PIERRE, S.D. (KELO) — Governor Kristi Noem told a joint assembly of the South Dakota Legislature on Tuesday that South Dakota looks to have $310 million in revenue growth for the coming budget year and can afford the $102 million cost of repealing the state 4.5% sales tax on groceries.

The Republican governor however made no mention of a competing proposal from Republican lawmakers, who want to eliminate the first $100,000 of taxable value from owner-occupied homes and fill the gap with increased state aid to K-12 school districts.

Noem instead called for a 5% increase in funding for state aid to K-12 schools and 5% percent more of state funding for state government employees and for providers of Medicaid services. State law calls for public schools to normally get no more than 3% or the rate of inflation, whichever is less.

The School Administrators of South Dakota group’s executive director hoped to hear something larger than 5%. “This percentage is a bit below where the CPIw (inflation) is currently running. We will have our work cut out for us to close that gap,” Rob Monson said on Twitter.

Noem also asked for targeted increases to help community healthcare providers and to help make state government jobs more attractive.

And she laid out plans for building new prison space for women at Rapid City and getting started on a new men’s prison, modernizing state government’s 35-year-old accounting system, expanding state government employees’ family-leave to 100% and starting a new family-leave program for private business.

Many of the one-time costs would be covered by using $213 million of one-time funds and then tapping some of state government’s $423 million of reserves over the next four years.

“I love South Dakota. It is a beacon to the rest of the nation for what is possible when we follow conservative principles and fiscal responsibility. We have become a success story because we keep government limited and live within our means,” Noem said.

The governor said the decision by South Dakota voters to expand Medicaid services would cost state government $13 million and the federal government $53 million the first year, but state government’s obligation would gradually rise by year five to more than $80 million. The expansion also would require another 68 full-time employees of state government, according to a briefing paper.

The governor’s general-fund budget recommendation is $2,190,378,155. That is $207,723,908 more than what the Legislature appropriated for the current fiscal year that runs through June 30. Her total budget recommendation including federal and other funds is $7,241,236,495. That is an increase of $1,465,648,054.

The gallery overlooking the House chamber was full. Some of the those on hand wore T-shirts or other apparel signaling membership in Convention of States. The group, which rallied before the speech, became involved in some Republican legislative primaries and has tried for years to get South Dakota lawmakers to align with their call for a national constitutional convention.

South Dakota lawmakers will spend the next month discussing her proposal and their ideas with one another and with their local citizens, and then return to the Capitol for the 2023 session that starts January 10 and runs 38 working days.

“The governor’s proposal is a good starting point for our appropriators as we collaborate with the House to take care of South Dakota with a balanced budget,” the incoming Senate Republican leader Casey Crabtree of Madison said in a statement afterward. “I’m confident we can reach consensus on what is best for our citizens.”

Republicans enter the 2023 session with a 31-4 advantage over Democrats in the Senate and 63-7 advantage in the House.

Noem has been busy raising money and giving speeches outside South Dakota to conservative audiences, raising speculation that she might run for U.S. president or vice president. She used part of her speech Tuesday to criticize U.S. President Joe Biden, a Democrat, for rising prices.

“Eliminating the sales tax on groceries is the biggest way that my budget helps South Dakotans tackle the challenge of Biden’s inflation and protect hard earned money. Unfortunately, food costs have risen by far too much. And families are struggling to make ends meet, as a result,” she said.

She spoke about the “rapid increase” of the costs of milk, ground beef, eggs and other groceries. “Even with South Dakota having the best personal income growth, family budgets are not keeping up. We can grow incomes even more by letting people keep more of their own hard-earned money in their pockets,” Noem said.

She didn’t mention the billions of dollars in federal COVID-19 aid that flowed to South Dakota and other states from Congress during the presidencies of both Republican Donald Trump and Biden.

“Gas prices continue to increase because of President Biden’s energy policies. New regulations and taxes, a lack of utilization of American energy sources, and a dwindling reserve indicate this trend will continue,” Noem said.

“Senior citizens, working parents, single moms – every South Dakotan is paying more for food, gas, and to heat and cool their homes. Their family finances are struggling under the strain. Over the last 10 years, Americans have saved 7 to 8 percent of their monthly income on average. During the pandemic, that jumped to 20 to 30 percent. Today, they are saving less than 4 percent because almost every dollar they make is needed to pay their monthly bills. They are no longer saving for college or to buy a new house or a new car. They are just barely getting by. 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.

The incoming Senate Democrats leader Reynold Nesiba of Sioux Falls responded that the governor’s 5% cost of living adjustment amounted to a 3% wage cut because inflation has been 8%. He said they took a 2% wage cut last year when the Legislature approved Noem’s proposal of 6%. Nesiba wants them to get 10%.

Nesiba also called for state government to subsidize childcare. He said Democrats were pleased the governor was “claiming three of our priorities as her own — cutting the sales tax on food, paid parental leave, and 100% tuition benefits for our (National) Guard members.” 

The governor’s press secretary took issue with Nesiba’s math. “Over the last 2 years, inflation has been 10.5%. Last year, Governor Noem provided a 6% inflationary increase, and this year, she’s recommending a 5% inflationary increase. 11% is bigger than 10.5%. @ReynoldNesiba is wrong here,” Ian Fury tweeted.

One item not mentioned in the speech was $6,250,000 in one-time general funds to complete the reconstruction of 37 miles on the Sisseton Milbank Railroad. The money would be the state’s support for a Consolidated Rail Infrastructure and Safety Improvement grant request from the Federal Railroad Administration.

The governor’s entire speech is available here. Information from the state Bureau of Finance and Management about the budget proposal is here.