Governor Kristi Noem put S.D. surplus in second reserve

Capitol News Bureau

PIERRE, S.D. (KELO) — For the first time, all of South Dakota state government’s record $85.9 million surplus from the budget year that ended June 30 was put into a second rainy-day account.

The main budget-reserve fund was already at its legal limit, according to Governor Kristi Noem’s finance commissioner, Liza Clark.

Clark said Tuesday that the second account, known as the general revenue reserve fund, now has a balance of $132.2 million after the $85.9 million transfer.

She said the budget reserve fund meanwhile has a balance of $169.6 million.

Together, state government’s budget reserves total $301.8 million. That would be equal to 16.6% of total general-fund spending for the 2021 budget year ending June 30.

State law says the finance commissioner at the end of each budget year shall transfer unobligated reserves into the budget reserve fund.

The law notes, “In no event shall the cash balance in the budget reserve fund be greater than ten percent of the general fund appropriations from the general appropriation act for the prior fiscal year.”

That is why, Clark said, she put the $85.9 million surplus into the general revenue replacement fund. She followed a second state law about the process for when the budget reserve fund is full.

The budget reserve fund grew by about $20 million because federal COVID-19 aid could be substituted as funding for some state government salaries.

The Legislature’s Appropriations Committee meets Wednesday at the Capitol. Clark’s office will present an explanation to the lawmakers.

The state law that re-designated the property tax reduction fund as the general revenue replacement fund in 2015 gives the finance commissioner the authority to transfer moneys from the replacement fund to the general fund to balance the budget “due to an unforeseen revenue shortfall.”

The Legislature meanwhile has the authority to tap the budget reserve fund through special appropriations.

Here’s a look at how Noem and her predecessor, Dennis Daugaard, handled the past decade of surpluses.

July 2011 — In Dennis Daugaard’s first year as governor, state makes full refund of a $26.1 million overpayment of bank franchise tax rather than transfer money to the budget reserve fund. The fund’s balance remained $43.4 million. The balance in the property-tax reduction fund remained at $63.6 million. Total reserves stood at $107 million, which was 9.3% of general fund spending.

July 2012 — State spent $20.2 million during the year from budget reserve fund on emergency flood and mountain pine beetle issues, then transfers $47.8 million back into budget reserve fund after the June 30 end of the 2021 fiscal year. The fund’s new balance was $71.1 million. The balance in the property tax reduction fund remained at $63.6 million. Total reserves rose to $134.7 million, which was 11.2% of general fund spending.

July 2013 — State transfers $24.2 million surplus to budget reserve fund. The fund’s new balance was $95.3 million. The balance in the property tax reduction fund remained $63.6 million. Total reserves rose to $158.9 million, which was 12.3% of general fund spending.

July 2014 — State transfers $9.9 million surplus to budget reserve fund. The fund’s new balance was $105.2 million. The balance in the property tax reduction fund dropped to $44 million. Total reserves fell to $149.2 million. which was 10.3% of total spending.

July 2015 — State transfers $21.5 million surplus to budget reserve fund. The fund’s new balance was $126.7 million. Legislature in the 2015 session had re-designated the property-tax reserve fund as the general revenue replacement fund. The balance in the renamed revenue replacement fund was $44 million. Total reserves rose to $170.7 million, which was 12.3% of general fund spending.

July 2016 — State transfers $14.1 million surplus to budget reserve fund. The fund’s new balance was $113.4 million. The general revenue replacement fund’s balance remained at $44.0 million. Total reserves fell to $157.4 million, which was 10.8% of general fund spending.

July 2017 — State transfers $7.8 million surplus to budget reserve fund. The fund’s new balance was $121.3 million. The general revenue replacement fund’s balance remained at $44.0 million. Total reserves rose to $165.3 million, which was 10.7% of general fund spending.

July 2018 — State transfers $16.9 million surplus to budget reserve fund. The fund’s new balance was $132.4 million. The general revenue replacement fund’s balance remained at $44.0 million. Total reserves rose to $176.4 million, which was 11.1% of general fund spending.

July 2019 — In Kristi Noem’s first year as governor, state transfers $19.4 million surplus to budget reserve fund. The fund’s new balance was $145.1 million. The general revenue replacement fund’s balance remained at $44.0 million. Total reserves rose to $189.1 million. The reserves as a percentage of general fund spending wasn’t disclosed.

July 2020 — State transfers $19.1 million surplus to budget reserve fund. The fund’s new balance was $149.4 million. The general revenue replacement fund’s balance remained at $44.0 million. Total reserves rose to $193.4 million. The reserves as a percentage of general fund spending wasn’t disclosed.

July 2021 — State transfers entire $85.9 million surplus to general revenue replacement fund, increasing its balance to $132.2 million. The budget reserve fund balance meanwhile rose to $169.6 million. Total reserves climbed to $301.8 million, which was 16.6% of general fund spending.

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