PIERRE, S.D. (KELO) — The coronavirus pandemic has been surging since August, but South Dakota’s economy grew faster the past three months than state budget officials and legislators had expected.
State economist Mark Quasney went over data Tuesday with the Governor’s Council of Economic Advisors.
He said state sales-tax revenues saw negative growth in May but went back up about 2.7% in June. The 2020 budget year ended June 30 with sales-tax revenue about 4.9% above the 2019 year-end.
What’s happened since then, Quasney said, was state government revenues have been strong overall. For July through September, compared to the similar period last year:
Sales tax up 8.3%
Lottery up 16%
Contractor excise tax up 15%
Insurance tax up 7%
All told, first-quarter ongoing revenues for the 2021 budget year totaled nearly $492.5 million. That was nearly $50.5 million more than the similar quarter a year ago, or 11.4%; the Legislature last winter had adopted a budget based on 2.5% ongoing growth.
State government also reported another $27.6 million of one-time funds for July through September.
The question now is how much of that growth was real and how much resulted from federal COVID-19 aid. October forecasts from the state’s outside consultant being considered for Governor Kristi Noem’s budget recommendations are a 2.5% loss in real gross domestic product for South Dakota this year and 3.2% real growth in GDP for South Dakota in 2021. The 2009 through 2019 average was 1.5%.
Quasney asked council members for their perspectives on the 2020 and 2021 GDP forecasts. Curt Everson, the outgoing president for the South Dakota Bankers Association, said making any kind of a prediction for 2021 would be difficult.
Everson previously was state government’s budget and finance commissioner; in essence, the state economist’s supervisor. The problem with making an accurate forecast, he said, was the volume of federal COVID-19 stimulus payments since March, such as payroll protection funds, farm aid and federal unemployment bonuses, that was helping support South Dakota’s economy.
Will there be a second round of stimulus? Everson asked, and if so, would it be $500 billion as the U.S. Senate’s Republican majority has proposed, or $4 trillion, as some Democrats in the U.S. House majority have sought?
“I don’t know how you do that,” Everson said about trying to forecast 2021. “I don’t have any good answers for you. I wish I did.”
Another council member, farm-implement dealer Dan Noteboom of Corsica, said the 2.5% real-GDP loss forecast for this year seemed optimistic. Noteboom said he sees ag producers being cautious until they have a better idea on whether prices and demand will stay strong.
Noteboom said sales of ag equipment have been solid but maybe won’t get stronger until late spring or next fall. “It’s just going to take that long to comprehend what’s happening, because there’s a lot of change going on in the industry right now,” Noteboom said.