Gov. Noem Delivers 2022 Budget Address

 PIERRE, S.D. – Today, Governor Kristi Noem delivered the 2022 Budget Address, unveiling her budget proposal for the remainder of Fiscal Year 2023 and Fiscal Year 2024.

You can find the full text of Governor Noem’s 2022 Budget Address below:

Good afternoon, Lieutenant Governor Rhoden, Mr. Speaker, members of the House and Senate, and my fellow South Dakotans:

Before I begin today, I want to thank my team at the Bureau of Finance & Management, the folks at the Department of Revenue for all of their hard work preparing all the data and information for today. They do their work with excellence, and I am so thankful for their help.

I also want to thank my family who is here today.

Today I will present my budget to you for consideration. This budget will cover the remainder of Fiscal Year 2023 and all of Fiscal Year 2024. Before I discuss our future, I want to remind you where we have been and how we stand financially today.

The last four years, we have made South Dakota the strongest state in America.

We lead the nation in almost every single economic metric. Our personal income growth is number one. And over the last year, both our new housing development and new business applications have been the best in America. Our kids lead the nation in educational outcomes, and we are breaking tourism records year after year.

This past year, our unemployment rate has been the lowest it’s ever been in history. Today, we have less than 700 people in the entire state on unemployment.

Our population is expanding at ten times the national average. I will continue to recruit Freedom-loving Americans to come join us here in South Dakota, particularly those who can fill high-demand positions. My budget today will help address these workforce challenges, as well.

South Dakota’s government is small but effective.

While we have grown, we have also been fiscally responsible. We have the best funded pension plan in the country. We continue to have a AAA credit rating, and we balance our budget.

I recognize that taxpayer dollars are not our own – they belong to the people of South Dakota. We all must remember throughout our budget discussions, that this money belongs to the hard-working people of South Dakota.

In South Dakota, our state motto declares “Under God, the people rule.” These aren’t just words we say…we believe them, and take action based on them. We MUST for the future security of our great state.

Frankly, the irresponsibility of the federal government demands it. No nation in history has ever survived the tax burden and spending spree that this White House is pursuing. They haven’t balanced the federal budget in decades, Congress continues to raise the debt limit with no plan for spending, and leaders in DC print money only to turn around and go into debt with foreign entities that are our enemies.

Then they declare that they MUST reach into the pockets of everyday Americans to grab more of their earnings to keep us safe, enforce law and order, and subsidize programs designed to enslave families to government. We have seen the incredible power grab of these leaders the past few years. They have used unconstitutional actions and the enticement of more money to take unprecedented action to make people more dependent, weak, and apathetic. It is irresponsible and wrong.

That’s not how we run our state. We make hard decisions and recognize that a limited government respects people AND their dollars and that it is the way to preserve the American dream for our children and our grandchildren. We don’t make decisions to only benefit us today. We look far into the future and the realize the ramifications of our decisions and make the hard choices, so that future South Dakotans have the chance to grow up in a place of opportunity and freedom.

The nation is watching how you in this body make decisions. That may not have been true 5 to 10 years ago. Whether you like it or not, people now know where South Dakota is. They see this state as a beacon of hope. A place of Liberty. How you decide to govern, budget, and communicate to our people will be watched, evaluated, and judged. Has your job gotten easier with more revenue? I would say No. It is much harder. We must be disciplined in order to protect our state from an expansion of government in our lives through new programs and subsidies. Let’s not forget that government should be beholden to the people and not the other way around. Our founding fathers did not believe in a centralized government. They believed in the rights of individuals and their ability to govern themselves.

Our state is bringing in incredible revenue.

People are making more money, our businesses have expanded, we have recruited new industries and because of the way we have followed our states’ motto “Under God the people rule” we have permanently grown the state’s economy. We have lived through unprecedented challenges since I’ve been your Governor:  bomb cyclones, a pandemic, the Derecho – make no mistake, this economic growth is an unprecedented event as well.  We must be leaders who protect South Dakota’s way of life as we look to the future.

On November 8th the people of this great state gave us a mandate. They turned out in record breaking numbers to make sure we in this building heard from them loud and clear. They demand low taxes, less regulation, and more freedom. They were also clear that they want us to take care of people and create opportunities to succeed.  As Governor, I will continue to listen to our people. I will guide our discussion and decisions based on my constitutional authority.

We have $423 million in reserves. Historically, our goal is to keep 10% in these funds. Since I’ve been Governor, we have almost doubled that number. We ended last year with a record-breaking budget surplus of $115.5 million.

That historic surplus in Fiscal Year 2022 was largely thanks to sales & use tax receipts growing by more than 12% over the prior fiscal year. So far in Fiscal Year 2023, sales & use taxes have grown by another 14.1%. Early indications for November have us beating revenue projections by another $58.8 million, putting us up $135.3 million fiscal year to-date. Sales tax alone is running $81.8 million ahead of the estimates that you adopted.

In South Dakota we know to prepare for the future. Let me be clear, we have done everything we can in our state to be successful. However, economists indicate there will challenges ahead. Bad policies coming out of Washington, DC will unleash a recession on this country. We will be impacted. Earlier this year our country had two consecutive quarters of negative economic growth. The Federal Reserve’s increase of interest rates is another indicator that a recession is on the horizon.

But South Dakota’s growth in tax revenues continue, because our state’s economy is in a far stronger position than the nation’s as a whole. Economists expect that the upcoming recession will be primarily “investment-led.” They expect that our unemployment rate will remain low. And they don’t expect consumer spending to be heavily impacted. Those factors affect how we budget here in our state.

In my budget today, I am keeping our revenue projections for the future very conservative. The people of South Dakota deserve safe planning that protects them from future tax increases or drastic cuts to state services.

We expect $310 million in ongoing revenue available for Fiscal Year 2024. And we are anticipating $216 million in one-time revenue will be available in the upcoming Fiscal Year, as well. The budget that I am proposing to you today invests every single dollar of those revenues wisely.

Eliminating the sales tax on groceries is the biggest way that my budget helps South Dakotans tackle the challenge of Biden’s inflation and protect hard earned money. Unfortunately, food costs have risen by far too much. And families are struggling to make ends meet, as a result.

You have heard me talk about the rapid increase of the costs of milk, ground beef, eggs and other groceries. Eggs alone have increased to over 140% of what they were a year ago. Even with South Dakota having the best personal income growth, family budgets are not keeping up. We can grow incomes even more by letting people keep more of their own hard-earned money in their pockets.

Gas prices continue to increase because of President Biden’s energy policies. New regulations and taxes, a lack of utilization of American energy sources, and a dwindling reserve indicate this trend will continue.

Senior citizens, working parents, single moms – every South Dakotan is paying more for food, gas, and to heat and cool their homes. Their family finances are struggling under the strain. Over the last 10 years, Americans have saved 7 to 8 percent of their monthly income on average. During the pandemic, that jumped to 20 to 30 percent. Today, they are saving less than 4 percent because almost every dollar they make is needed to pay their monthly bills. They are no longer saving for college or to buy a new house or a new car. They are just barely getting by. We need to give them relief, and we can do so by giving them a $100 million tax cut by eliminating the sales tax on groceries.

We have $310 million in permanent revenue growth. And we still have $208 million even after we deliver this tax cut to the people. We have been exceeding estimates by about $25 million a month. The people of South Dakota overwhelmingly want this tax cut, and they know we can afford it.

Remember – our revenues are strong because we have grown our economy. It is the strongest in the nation. People have moved their families, their jobs, and their businesses to South Dakota. Our new housing developments are here to stay. New industries are thriving. The jobs of the future are right here in South Dakota.  And once again, we have the fastest growing incomes in America. This growth is sustainable. And there won’t be a better opportunity in the future.

My team and I are fully confident that this is the right tax cut at the right time. Let’s get it done.

Medicaid expansion passed on the ballot, and therefore it will be implemented.

In every other state where Medicaid Expansion was passed, the costs exceeded their expectations. That’s why this past year, we did our homework, researched those states, and consulted with experts to put together this budget plan to ensure the law is followed.

The federal government incentivizes states to implement Medicaid by subsidizing costs the first few years. After that, the burden falls on the state. The first year, the cost for Medicaid Expansion will be $66 Million, but the state’s responsibility will be $13 million. In the second year, the program will cost just under $70 million, and the state will cover $16 million. We expect the cost of Medicaid Expansion to be $66 million in year one, just under $70 million in year two, rising to more than $80 million by year five.

Make no mistake, the expansion of Medicaid – as passed on the November ballot by the people of this state – is an expansion of a government program that will give free healthcare to a population of the state that the majority are able-bodied, single males. Our goal in policy should be to give people the opportunity to have more freedom in healthcare options, not government-run programs. Let’s keep that in mind in the coming days and give people the dignity of responsive and responsible healthcare that they control – not the government.

There are on-going budget increases we address every year in the legislature. State statute requires we address state aid to education, and we also take care of state employees and providers. This year, I am recommending a 5% increase for all three, which is almost double what is required by state statute.

A few years back, the legislature created a process to establish a rate-setting methodology for health and human service providers – this would affect services delivered by community-based providers. This methodology reflects the reasonable amount that we should pay for services that are provided.

Unfortunately, as the cost of living has increased, reimbursement rates for many of these services have struggled to keep pace. Today, I am recommending that we invest $22 million in targeted increases to reimburse at least 90% of the reasonable rate for all providers of these services.

Some have fallen too far behind. To get to 90%, we will need a 21% increase to nursing homes; a 17% increase to community support providers for South Dakotans with developmental disabilities; and a 26% increase for psychiatric residential treatment facilities. These providers are critical to our state and ensure we can continue to take care of some of the most vulnerable among us.

We must address the fact that we are having a very difficult time recruiting state employees. Today they are falling behind industry, and we often train people for their positions only to have them leave for jobs elsewhere. My budget has $11 million in targeted pay increases for specific job areas and $11 million in added benefits to ensure state government has the workforce it needs to carry out critical services that are necessary for us to fulfill our responsibilities.

I want to remind everyone of one thing that the media seems to forget every year – the governor and the legislature do not decide where all of these dollars go. We cannot dictate to schools and healthcare providers how these dollars are spent. But I would encourage all of them to put as much of it into pay increases as they can. South Dakota has the fastest growing incomes in the country, but if you don’t continue to invest in your workers, providers, and teachers, they will find good paying jobs elsewhere.

Because of President Biden’s inflation, building projects that have already received legislative approval are coming in far over budget. I am recommending $25.6 million in one-time funding to finish these critical projects that we’ve already started.

This request includes $13 million to the State Public Health Lab; $7 million to Board of Regents projects; and $6 million to the DEX – or Dakota Events CompleX – at the State Fair. All of these projects have received prior legislative approval, and they need to be completed.

Margaret Thatcher, famously said, “There is no such thing as society. There are individual men and women, and there are families.”

Amen sister.

When I became Governor, I implemented Paid Family Leave for state employees. We told state employees that if they were bringing a new child into their home – whether by birth or adoption – that the state would cover 60% of their pay via paid family leave.

Today, I am announcing that we will be extending that benefit to cover 100% of pay for state employees. This will cost $3 million in ongoing dollars.

One of the biggest challenges facing our state overall is workforce. Too often, new parents have to leave the workforce when a new child joins the family. Those early days are so crucial to give moms and dads the opportunity to bond with the new child. By extending paid family leave opportunities, we can help workers and families.

To do this, we will be including $20 million in one-time incentives – spread out over four years – to incentivize private businesses to buy in to a new paid family leave opportunity.

We will also be supporting mothers and families through funding for adoption – and pregnancy and postpartum care for Medicaid patients. And we will be funding scholarships for foster children. You will hear more details about each of these proposals in my state of the state address in January.

But it isn’t just birth and adoption where families need our help. We can strengthen families by continuing to help them through some tougher circumstances, too. Over the last couple years, you have helped invest in regional behavioral health centers.

Too often, when someone is experiencing a mental health crisis, they just end up in jail or in the emergency room. That isn’t how we get them the help that they need. And that isn’t a responsible use of taxpayer dollars. These facilities will help these individuals get better care as soon as possible. And it will be closer to home.

We’ve built these facilities in communities across the state. Two years ago, you provided funding for facilities in Pennington County and Watertown. Last year, you provided an additional $15 million to expand these regional facilities statewide.

You built the buildings – now we need to fund the operations. My budget proposes $5.6 million in ongoing funding to these regional facilities to get these individuals the help that they need sooner. It will not only be better care, it will also be more efficient and cost-effective than what we are doing today.

The final way that this budget will continue to build on South Dakota’s strength is by investing in public safety and infrastructure. These are core functions of state government.

Over the last four years, we have made tremendous infrastructure improvements. We have repaired dams, roads and bridges, and built railroads to help support South Dakota’s incredible growth.

My budget continues to guarantee our state’s public safety, as well. South Dakota has set itself apart as a place that respects law enforcement and our military. We realize that our people cannot enjoy our state’s tremendous Freedom if they are not safe in their homes or on our streets.

Last year, we started the hard work of addressing the challenges within the Department of Corrections and prison system. We put $86 million into a new Incarceration Construction Fund and funded $3.8 million for land and design costs for a new women’s minimum-security prison in Rapid City. The new Incarceration Task Force agreed with these recommendations.

The engineering and design process came back with dollar figure estimates. Updated population projections indicate that we will need 300 beds at the women’s facility. The cost estimate for construction is $200,000 per bed, or $60 million. We can cover this cost with the money that you set aside in the Incarceration Construction Fund, and my budget reflects that.

We also need to address the state penitentiary. We know it is outdated, not compliant with ADA requirements, and overcrowded.  It has been an issue for many years, long before I was your Governor.

I am recommending that we take the same multi-year approach that you have taken with the women’s prison in Rapid City. My budget includes $52 million in funding to purchase land and conduct engineering and design for this new facility. $27 million of that will come from the remaining dollars in the Incarceration Construction Fund, and $25 million will come from one-time general funds.

I am recommending we transfer excess funds that are above and beyond the traditional 10 percent we always hold in reserves, to address this situation.  We remain committed and will continue to maintain 10% in reserves as we always have in the state of South Dakota.

We also have a responsibility to secure people’s personal information. We can’t do that with our current operational system. Our state’s accounting and software system is 35 years old. It is vulnerable to hackers and in danger of crashing in the future. Imagine using the same computer you used 35 years ago. Many of you wouldn’t dream of it, yet our state does. Also, we have no backup for this outdated system, which is a major security concern that comes with incredible liabilities.

Think about our agencies and all the personal information they are responsible to keep secure for the people of South Dakota. For instance, the Department of Health and the healthcare information they hold for individuals, or Social Services and their case work and child protective programs, to name a few. We need technology systems that will ensure privacy for all our citizens. Every hour, our state servers encounter thousands of hacking attempts. We need a system that will ensure privacy for all our citizens.

It will take 4 years and $70 million dollars in one-time funding to replace this accounting system – but we must get it done. We don’t want to look back and wish that we’d taken this threat seriously.

My budget also provides one-time funding to upgrade the State’s Emergency Alert System and upgrade remaining state radio infrastructure to support our law enforcement. They are our heroes, and they must have the tools and equipment they need to continue to serve our state.

Our National Guard serve us every day, and we can do more to support them. Currently, the state covers 50% of tuition if a Guard member attends a Board of Regents institution. We cover more than 80% of tuition at our state’s tech colleges. I want to take both of those numbers to 100%. We should fully support the men and women in our National Guard as they pursue their education and serve our state and country.

We are also going to address the needs of finishing the Sioux Falls Readiness Center. We will also be providing $8 million in additional federal fund authority to help them complete that project.

And I am also supporting $29 million in federal fund authority for a Field Maintenance Shop for the National Guard in Watertown. This will help us get more of our readiness capabilities in the same location.

I love South Dakota. It is a beacon to the rest of the nation for what is possible when we follow conservative principles and fiscal responsibility. We have become a success story because we keep government limited and live within our means.

Our blessings don’t just happen to us. Oh yes, God is good. All the time. But we have choices to make that will come with consequences for generations to come. If we are wise, we will preserve for our children the last best hope on earth. If we fail, well – Ronald Reagan defined that type of failure as “sentencing our children to take the last step into a thousand years of darkness.”

I have faith we will be up to the task at hand.

That we will remember the sacrifices of our founding fathers, the blood shed by the greatest generation so we can be here in this chamber today, and the commitment of our deployed military who stand – right now – in harm’s way so we can be free.

We have no idea what “hard” is. What they did – what they do – that’s hard. We are lucky. Honored. Blessed.

Let’s never forget that – and let’s get to work. Merry Christmas!

###