PIERRE, S.D. (KELO) — Lawmakers and citizens alike will see what South Dakota’s budget may look like after Gov. Kristi Noem presents her priorities during the annual budget address. 

Fresh from a re-election victory where she received 62% of the vote, Noem has said her budget proposal will include an elimination of state sales tax on groceries. You can find budget information on the Bureau of Finance & Management website.

On Tuesday, Noem said the biggest way her budget could help South Dakotans tackle inflation is by eliminating the sales tax on groceries.  A budget brief from Noem says local sales tax would not be impacted by the proposal. 

“We need to give them relief and we can do so by giving them a $100 million tax cut by eliminating the sales tax on groceries,” Noem said on Tuesday. 

She says there will be $310 million in permanent revenue growth and the state will still have $208 million after the grocery tax cut.

“My team and I are fully confident that this is the right tax cut at the right time. And I want you’re help to get it done,” Noem said.

The budget brief says the food sales tax cut would eliminate the tax on candy and soda as well. 

“We shouldn’t choose what our citizens do or don’t eat, and this will make implementation easier for retailers and businesses across the state,” the budget brief says.

Last year, Noem recommended a 6% raise for state employees and state aid for education. This year, she said she is recommending a 5% increase for state employees and state aid for education.

Noem will extend paid family leave for state employees and she’s encouraging more businesses to buy into a new paid family leave opportunity. 

She said paid family leave for state employees will cost $3 million in ongoing revenue.

For the South Dakota National Guard, Noem wants to cover 100% of a guard member’s tuition if he or she attends a Board of Regents school. 

Spending for projects, prisions

Medicaid expansion passed as a constitutional amendment on the November ballot. Noem said it will be implemented and she believes medicaid expansion will cost more than $80 million by year five. 

“Our goal in policy should be to give people the opportunity to have more freedom in healthcare options, not government-run programs,” Noem said. 

Noem said reimbursement rates for services like nursing homes have fallen too far behind. She’s recommending $22 million in targeted increases to reimburse at least 90% of the reasonable rate for the providers.

Noem said she’s asking for $25.6 million in one-time funding to help finish projects that have already started. She said inflation has made those projects come in over budget. 

The breakdown is $13 million for the State Public Health lab, $7 million to Board of Regents projects and $6 million to the Dakota Events CompleX at the State Fair.

Noem said the state needs a new women’s minimum-security prison in Rapid City. She said the cost will be $60 million that can be covered by the Incarceration Construction Fund created by the legislature.

Noem said $27 million from the Incarceration Construction Fund and $25 million will come from one-time general funds to address problems with the state penitentiary. 

Sales tax revenue growth

Noem said South Dakota continues to bring in incredible amounts of sales tax revenue. 

“We have $423 million in reserves,” Noem said. “Historically, our goal is to keep 10% in these funds. Since I’ve been Governor, we have almost doubled that number. We ended last year with a record-breaking budget surplus of $115.5 million.” 

She said the people in South Dakota gave lawmakers a mandate on the Nov. 8 election.

Noem said sales tax is running $81.8 million ahead of estimates. 

Noem says a recession is on the horizon and she will keep revenue projections very conservative. 

Noem said the biggest way her budget could help South Dakotans tackle inflation is by eliminating the sales tax on groceries. 

Noem started her speech by giving thanks to the teams with the Bureau of Finance & Management and the Department of Revenue. The group received a standing ovation from lawmakers and the crowd in the House gallery.

“The last four years, we have made South Dakota the strongest state in America,” Noem said. “We lead the nation in almost every single economic metric. Our personal income growth is number one.” 

Noem said new housing development and new business applications have been the best in America. 

Noem says there’s less than 700 people in the state on unemployment.

Noem said South Dakota’s government is small, but effective. 

Noem said no nation in history has ever survived the tax burden and spending spree that this White House is proposing.

Democrats respond

Senator Reyond Nesiba (D-Sioux Falls) issued a statement sent by the South Dakota Democratic Party in response to Noem’s budget address. 

“Democrats are pleased that the Governor is claiming three of our priorities as her own—cutting the sales tax on food, paid parental leave, and 100% tuition benefits for our guard members,” Nesiba said in an emailed statement. “We look forward to working with our Republican colleagues to bring these into reality.”

Nesbia said South Dakota continues to face a child care crisis and Noem’s address did not look at the topic.

Nesbia was also critical of the 5% cost-of-living adjustment for state employees, teachers and health care providers.

“In a world of 8% inflation the Governor’s proposed 5% cost of living adjustment means that teachers, state employees, and providers are having a 3% real wage cut imposed on them,” Nesiba said. “Last year they had a 2% real wage cut imposed. We need 10% across the board increase to simply allow essential workers to be protected from inflation whose existence the Governor mentioned multiple times in her speech.”

12:55 p.m.

KELOLAND’s Bob Mercer reports many people in support of a Convention of States are in attendance in the House gallery ahead of Noem’s speech.

12:45 p.m.

Lawmakers are starting to gather in the House chamber ahead of Noem’s budget address.

9 a.m.

In a news release, Noem said her 2022 budget address will address her proposal for the remainder of fiscal year 2023 and fiscal year 2024. 

“Governor Noem will discuss South Dakota’s best economy in America and continued record revenues,” a news release about the budget address said.

KELOLAND’s Bob Mercer looked at why some Republican lawmakers are considering a reduction in property taxes instead. 

Also ahead of this year’s budget, KELOLAND News looked back at where some of the money discussed during last year’s budget address has gone one year later.