Revenue projections rise as lawmakers prepare budget

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PIERRE, S.D. (AP) — South Dakota lawmakers projected Thursday that they will have more money to work with than previously expected as they craft the state budget this legislative session.

When Gov. Kristi Noem proposed the budget in December, she predicted revenues would be tight as the state recovered from a year of flooding and trade uncertainty. The Legislature's Joint Committee on Appropriations on Thursday approved projections that were more optimistic as revenue rebounded in the last two months. Lawmakers decided they will have roughly $1.74 billion in revenue for the 2021 budget that starts in July, an increase of $19 million from what the Republican governor predicted.

In her State of the State address, Noem asked lawmakers to find “extra flexibility” in the budget to fund inflationary pay increases for teachers, state employees and service providers for the first time in three years. The Bureau of Finance and Management estimates that each percentage-point increase in funding will cost about $16 million.

“The discussion and the math starts today," said Sen. John Wiik, a Republican from Big Stone City.

With the revenue projections in hand, lawmakers can now go to work hammering out the budget. Legislative leaders said that will be a priority for the rest of the session.

Hanging over the financial projections was the prospect of spring flooding, which could impact agriculture — the state's biggest industry. Last year, South Dakota led the nation in unplanted farm acres due to bad weather. With high water levels and a forecast for a wet spring, many lawmakers felt the state should brace for another tough year for farmers.

The state will also lose about $20 million in tax revenue starting in July when it can no longer tax internet services. Legislators also estimated that they will lose about $2 million in taxes because the age for tobacco purchases was raised to 21.

Noem predicted in December that the state budget would total roughly $4.94 billion once federal dollars and other state funds are added.

The governor has proposed three projects that would each cost about $5 million: funding initiatives for broadband internet across the state, a new School of Health Sciences at University of South Dakota and upgrading the state’s emergency response dispatch system. Noem also asked for $3.7 million to address increasing rates of meth addiction.

She also wants lawmakers to shell out about $3.5 million to get their proposed industrial hemp program up and running.

Democrats, who hold just three seats on the Joint Committee on Appropriations that approved the revenue projections, said the figures were pessimistic.

Sen. Reynold Nesiba, a Sioux Falls Democrat, called the revenue projections process “contentious and divisive. He wished that lawmakers would have been more optimistic in order to find wiggle room when they have hard budget decisions to make.

Wiik said the projections were just the opposite.

“We're going to have to have a really good year to hit those figures," he said.

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