$7.3 billion South Dakota budget funds $27 million increase, new programs and more

PIERRE — The 99th legislative session has balanced the budget for the 135th consecutive year. Lawmakers adopted the $7.3 billion fiscal year 2025 state budget on Thursday with a vote of 61-9 in the House of Representatives and a vote of 32-2 in the Senate.

The budget is up $27 million from Gov. Kristi Noem’s ask of $7.27 billion in her December budget address.

"When I started this year out as chair, I told my committee this year, far be it from me to be the guy that breaks the streak," of balancing the budget, Rep. Mike Derby, R-Rapid City, told the House ahead of the general budget vote.

Included in the 2025 fiscal year budget are 4% increases for state employees, educators and Medicaid health providers. The state will also fund a new office and commission for public defenders, two new judges in the Second Circuit Court and continue funding the construction of the new women’s prison in Rapid City and the future men’s prison in Lincoln County. On top of that, various water and waste water infrastructure projects will be funded with the remainder of the American Rescue Plan Act dollars.

State universities and technical colleges will also benefit from a tuition freeze for the third year in a row.

The state can afford the budget increase because ongoing revenue sources are expected to be high over the next fiscal year, despite last year’s overall sales and use tax cut from 4.5% to 4.2%, which will sunset in 2027. Lawmakers adopted an ongoing revenue estimate of $2.42 billion for FY2025 in mid-February of state funds. The remainder of the revenue sources come from one time receipts, or from federal and other funds.

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Republican leaders in the Senate and House of Representatives lauded the budget process and the funding coming down the pike for education.

House Majority Leader Will Mortenson described the Legislative session as a “banner year for education” that focused on the future.

“This is how we build a strong South Dakota for the next 30 years,” the Fort Pierre Republican said, speaking to the tuition freeze. “Getting these folks to stay here, getting our talented, hardworking young people to stay here…. This is a real needle mover and one of the strongest levers to shape policy that we can pull.”

By keeping young people in the state for their education and eventual employment, Sen. Casey Crabtree, R-Madison said it would help solve the workforce shortage problem the state is facing.

“The best way to address that is by making sure that we keep our kids and our grandkids here... we can also have them enjoy the quality of life we love here so much,” he said. “So if we can afford [the tuition freeze], I think we should continue to do that.”

Democratic leadership, while appreciative of the Big Three budget increases and the tuition freeze, were a bit more subdued about the adopted budget. They noted the Legislature’s inability to pass funding for a summer EBT program for school-aged children.

“We needed to fund that program,” said Rep. Oren Lesmeister, D-Parade. “We had the money from the federal level to do it. The Governor chose not to, or even bring it forward. Them funds would’ve been miles and miles for the children of South Dakota.”

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Both parties were wary of the future of the state’s revenue since a potential ballot measure to remove the state sales tax on food is currently gathering signatures.

Sen. Lee Schoenbeck, R-Watertown, said if “that consumption tax passes on the ballot, you take all that money out of our budget and you're gonna have a train wreck.”

Lesmiester, the House Minority Leader, said the future legislature, if the ballot measure passes, will have to work to figure out how the state will fund its obligations.

“We can’t do both,” he said. “This budget cannot survive by having both cuts in place. If this measure passes, they're going to have a hard task in figuring out what they're going to raise for taxes.”

Sen. Reynold Nesiba, D-Sioux Falls, added that he was confident the measure, if put on the ballot, would pass since the Legislature has failed to cut the sales tax on food.

Noem has 14 days to approve the budget.

This article originally appeared on Sioux Falls Argus Leader: South Dakota Legislature adopts $7.3 billion FY2025 state budget