Gov. Larry Rhoden laid out a tight spending plan for South Dakota’s upcoming fiscal year in his annual budget address.
In his first budget as governor, Rhoden stressed fiscal conservatism in a time of mostly flat revenue.
Rhoden said while the overall financial picture looks strong for South Dakota, there are still some roadblocks in the upcoming fiscal year. Namely, a gap between expected revenues and the reality of 2025’s financials.
“We’re $8.2 million behind legislative-adopted revenues. So, while our sales tax revenues are up we actually have to cut our total estimates by about $7 million. We’re expecting overall sales tax growth by 4.4 percent over the fiscal year, about where we’re at so far. We’re revising other revenues up by about $8 million.”
The biggest cost-saving measure — a zero percent increase for the Big Three – education, health care, and state employees.
Rhoden's budget lacked the sizable cuts proposed by his predecessor, Gov. Kristi Noem, last year. The budget even keft $14 million of unappropriated on the table for the lawmakers to play with.
Rapid City Republican Rep. Mike Derby said he’s keeping an eye on his caucus before making promises.
“As chair of appropriations, I’m not going to put my finger on the scale yet, and that’s part of the discussion we’ll have with our caucus," Derby said. "What do we want to do with that $14 million? We’ll prioritize that, arm wrestle with the senate, and come up with a plan.”
Ultimately, the budget address is a request to lawmakers, who have final say on the budget’s contents. Sioux Falls Democrat Erik Muckey said the 2026 session will tell the final tale.
“Though $14 million might seem like a lot of money to the average South Dakotan, you’re packing that into about a $2.6 billion budget. There’s not a lot to work with. That means we’re going to have hard debates about that $14 million but it also means we’re going to look hard at the other $84 million the governor produced and say ‘is this actually what we need as a state right now, and is this the best and highest use of taking care of every South Dakotan? The message about affordability is going to be something that will dominate this session.”
The full budget address can be viewed here.
