S.D. sales-tax revenue grew 14% during past 12 months, amid billions of federal coronavirus aid

Capitol News Bureau

PIERRE, S.D. (KELO) — One of the reasons the South Dakota state government was able to post a record $85.9 million budget surplus this week was that its largest source of tax revenue had a record year, too.

Revenue from the state’s 4.5 percent sales and use tax grew by roughly 14% during the budget year that ended June 30, state economist Derek Johnson said Wednesday.

“And that is historic growth in sales tax,” he told the Legislature’s Appropriations Committee.

For comparison, South Dakota saw a more-typical growth rate of 4.6%-plus during the previous year.

Sales plunged in April and May 2020 as the coronavirus pandemic took hold in South Dakota, and that was reflected in much smaller collections in May and June 2020.

But commercial activity jumped in July 2020 and hasn’t let up.

The bump seemed to coincide with billions of dollars the federal government distributed nationwide in COVID-19 aid to people, businesses, hospitals, schools, local governments and states.

Looking back, South Dakota sales tax revenue grew about 8.9% in 2011, but that came off a negative year, according to Johnson.

“From there, you have to go back to 1994 to find anything over eight percent,” he said.

State revenues from all sources came in $62,011,540 above expectations, while the various branches of state government spent $23,863,600 less than expected, according to a summary from the governor’s Bureau of Finance and Management.

Morgan Gruebele, the bureau’s chief budget analyst, said the state Department of Education reverted the largest amount at $10.3 million.

Much of that came from savings in per-pupil aid to K-12 schools that saw enrollment lower than expected, she said.

The Department of Social Services returned more than $3.3 million. The Department of Corrections turned back more than $3.1 million. The Department of Human Services reverted $2.4 million.

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