PIERRE, S.D. (KELO) — What happens if South Dakota’s budget surplus someday becomes larger than state government’s rainy-day funds can handle?

A state lawmaker asked that question Wednesday during the South Dakota Bureau of Finance and Management’s presentation on state government’s record surplus of $115,478,433 from the budget year that closed June 30.

BFM economist Derek Johnson told Rep. Taffy Howard, R-Rapid City, and other members of Legislature’s Appropriations Committee that any unobligated cash in excess of the two reserve funds would carry forward to the next budget.

In other words, it could be spent.

Johnson said state law requires that a year-end surplus first flow into the budget reserve fund that can legally accept up to 10% of the “general fund appropriations from the general appropriation act for the prior fiscal year.”

That cap currently is about $176 million. So, some $7.3 million of the latest surplus went there.

With that account filled up, the surplus next went to the general revenue replacement fund that can legally accept up to 15% of the “general fund appropriations in the general appropriations act for the previous fiscal year.”

The remaining $108.2 million went there, according to Johnson. The GRR fund’s balance now is $245.8 million.

Johnson noted that the amounts in the two reserves together currently total about $422.6 million. He said that is about 20.5% of the fiscal 2023 budget that the Legislature adopted in March and took effect July 1.

The two reserves together max out at 25%. The Legislature however could change one or both caps.

“We’ve been doing very well the last couple of years. We unfortunately can’t get the will to cut taxes,” Howard observed.