A report from a group that assists the state legislature shows the state’s economic growth is driven by inflation and federal stimulus dollars.
The report by the Legislative Research Council shows the state’s organic growth declined in the last year.
That could complicate Gov. Kristi Noem’s push to cut the state sales tax on food.
During her annual state of the state address, Noem said South Dakota has the strongest economy in the nation.
“We continue to have record surpluses," Noem said. "What should we do with our surplus? My answer is simple: Cut taxes and provide relief to South Dakotans.”
Just a month ago Noem said the state should anticipate $310 million in additional ongoing revenue. On Tuesday, Noem said state revenues continue to grow.
"December revenues have us up another $10 million above legislative adopted estimates," she added. "Now is the time – let’s get it done."
But the Legislative Research Council report shows that growth may only be temporary. The report stated federal stimulus dollars and inflation each contributed seven percent growth.
The report, which was distributed to legislative leaders, said the state’s organic growth shrunk by nearly two percent, according to sales tax collections.
Republican State Senator Helene Duhamel is the majority whip. She said the LRC report shows the state is not in a good position to permanently cut food sales taxes.
“It’s a big deal, and we’ve all been told that,” Duhamel said.
Duhamel said federal money is going away in two years. She said the state is facing many needs and questions whether now is the right time.
“Let’s say you had to put a roof on your house and didn’t have insurance. You’d start saving,” Duhamel said. “But would you put that off or would you pay for it when you had the money to pay for it? And we do right now, to make some big investments.”
The state is seeing rising costs in many areas, including public safety, health care, and education. Two proposals seek to build and expand prisons in Rapid City and Sioux Falls. Lawmakers face a voter mandate to expand Medicaid coverage. Half-a-dozen nursing homes have closed in the last year. Teacher pay is at 50th in the nation, again.
