State revenue projections are in, and the sun is shining brighter than previously thought. Now with tens of millions of extra dollars in hand, leadership can plan for good news as session continues.
On revenue day 2026 in the Capitol building, lawmakers are pleased with what they’re reading in the tea leaves.
Republican Senator Glen Vilhauer provided the latest projection to the Joint Appropriations Committee Wednesday.
“I move to adopt the revised fiscal year '26 revenue projection of $2,479,571,670 in ongoing revenue,” Vilhauer said.
That’s nearly $30 million above the projected revenue numbers the governor issued in his budget address late last year.
These kinds of budget differentials, according to Vilhauer, aren’t unusual and come with the challenge of long-term projection.
“I want to give kudos to the (Bureau of Finance and Management) and the (Legislative Research Council) staff that put together these projections," Vilhauer said. "Realize that we’re looking out almost a year-and-a-half on some of these projections.”
Considering the state now has a much easier budget year than once thought, that enthusiasm is crossing party lines. Democratic Rep. Eric Muckey said this indicates a victory for the state.
“It’s a good thing to see South Dakota trending in the right direction, economically," Muckey said. "When we’re talking about adopting a revenue figure, we’re talking about, in a lot of ways, the state of our economy and the confidence we have in it. Looking back at our time in October, November, things were looking a little more bleak than they are today. Obviously as a committee, we love to see us continue to grow in a further direction in that was as a state. This is a good step forward for us.”
In a normal political year, in a normal state, this would mean an immediate tug of war amongst competing interests vying for their own political goals.
However, South Dakota’s streak of political independence has created a unique situation where legislative and executive leadership from both parties are unified by one goal — more money for the so-called “big three” — state employees, educators, and health care providers.
Senate Majority Leader, Republican Jim Mehlhaff was among those focusing on those areas.
“It could be used for anything under the sun if you have the votes for it, but I think the pulse that I’m picking up — though it’s unofficial because I don’t have it on paper — is that there is an appetite to provide more funding for education, more funding for state employees, and more funding for our community service providers," Mehlhaff said.
Or consider the opinion of someone who is often in the opposite side of Mehlhaff on many arguments — House Minority Leader, Democrat Erin Healy.
“It’s a real chance to put people first," Healy said. "We can invest in public schools, protect access to health care, support working families, especially those working families that are state employees. I think it’s important because our budget really needs to reflect our values.”
Even Gov. Larry Rhoden, whose initial budget proposal called for no raises to the big three, said that’s where he wants the bulk of this cash to go.
“We didn’t have anything left for the big three. Well, we do now," Rhoden said. "So, I’m advocating we put a one percent inflationary increase into the big three with these new revenues.”
Rhoden’s target increase would represent roughly $24.8 million from these revenue totals, leaving about $5 million on the table. Rhoden said if lawmakers take his plan, the remaining money is fair game to fund other policies coming from the Capitol.
Rhoden had previously left $14 million unallocated in his budget for lawmakers to play with, be it spent on policy or put in the rainy day fund.
“The logic I applied in leaving those dollars on the bottom line for legislative priorities — they can figure that out," Rhoden said. "There’s good ideas, and maybe not so good ideas, but that was a commitment we made. Leave that on the bottom line for their collective priorities.”
Meanwhile, others have angled for increases closer to 1.25 and as high as 1.5 percent. Higher bumps would mean using the entirety of this money on the raises or even cobbling together additional dollars, perhaps from the unallocated total, to close any remaining gap.
For now though, Mehlhaff said the conversations are only just beginning.
“You know, $30 million used to be a lot of money," Mehlhaff said. "Nowadays, it just doesn’t go as far as it used to. That would be a 1.25 percent increase, across those, and then we would still have to find almost a million dollars somewhere else to achieve that. So, I think that will probably be the main thrust of the conversation on that.”
Overall, these projections seemed to provide everyone, regardless of party affiliation, with a collective sigh of relief as South Dakota begins the back nine of legislative session.