Muckey said. “The message is we’ve clearly had opportunities to make a difference, and did we leave money on the table to accomplish that?”
He pointed to the Department of Social Services’ large reversion, “particularly at a time when addiction and behavioral healthcare are seeing significant needs,” and at a time when the state needs funding for programming at a prison under construction in Sioux Falls.
State leaders broke ground on a $650 million men’s prison in the state’s largest city earlier this year. It’s needed, Muckey said, “but not without accompanying programming in terms of rehabilitation, recidivism and so on.”
Muckey has also questioned the Department of Social Services in recent years over its management of Temporary Assistance for Needy Families, a federal-state program. It’s used in South Dakota to assist families with children who need financial support because of the death of a parent, an absent parent, or the unemployment or physical or mental incapacity of a parent. Caregiver participants are required to work, search or train for a job.
Earlier this year, lawmakers partially restored cuts to the program that the department made last year.
“The same question keeps coming up,” Muckey said. “Why are we trimming off the edges of programs that are really having an outstanding impact on people in South Dakota and are known for their impact, while we then turn around and say we don’t really need this money, we can just send it back?” [Meghan O’Brien, “Governor Celebrates Surplus as Democratic Lawmaker Says State Missed Opportunities to Help People,” South Dakota Searchlight, 2026.07.13]
A surplus is better than a deficit. But South Dakota continues to lock up a lot of money that could be put to actual use stimulating the economy, either through investments in public services or through tax relief that South Dakotans can invest themselves in groceries, home improvement, and other needs.