South Dakota reserves increase 42%, mostly due to federal COVID aid
A new report says the state government of South Dakota increased its total reserves by 42.2% in one year, mostly due to federal COVID relief aid.
The increase happened due to unspent General Fund appropriations after South Dakota spent $29.2 million less than it budgeted while taking in $62 million more than expected in revenue.
In turn, "most of the General Fund savings are attributed to Coronavirus Relief Fund federal aid," the report says.
These numbers were released in South Dakota's Annual Comprehensive Financial Report for Fiscal Year 2021.
Fiscal year 2021 ran from July 1, 2020, to June 30, 2021.
Total reserves increased from $215.9 million in 2020 to $307.1 million in 2021. The 42.2% increase represents $91.2 million. Total reserves have increased by 120.9% since 2012, when the reserves were at $139 million.
Gov. Kristi Noem says the state needs to be cautious.
"Last year — in the face of the pandemic — we increased our savings from 10% as is traditionally done, to 12% of our budget," she said earlier this month during her FY 2023 budget address. "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."
State government revenue increased from $4.5 billion to $6.1 billion between FY 2020 and FY 2021.
The biggest factor is that South Dakota received $1.2 billion in federal grants related to the pandemic in FY 2021, the state's fiscal report says.
The report says revenue also increased due to the growing economy and construction industry, which brought in $133.3 million more in sales, use and contractors excise tax. That's a 10.4% increase.
More than half — 51.4% — of South Dakota's FY 2021 revenue came from federal grants and contributions. Another 34.4% came from taxes, while 9.4% came from charges for government services.
Spending also increased, from $4.3 billion in 2020 to $5.6 billion in 2021.
Most of the increase in spending comes from the extra federal COVID funding, the report says.
South Dakota spent most of its FY 2021 money — 27.8% — on "taking care of people" through the departments of health, human services and social services. The state spent 22.9% of its money on the pandemic response, 19.1% on education (kindergarten through college), and 12.6% on transportation.
South Dakota has a net worth of $8.1 billion, a 10% increase.
The state also retained AAA ratings — the highest possible — from the top three bond rating agencies.
Its retirement system is funded at 105.5%, higher than the national average of 85%.
"The long-term experience of South Dakota Retirement System (SDRS) has been very favorable, resulting in a funded status that exceeds virtually all other state retirement systems," the report says.
The report says SDRS remains well funded thanks to long-term investment returns, employers and members making their required contributions, and managing benefits and liabilities in a sustainable way.
South Dakota also grew its tourism industry in 2021.
"Tourism activity was significantly impacted by the pandemic, but efforts by the State to attract individuals looking for outdoor recreational activities mitigated this impact. As a result of these efforts, tourism activity rebounded," the report says.
Visitor spending is estimated to have increased 31% from October 2020 to October 2021. The number of hotel room bookings and airport arrivals are estimated to have increased 33% and 77%, respectively, during this time period.