Noem signs $7.4 billion budget

March 21, 2023

PIERRE, S.D.–Gov. Kristi Noem signed the state’s fiscal year 2024 budget into law Monday, providing for increased funding to the “Big Three” state obligations and 100% tuition coverage for National Guard members, among other funding decisions.

Makenzie Huber with South Dakota Searchlight ( reports Noem had made veiled threats in recent weeks to veto the budget because legislators chose to pursue a different tax cut than the one she promised South Dakota voters during her reelection campaign. The Legislature adopted a temporary reduction in the overall state sales tax rate, rather than Noem’s proposed repeal of the state sales tax on food.

In a letter to legislators about her approval of the budget, Noem did not mention the sales-tax reduction bill, which she still has under consideration with less than a week until legislators return to Pierre for consideration of her vetoes.

But Noem’s letter did express skepticism about the sustainability of the spending levels that legislators adopted.

Noem’s recommended budget would have increased funding for the “Big Three” — education, state employees and Medicaid providers — by 5% for education and state employees, while increasing reimbursement rates for some Medicaid providers to 90% of their costs.

Instead, legislators increased funding by 7% for education and state employees, and set a 100% reimbursement rate for community support providers that heavily rely on government funding, such as nursing homes. Other Medicaid providers, such as hospitals, are set to receive a 5% increase.

“I’ve put significantly more funding into our reserves in recent years,” Noem said in her letter. “Only time will tell if it was a wise decision to spend these additional dollars.”

The budget for the 2024 fiscal year includes $7.4 billion in total spending, up 8.8% from the last legislative session’s fiscal year 2023 budget.

Noem added that the staggered increases in funding for the “Big Three” – rather than what she described as “a tradition of funding equal inflationary increases” – set a “bad precedent” because one or more of the groups could be “left behind” in future budgets.

The budget also:

Provides 100% tuition assistance for National Guard members to attend technical colleges and public universities.
Freezes tuition at South Dakota public universities and technical colleges.
Allocates $11.4 million for future Medicaid expansion costs.

“I appreciate the Legislature for recognizing that it should fund my administration’s priorities to maximize freedom and liberty for the people of the state,” Noem said in a written statement.

While the Legislature did pass some of Noem’s budget recommendations, lawmakers did not support much of Noem’s “Stronger Families” initiative, which unsuccessfully proposed creating a 100% paid family leave program for state employees that private businesses could also buy into, creating scholarship vouchers for children in foster care, and eliminating the state sales tax on groceries.

Legislators passed instead an overall reduction in state sales taxes from 4.5% to 4.2% with a sunset date in 2027. In response, Noem repeatedly threatened to withhold support for the budget, without using the word “veto.”

“I still believe that the best budget option for our state’s future is the one that I presented in December, including the elimination of the sales tax on groceries,” Noem wrote in a press release earlier this month. “And in the coming weeks, I will have to decide whether the budget that has been presented to me is worthy of my signature.”

When asked what Noem’s signature on the budget means for the tax cut bill, spokesman Ian Fury told South Dakota Searchlight that Noem’s letter “speaks for itself.”