Shock: Rhoden's Bold No-Increase Decision Leaves 'Big 3' on Edge—What It Means for YOU!

In his first budget address since taking office earlier this year, South Dakota Governor Larry Rhoden unveiled a spending plan that signals a shift from the revenue surpluses the state enjoyed in recent years to a more constrained fiscal environment. The governor's budget proposal, addressed to the state Legislature, reflects a reality where traditional funding for core state responsibilities—including K-12 education, health care, and state employees—will see no increases.

Rhoden's proposal outlines a total spending plan of $7.44 billion for the upcoming fiscal year, which includes $2.51 billion from state general funds, $3.14 billion in federal funds, and $1.79 billion from other sources. Notably, there are no proposed pay raises for the approximately 14,500 state employees, though the governor did suggest that health care plans for these employees should not incur premium increases for the next fiscal year.

This budget comes as South Dakota's primary revenue source, the sales tax, has been in decline, experiencing drops of 2.6% in the fiscal year ending June 2024 and 0.6% in the fiscal year ending June 2025. Despite this, Rhoden noted a recent uptick in sales tax revenues in the first three months of the current fiscal year, indicating he anticipates growth of approximately $60.3 million in sales tax and $58.7 million in overall revenue next year.

"So when folks try to tell you that slower sales tax growth means our economy is weak, don’t be fooled. We’re in great shape. We just can’t spend money we don’t have."
– Governor Larry Rhoden

Despite the optimism, Rhoden acknowledged that revenues are currently lagging 8.2% behind legislative estimates. This decline is partly attributed to a downturn in the agricultural sector, with prices for key crops like soybeans, corn, and wheat on the decline.

Public Safety and Infrastructure Priorities

Among the highlights of Rhoden's budget is a significant investment in public safety, totaling $13.2 million for 133 full-time employees at a new women's prison set to open in Rapid City in 2026. This facility will focus on extensive drug treatment programming. Additionally, the governor proposed $2.4 million in state funding to leverage $38 million in federal funds aimed at expanding the South Dakota National Guard Readiness Center and constructing a new vehicle maintenance facility in Sturgis.

Rhoden also laid out plans for infrastructure improvements, including $15 million in zero-interest loans for airport enhancements in Sioux Falls and Rapid City, driven by increasing passenger counts. Furthermore, he proposed $6 million for a new advanced manufacturing center at Southeast Technical College in Sioux Falls, alongside $4.3 million for equipment upgrades across the state’s four technical colleges.

In a significant move, the governor is seeking to restore $16.4 million to the Department of Human Services, following a previous cut of $22 million, which he deemed "too steep." Rhoden is also looking to modernize state technology systems, proposing an expenditure of $10 million to rectify outdated equipment.

Rhoden's budget sets aside $14 million in non-specific funding, allowing lawmakers the flexibility to allocate these funds based on emerging needs during the legislative session set to commence on January 13.

As South Dakota gears up for a tighter fiscal landscape, the implications of Rhoden's budget will be felt across various sectors. With no increases in funding for education and healthcare, stakeholders are left to grapple with the challenges of maintaining services amid financial constraints. As the state's economy continues to recover from the impacts of the pandemic, it remains to be seen how these budgetary decisions will shape the future for South Dakotans.