Special Address: Update on Revenue Numbers

Special Address: Update on Revenue Numbers
By: Governor Kristi Noem 
February 9, 2021

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

I am here today because South Dakota is in a historic position. I stood before you two months ago and said, South Dakota is entering 2021 in one of the strongest financial positions in the country.

I told you, South Dakota wouldn’t be raising taxes on our citizens or our businesses. We wouldn’t be borrowing billions of dollars to cover our budget shortfalls. And we wouldn’t be looking to Congress to send us more stimulus money.

As I stand before you today, I am pleased to report that our position is even stronger than we previously thought.

Before I go into the details, we should remember how we got here.

I believe it was our commitment to conservative principles that put us in the position that we’re in today. It was our respect for the rights of the people. It was our commonsense conservative values and the principles we hold dear in America. In short, it was our trust and respect for the people who we serve.

Going forward, we should trust this model and continue to stay true to what we believe in. As I said in December, we need to remain prudent and conservative as we look to adopt a budget. We must remember that these dollars are not ours. They belong to our constituents, to the incredible people who have made this opportunity possible in the first place.

Additionally, I also want to urge you to be cautious. Remember, we will face new challenges as a result of the policies of the current administration in Washington. We’ve already seen the consequences of President Biden’s energy policy on some South Dakota communities that were hoping to capitalize on the Keystone XL pipeline. And there are several other policies that could hurt our future economic position by driving up energy prices and pushing more costly regulations.

If we learn from the lessons of the last year and continue to apply them in all our decision making, I firmly believe we can keep our state in a strong position far into the future.

South Dakota is in the position that we are today because of the principled approach that we took over the last year. As states across the country were shutting down, South Dakota remained open.

Our economy is thriving. We have the lowest unemployment rate in the country – lower than it was before the pandemic. Families and businesses are relocating to our state – we’re 4^th in the nation for inbound migration, according to United Van Lines. And we’re a national leader in distribution of the COVID vaccine. By all accounts, that is the best way that we can have success against the virus over the long-term.

I want to encourage you to trust our principles and carefully consider how best to use one-time funds. We need to focus on solving long-term problems and strengthening our state for the next generation. First, we should put money aside into savings and investments so that we protect the next generation from higher taxes or drastic spending cuts in the future. Second, we should pay down debt and remove future liabilities. And third, we should use these funds to improve and restore our state’s infrastructure.

Remember, not long after the 2008 financial crisis and the resulting federal stimulus funding, our state faced 10% budget cuts to make ends meet. With that recent historical context in mind, we must remain disciplined and save for the future, whatever it may look like.

The fiscal policies that we are seeing from the federal government are not sustainable. South Dakota needs to be prepared for whatever may come.

So let’s get into the numbers. The appropriations committee will be adopting revenue estimates this week. They will hear projections from the Bureau of Finance and Management, as well as the Legislative Research Council. But I’m going to give you a preview now.

We are continuing to see increased revenues above what I discussed with you in December.

The growth rates that we are seeing are historic. There has been 11% growth in our ongoing revenue this year. I want to put that number in context.

When you account for changes in taxes and fees, the state has likely never seen this kind of growth in its ongoing revenue. We looked back thirty years and believe this is unprecedented.

We are projecting an additional $8.6 million in ongoing revenue for FY 2022. This is on top of the $61 million that we previously reported to you. We are also forecasting about $51.5 million in one-time revenues in FY 2021. This is above my recommended budget.

In addition to this money, we believe we can utilize another $74 million dollars. The one-year extension of Coronavirus Relief Funds enables this flexibility. Previously, my budget proposed that this money come from general funds. For example, we can now plan to utilize $25 million in CRF money on my broadband proposal instead of general funds. So for broadband: $75 million from general funds and $25 million from CRF. This is just one example of how we can capitalize on CRF flexibilities.

To summarize, between the $51 million in one-time revenues and the additional $74 from CRF flexibilities, we could have approximately $125 million in one-time money that we were not previously anticipating.

Though it is tempting to assume that our current growth will continue, I urge you all to hold true to our conservative ideals. History tells us that this dramatic growth could decline once the effects of federal stimulus wear off.

Along those lines, I want to highlight the importance of putting some of this money into savings and investments.

In 2001, our trust funds brought in $12 million in annual proceeds. In 2022, we forecast that number will grow to more than $43 million. That is an increase of 350 percent. This is how we set the state up for long-term success. It is important to remember what this number represents. In the past, we have invested money by putting it into trust funds, and today we have an additional $43 million that we do not take from our people in taxes. This is why I proposed putting at least $50 million dollars into the trust funds in my December budget and why I am encouraging you all to adopt that proposal.

I’ve told you many times that my mission is to make South Dakota safer, stronger, and healthier for our kids and grandkids. To do that, we need to take this perspective: whatever action we take with this money needs to fix something for 20 to 30 years or longer. That is why I am proposing important infrastructure investments like broadband, the Brittle Fund, dam repair, and radio tower equipment. It is also why we would like to set up a needs-based scholarship endowment that will sustainably fund itself long into the future.

That is why I am also focused on the Dakota Events Complex, which will set Huron up for long-term success. And that is also why we are making our state aircraft safer by selling two of our three old planes and replacing them with one newer plane.

In short, we need to view our budget an opportunity to invest in infrastructure, cut long-term expenses, and bolster our savings and investments.

South Dakota’s future is very bright. But we have faced real challenges this year. And we will face more in the future. To safeguard against unforeseen economic setbacks, we must continue to take a prudent and conservative approach to state government. We need to carefully consider our present unusual circumstances as we project revenue.

It was President Eisenhower, in his farewell address, who warned us to avoid the impulse of living only for today. He spoke candidly about how wrong it would be to mortgage the future of our grandchildren because it would lead to the loss of their political and spiritual heritage. He said, “We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.”

Together, our actions can capitalize on the unique opportunity that our state faces and set us up for tremendous success in the future. We must remember the steps that we took that got us here in the first place.

Our state motto: “Under God, the people rule,” is an important reminder for all of us here today. Let’s leave this chamber as responsible stewards of the hard-earned taxpayer dollars of the PEOPLE of South Dakota.

Today’s revenue numbers are good news. We are where we are today because South Dakota respects freedom, personal responsibility, and conservative governance.

It is my hope that we can keep working together to build and grow our state. And that we can keep our focus where it counts: on strong families. Remember, strong families lead to strong communities. And strong communities will build an even stronger South Dakota.

God bless you all. Thank you.

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