Revenue for the state of South Dakota has taken a multi-million dollar dive in the last three months. Monday, Governor Mike Rounds gave Sioux Falls business leaders a glimpse at the bleak state budget that will be written in the next few weeks. He says that state tax revenue is down and costs are up, creating a tough set of circumstances for the state.

Rounds says that the state has collected $33 million less in taxes and revenue in July, August and September this year compared to the same time last year. 

"We are having several challenges in writing the budget over the next six weeks that the legislature will start considering in January," Rounds said.

Sales tax and video lottery revenues are both down five percent, bank franchise tax and insurance tax are down even more.

"Even though South Dakotans are optimistic they aren't spending money that generates enough sales tax revenues for our increased expenses."

Rounds says its those increased expenses that will really hurt the state next year. Six thousand more South Dakotans qualify for Medicaid this year, which helps pay the medical bills for low income families. The state will have to pay for those families as part of the federal program.

"So, the combination of a potentially flat or slow growth economy and higher Medicaid costs will cause another tight budget year in the state government spending when I deliver my budget proposal to the Legislature on December 8th," Rounds said.

For an example of just how fast Medicaid costs are increasing for the state, between 2004 and 2008 South Dakota saw had six thousand more people qualify for Medicaid over that four year period. The state has seen that same increase of six thousand people just in the last year.