SIOUX FALLS, S.D. (KELO) — During last year’s budget address, South Dakota Gov. Kristi Noem proposed a 6% raise for state employees, saving 14% of the state budget in reserves, $200 million for workforce housing and another $100 million for child care among other priorities.
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.
Noem will give her annual budget address in front of lawmakers at 1 p.m. CST Tuesday in Pierre. KELOLAND’s Bob Mercer looked at how Noem wants to exempt most grocery items from the state 4.5% sales tax, while some Republican lawmakers are considering a reduction in property taxes instead.
6% raise to state employees
Last year, Noem recommended a 6% pay increase for state workers along with 6% increases in state aid for education and 6% increase for health care providers.
“This 6% increase is unprecedented, but also necessary,” Noem said on Dec. 7, 2021. “Many of these positions in these three areas are not keeping pace with their counterparts in the private sector or other states.”
That 6% raise to state employees was supported by lawmakers on the Appropriations Committee and both chambers.
South Dakota Bureau of Human Resources Darin R. Seeley told lawmakers state employees’ median wage is 8.9% less than the public and private market average in South Dakota and six surrounding states. In 2013, the number was as high as 17.3%, Seeley said.
Eric Ollila, with the South Dakota State Employees Organization, told KELOLAND News last year’s 6% raise was absolutely necessary with inflation above 7% in December 2021. The latest inflation report from the Consumer Price Index shows inflation at 7.7% in October 2022.
Ollila said state employees want to see a 10% cost-of-living adjustment (COLA) in the next state budget.
“We’d like to see 10% COLA for state employees, health care and K-12,” Ollila said. “10% is what we need to stay in the game, to stay at level.”
Ollila also said parity pay and career banding for certain in-demand positions like nursing, engineers and attorneys is needed for state employee compensation.
“They are not just numbers, they are not FTEs (full-time employees). They are our citizens getting the job done for us,” Ollila said.
State budget reserves
During last year’s state budget address, Noem brought up the idea of the state turning down federal government tax money coming into the state as tax revenue. She described the billions of dollars the federal government sent to South Dakota during the COVID-19 pandemic in the past three years as “a giant handout from Washington, D.C.”
“Giving that money back means that money goes to another state — to California, to New Jersey, maybe Illinois, Michigan, or Minnesota. That money is not going back into South Dakota taxpayers’ pockets,” Noem said last year.
State law requires budget surplus money to transfer to the state government’s reserve funds, which totaled $422.6 million. That number is equal to 20% of the 2022 Fiscal Year budget.
“Today, with inflation rising to unimaginable levels, our nation’s future is even more uncertain. That is why I am proposing we save more than 14% of our budget in reserves,” Noem said during last year’s budget address.
This year’s budget surplus was a record-setting $115.5 million, up from $85.9 million in 2021. The state has typically averaged anywhere from a low of $7.9 million in 2017 to $19.1 million in 2020 and $19.4 million in 2019.
In late July, the South Dakota Freedom Caucus said the nearly half a billion dollars in rainy day funds was a sign of “over-taxation and reckless spending priorities by the Noem administration.”
Lawmakers in the Freedom Caucus group said they plan to make addressing the reserve funds a legislative priority in 2023.
$200 million for workforce housing not used
In her address last year, Noem said more people were moving to South Dakota and playing a role in a tight housing market. She proposed a $200 million investment in workforce housing grants.
“It isn’t the government’s job to solve this problem. Instead, we need to find ways to help the free market to solve this problem,” Noem said about housing issues in last year’s speech.
The program that was supposed to begin disbursing funds for housing infrastructure in summer 2022 was put on hold with Gov. Noem’s office blaming lawmakers and lawmakers blaming Noem’s office.
South Dakota News Watch reported on how the delay for the housing program centered around who would (either the Governor’s Office of Economic Development or the South Dakota Housing Development Authority) disburse the funds and what type of housing the program would support.
“The SDHDA Board of Commissioners determined that SDHDA could not appropriately administer the transferred funds without further clarification by the South Dakota Legislature,” Lorraine Polak, director of the South Dakota Housing Development Authority, told South Dakota News Watch.
Polak said the confusion on the money came from the final bill and whether money could be used for housing for low-income or moderate-income residents.
$100 million for child care
Last year, Noem said child care, along with housing issues, was causing workforce problems. She said the child care industry needed to be studied and fund scholarships to train skilled child care workers.
“Through the use of federal funds, the Department of Social Services will use $100 million to provide grants for startup and one-time costs for new day care centers,” Noem said in last year’s budget address. “This will allow high-quality child care facilities to open and expand around the state. And it will help existing registered facilities stay open.”
For Fiscal Year 2022, DSS received $182 million in federal pandemic grants. The largest chunk was $126.9 million that went for child care aid. More than $32 million has been sent from DSS to state-registered and licensed child care providers. You can view all the child care payments on the open.sd.gov website.
Non-registered or licensed child care providers can now register on the Department of Social Services website.
DSS had more options on how to spend $38 million in ARPA discretionary funds. The deadline for that money isn’t until September 2023 and September 2024.
Many people in the child care industry said one-time federal money wouldn’t fix the broken system. The Sioux Falls Childcare Collaborative hired two coordinators to develop solutions in the Sioux Falls area.