Lieutenant Governor Rhoden, Mr. Speaker, members of the House and Senate, and my fellow South Dakotans.
I stand before you today, honored to serve as Governor of this great state. And I’m honored because of what this state stands for. Freedom, family, and fiscal responsibility. Fiscal responsibility is not just a talking point for us – it’s how we do business. We pay our bills. We plan for the future. We keep government small and effective.
Since I’ve taken office, we’ve built on those commitments. We have a lot to be proud of today. South Dakota’s economy is growing. Our people are working. New residents are moving to our state.
Our unemployment rate is 2.8%. We have the most job openings per unemployed resident of any state. We have one of the very best state business tax climates, according to the Tax Foundation. Our state GDP growth consistently ranks among the highest in America. Both Moody’s Analytics and WalletHub rank our economic recovery as the strongest in the country.
South Dakota has the strongest economy in America.
This is our state’s 133rd consecutive year with a balanced budget. We still have no personal income tax. We still have no business tax. And again this year, as I have pledged, there will be no tax increases.
But know this: South Dakota is not successful because of government. Government does not grow our crops or raise our livestock. Government does not run our businesses. And the government does NOT raise our children.
What we have today, we have because of who we are, what we do, and how we live our lives.
Take a look at the last two years. During the pandemic, our state stood apart from the rest of the country. When they shut down, boarded up, and stayed indoors, we stayed “Open for Business.”
That’s not to say we did not take precautions during the pandemic. We certainly did. We take public health seriously in South Dakota. But we also take freedom seriously — freedom and individual responsibility. And part of that is recognizing that the dollars we will discuss today aren’t ours. They belong to the people of South Dakota.
The power belongs to the people, to the states, to our communities and our families. It is in each of us, every individual. That’s the genius of our federalist system. Our state motto says it best: Under God, the PEOPLE rule.
And that brings us to the topic at hand — our state budget for the next fiscal year and beyond. We have choices to make – priorities to set.
Remember, there isn’t a dollar that the government spends that doesn’t come from somewhere. It’s money that’s taken from a paycheck, or from a small business, or from a family farm. It’s money that didn’t get saved, that didn’t get invested, that didn’t create a new job, that didn’t expand a business. That dollar spent won’t be used to invent a new product, or put food on our tables, or clothes on our kids’ backs.
Every dollar we talk about today is a taxpayer dollar. We have a solemn obligation to our citizens. What we spend that money on — how we spend it — matters for today and for generations into the future.
II. Revenue and Savings
That’s why the first thing I’d like to talk to you about is our state’s revenue and how we are saving for the future.
And before I get too far along, I want to thank someone who has been instrumental in keeping our budget in line: our Bureau of Finance and Management Commissioner, Liza Clark.
During her five years as Commissioner, we’ve grown our budget reserves by 95%, funded important priorities, and collaborated with partners across the state to care for people. We will miss having her on the team, and I’m sure the legislators will miss her tenacious defense of fiscal responsibility. Will you all join me in giving Liza a round of applause?
In 2020, before the pandemic even started, I declared South Dakota “Open for business,” and we haven’t closed our doors since. According to our Department of Revenue, historically, the state’s annual sales tax growth, our largest revenue source, averages about 5% each year.
However, in fiscal year 2021, our state general fund revenues grew by 15.75%, approximately $275 million. That’s three years’ worth of revenue growth in one year. And the growth has not slowed. Through four months of fiscal year 2022, ongoing general fund receipts are up another 7.3%, and total general fund receipts are up 11.4% above last year’s historic numbers.
We are projecting to have $215.5 million in one-time dollars for fiscal year 2022. And we are projecting an additional $157.6 million in ongoing general funds. While these are signs that our economy is strong and thriving, there is something we must remember.
When revenue comes into a business, it’s good news because people like the product they are purchasing from that business. When a farm has more revenue, it’s because they’re growing more, raising more, producing more, or have better markets. But when the state has more revenue, it’s because the state’s economy is doing better, and people and businesses are spending more.
We should all celebrate that our state is doing great. But it shouldn’t be a celebration where bigger government is the result. So as South Dakota’s revenue goes up, I want to make sure we are only spending that revenue on necessary investments that benefit our people.
There’s another kind of revenue that’s coming into South Dakota this year. And it’s not revenue in the traditional sense — it’s a giant handout from Washington, D.C.
That money isn’t appearing out of thin air. Those are taxpayer dollars too, and it’s money that is being borrowed from the future — from our children, our grandchildren, and beyond.
I have had people ask me from time to time, “Kristi, why don’t you just give the federal money back? After all, it’s taxpayers’ money.” That was my first thought, too — to refuse the money. But here’s the problem. Giving that money back means that money goes to another state — to California, to New Jersey, maybe Illinois, Michigan, or Minnesota. That money is not going back into South Dakota taxpayers’ pockets. It would be spent somewhere other than South Dakota. The debt would still be incurred by the country, and our people would still suffer the consequences of that spending.
There’s something else about those dollars. The money that has already been spent in Washington, DC was sent to the state with strings attached. They put conditions on how we can spend it and when we can spend it. To the fullest extent that we can, we are going to put those funds to work for our state, to address our state’s most pressing needs, to make fiscally responsible, one-time expenditures that will not grow the government, but that will save our people money in the long run.
Washington could learn a lot about fiscal responsibility by watching how we operate and spend money in South Dakota. We have a strong track record of doing just that.
Last year — in the face of the pandemic — we increased our savings from 10% as is traditionally done, to 12% of our budget. Today, with inflation rising to unimaginable levels, our nation’s future is even more uncertain. That is why I am proposing we save more than 14% of our budget in reserves.
Our economy in South Dakota is strong, but we don’t live in a bubble. It is up to us to brace for the future, to look beyond the horizon, and to prepare our state for what is coming next.
Having strong reserves is an important part of that plan. But so is addressing other long-term challenges facing our state – our people, our infrastructure, and our public safety.
III. Invest in Our People – Workforce
I’d like to start today by talking about our workforce — the talented, hardworking women and men of South Dakota, the challenges they are facing, and how we can help them be competitive in our changing economy.
Something pretty incredible happened in South Dakota over the last two years. There has been a dramatic increase in new residents to our state. They’re coming here for many reasons, but the main reasons are because we respect freedom, our taxes are low, and we cut red tape so people and businesses can succeed.
We didn’t shut down our economy, so it is strong. So strong, in fact, that we have about 28,000 open jobs — but not enough people trained to fill them. There are only 800 South Dakotans on continued unemployment claims — making us Top 5 in the nation for lowest unemployment rate. If we want our businesses to stay in South Dakota — and to grow in South Dakota — we need qualified workers who can fill those jobs.
But new folks who are coming to South Dakota to fill those jobs are running into a problem. A tight housing market is making it difficult for them to find a place to live. It isn't the government's job to solve this problem. Instead, we need to find ways to help the free market to solve this problem.
Here’s how we’re going to accomplish that: Today, I am announcing a $200 million dollar investment from the state in Workforce Housing grants. $150 million will be one-time state general funds. An additional $50 million in federal funds will be invested in sewer infrastructure tied to these workforce housing projects. Those dollars will be matched by local communities and developers to ensure that everyone works together in partnership: 1/3 from the developers, 1/3 from the municipalities, and 1/3 from the state. This is a $600 million total investment in workforce housing.
With this investment in housing, we will help free up our tight housing market. We will open up opportunities for more freedom-loving Americans to move to South Dakota. And we will accommodate the businesses who want to move here, as well.
2. Inflation Pay Increases
We can’t invest in our workforce without supporting the hard workers that we already have here. That includes our teachers. It includes state workers. And it includes healthcare providers who take care of the rest of us.
But like all Americans, they’re suffering under the strain of horrifically high inflation stemming from the Biden Administration’s policies. Today, I am announcing my recommendation for a 6% pay increase for state workers; a 6% increase to state aid for education; and a 6% increase for our healthcare providers.
Since I took office, our state has taken on unprecedented challenges. In 2019, we faced historic flooding that placed 63 of our 66 counties in federal disaster status. 2020 brought the COVID pandemic, among countless other challenges. I think we can all agree that our healthcare and frontline workers deserve our full support for their dedicated service these past two years. The funding increase to providers should go directly to those frontline workers. And our state employees have taken everything in stride, increased their workload dramatically and continued to provide our constituents with the best service possible.
The same can be said for educators. They adapt to challenges everyday. Our teachers are working with each student uniquely to prepare them for the future. School districts should reinvest this 6% increase directly in our teachers and other district staff.
This 6% increase is unprecedented, but also necessary. Many of these positions in these three areas are not keeping pace with their counterparts in the private sector or other states. They deserve our support – let's give it to them.
Now, housing is a big piece of the workforce puzzle. But there’s another challenge we need to address. It’s one that is affecting working families, single mothers, and single fathers. That issue is childcare. For families who are struggling to make ends meet, daycare is the only way to ensure they can work to put food on the table.
The pandemic has caused a decrease in the number of registered daycare providers around the state. Washington has a plan that will make this problem worse. It’s more of the same from the Big Government crowd: more entitlements and never-ending government-run programs that do more harm than good.
Let’s do something better in South Dakota. We already have some great examples to look to. I want to applaud the work of nonprofit groups like Compassion Child Care and the Boys and Girls Clubs. These groups are providing low-cost and affordable daycare options for young children and after-school programs for older youths.
Through the use of federal funds, the Department of Social Services will use $100 million to provide grants for startup and one-time costs for new daycare centers. This will allow high-quality child care facilities to open and expand around the state. And it will help existing registered facilities stay open.
We need to study the hurdles facing child care centers. We will provide resources to employers who want to open child care facilities for their employees. And we will fund scholarships to train skilled child care workers.
I know parents want the best for their children. But the answer isn’t government bureaucrats taking care of their kids. Let’s strengthen our existing daycare centers, help new providers enter the business, and put more talented child care professionals into the field.
4. Skills Training
More skills training is needed across the board as we look to increase our competitiveness with other states. It’s also important for our children and grandchildren, who will be looking for new opportunities in the job market. I am proud to announce today something truly transformative for our state. I propose that we invest $30 million to facilitate new cybersecurity training at Dakota State University.
Cybersecurity is an emerging, cutting edge industry. But companies go where the talent is. Let’s train South Dakotans in cybersecurity. Let’s give those companies a reason to locate in our state. And let’s equip our graduates with the skills they need to compete for six-figure salaries at cybersecurity companies right here in South Dakota.
I am also recommending an additional $17 million to enhance workforce training capacity at our technical colleges. These targeted projects will increase training for nurses, farmers, ranchers, and manufacturers. Now, not every proposal in this budget comes with a major price tag. In many cases, we are able to promote low-cost programs that have a big impact on small communities.
For those looking to start a new business or enterprise at the University of South Dakota, I am proud to announce support for the Coyote Business Consulting program. This dual-purpose program connects small business owners with business students who provide marketing and other services under the guidance of faculty. This program provides these services for free to small businesses. It also gives students valuable work experience that they can take with them into the job market.
Additionally, to meet the needs in our health care industry, I am recommending that we seek federal approval to fund construction projects at Northern State University and Black Hills State University. Both schools are looking to expand their nursing programs. The project at Northern State would fund facilities for a partnership with South Dakota State University’s accelerated nursing program.
5. Tourism/Workforce Marketing
One powerful way we can attract people to our state is by marketing what our state has to offer. That will help attract the visitors that we love and the workforce talent that we need.
South Dakota is one of America’s best-kept secrets. But word is getting out. Part of the reason our state is in such a strong fiscal position today is because we have benefited from an increase in tourism. That has been a boon for businesses. It has created new jobs. And it has helped give us the resources to make the investments we are discussing today. We need to tell the story of our state now to help facilitate workforce development.
Our team at the Department of Tourism is the best. They have won award after award for their marketing efforts, and we are going to empower them to keep delivering for South Dakota. I am recommending that we invest $35 million in marketing efforts, to be routed through the Department of Tourism.
These efforts will include traditional tourism campaigns. We will promote our local communities, Native American tourism, and agritourism. We will ramp up our marketing efforts to highlight South Dakota’s hunting and fishing opportunities. We will also provide grants to local Destination Marketing Organizations. And on top of all this, we will increase our workforce marketing efforts, too.
Our state’s number one workforce need is healthcare practitioners. We recently partnered with our state’s health systems to recruit nurses to our state. And we will continue to do the same in other areas. The law enforcement recruitment plan we implemented paid tremendous dividends. Let’s continue that momentum across other careers and industries.
6. Healthy Families
We cannot have a strong workforce if we do not have strong and healthy families.
I am proud to announce that our Bright Start program has been an overwhelming success in serving eligible mothers. That’s why I am recommending the funding of this program statewide. Bright Start serves mothers in need by bringing nurses to their homes in the first years of a child’s life after a child is born. You all know that I am pro-life. Too often, pro-lifers get falsely criticized for not caring about mothers and their children after the child is born. As we get closer and closer to our goal of protecting every unborn child, our pro-life focus should include programs like Bright Start that help set up families and mothers for success.
These nurses are teaching skills that are instrumental in the care of a child, as well as the important developmental steps in those first few years. Bright Start is going to help more families get on the right path, right away. Every child’s life matters. And we need to protect those lives in a smart way. Bright Start accomplishes that.
IV. Building for the Future – Infrastructure
One of the fundamental roles of our government is to build and maintain the infrastructure that is necessary for our society to function. Just like having a roof on a house or putting oil in a car, these are not optional expenses. Some of our infrastructure is aging and needs to be updated or replaced. Some infrastructure needs to be built from scratch. These are investments that will last a lifetime.
As our state continues to grow, so does our need for access to clean, quality water. Thankfully, we now have the resources to make a $660 million dollar, once-in-a-generation investment in water projects across the state. With our combined resources, including state, federal, and local dollars, these projects could yield a landmark $1.5 billion investment. This necessary work will ensure rural towns have clean drinking water; it will update existing water treatment facilities; replace outdated water systems in our older communities; and construct drainage projects for new communities.
I know some of you feel strongly about particular water projects in your community. Routing this money through existing programs at the Department of Agriculture and Natural Resources, we will ensure a fair, objective, and impartial process that makes the best use of taxpayers’ dollars.
With these efforts, we will be able to provide clean water for our communities for years to come, even as they grow and expand. And we will be able to ensure the continued success of our agriculture industry and new industries as they move into our state.
2. Dams and Flood Repair
Dams are one of the most essential forms of infrastructure – especially for a state that has the Mighty Missouri running through it. We need dams that are strong and built to last. Unfortunately, the Richmond Dam near Aberdeen is over 80 years old. Due to the risk of loss of life and property, repairing it is a top priority for Commissioner Ryan Brunner of School and Public Lands. I am recommending $6.5 million in funding to repair this critical infrastructure. This will build on the investments we made in our dam infrastructure over the past year.
Additionally, I am recommending $5.6 million to repair public recreation areas damaged by the 2019 floods. In the case of Lake Alvin, that project is estimated to cost about $3 million and is at risk of failure. We have the money available to get these crucial projects done – so let’s do it.
3. Public Health
Having sound infrastructure is about ensuring a high quality of life for South Dakotans. And we can’t have a high quality of life if we are not safeguarding public health. America has the most innovative and creative healthcare system in the world because we don’t take a top-down approach to medicine. That’s part of the reason why South Dakota trusted our people to exercise personal responsibility during the pandemic.
But as healthcare continues to innovate and evolve, our Public Health Lab needs to be able to continue its work. I recommend we seek federal approval for $69.6 million to build and remodel our State Public Health Lab. This money will come from the federal Capital Projects Fund, which has tight strings on how it can be used and requires federal approval. The State Health Lab was crucial during the early days of the pandemic, and it will continue to be.
We all know that our state’s great outdoors – including our parks – are part of what makes South Dakota the greatest state in the nation.
Others from around the country are seeing the beauty of our parks. They’re visiting our parks in record numbers. That’s good news for our small towns and the businesses that serve them.
We want the people who live here in South Dakota to be able to enjoy our Great Places, too. That’s why I am recommending we fund a nearly $10 million expansion at Custer State Park to create 175 new campsites. The best part about this investment is that the estimated economic impact of this expansion is so great that the project will pay for itself in a little more than a decade.
In the coming weeks, we will roll out details on several other improvements to enhance visitor experiences in our parks. Those investments will ensure South Dakotans can continue to enjoy these areas, as more visitors and new residents come to our state.
In my budget proposal, there is a list of other infrastructure projects that will help enhance our state – our quality of life, our colleges, state buildings, and our cultural centers. Please let me know if you have any questions about these items. But now, I’d like to turn your attention to public safety.
V. Public Safety
Over the last two years, we have watched riots and violence in the streets. Businesses burned to the ground. Police officers attacked. It’s happening all across the country. But thankfully, we haven’t seen that kind of violence and rioting here in South Dakota. That’s no accident.
It is because we respect our police. We support law enforcement. We fund public safety. So, let’s continue that support for law enforcement by ensuring they have the resources they need to do their job right.
One of the ways that we can improve public safety over the long-term is to improve our Department of Corrections. It’s no secret that the Department of Corrections needs improvement. Recently, we conducted a study that shows we need $600 million worth of new construction and facility improvements. We also need to address our staff shortages within the department and prison system.
I’m not going to ask you to spend $600 million for prisons today, but I am asking you to save additional reserves for it in the future. We can get the ball rolling on several of the items that were highlighted.
For starters, we need to pay our correctional workers what they deserve. The 6% across the board increase for all state workers will surely help. But it’s not enough to keep correctional pay competitive enough to recruit people to the profession. So, I am proposing an additional $2.1 million in targeted pay increases. This money will go directly to personnel, such as correctional officers, parole officers, and case managers. It won’t go to administration. That will help us retain good officers and attract new professionals to the field.
There are smart things we can do today to keep our communities safer in the long run. I am proposing that we use reserve funds to start addressing our prison facility needs. We know that most criminals who go to prison will be released one day, after they serve their time. If they find a job, it can reduce the chance they commit another crime. That’s why I am recommending we invest $28 million in a Community Work Center for Women in Rapid City. This will help incarcerated women learn the skills they need to get a job, contribute to society, and avoid a life of crime.
2. Courts and judges
Our judicial system plays a vital role in our public safety efforts, too. Sadly, courtrooms have become targets for violent criminals. We are taking steps to protect those who serve the public as dedicated members of the justice system. We are providing $5 million in funding for courthouse security. This is a strong starting point to begin modernizing security – it’s another way that we’re making South Dakota safer. We’re also investing half-a-million dollars for justice and judge salary increases to fairly compensate them for their service to our state per the legislation you all passed last year.
3. Mental health
Here’s another way that we’re going to strengthen our prison system: we aren’t going to rely on them to be mental health holding centers. Too often, when someone is experiencing a mental health crisis, they just end up in jail. That doesn’t help them, and it’s a strain on taxpayer dollars. We can take care of these individuals better. Let’s do it by creating regional behavioral health centers to serve people in crisis statewide.
Last year, we funded such a project for Pennington County, and construction is underway. I am proposing $15 million in one-time money to construct more regional facilities across the state. We can do a better job helping people struggling with mental health. Our state will be safer and healthier as a result.
4. First Responders
For most of us, we depend on first responders when we are in our darkest hours – and we hope to never need their services. But in our most trying times, they answer the call. They put their lives on the line to help others every day. Wherever you live – whatever and wherever your emergency may be – we want to ensure that every South Dakotan can be taken care of in an emergency.
I am recommending $24 million to fund a comprehensive reform proposal from our Departments of Health and Public Safety to improve emergency services. A significant portion of this investment will go to support our EMS workers and bolster service in our rural areas.
My proposal includes a series of investments to make much-needed upgrades to first-responder equipment – to keep them on the cutting e