State legislators get a pay cut next year
Neal Pinnow has two jobs. One is his Lemmon-based exterior remodeling company.
“We specialize in seamless siding—of course we do other kinds of siding—replacement doors and windows, seamless gutters, decks," he said.
But for 10 weeks a year, Rep. Pinnow (R-Lemmon) is a state lawmaker— who spends most of his time at the state capitol in Pierre. He said it’s a challenge to balance those responsibilities.
“I have a construction supervisor that runs everything while I’m gone, along with an office manager, which they did great," Pinnow said. "Without those two people there’s no way I’d be able to do this.”
Outside of a daily check in call, Pinnow said during the legislative session he's pretty much out of touch with that's going on at his business day-to-day.
Next year, the salary for Pinnow and his fellow lawmakers will drop by about $1400 - from nearly $14,800 down to $13,400.
It’s the first decline, since lawmakers tied their salaries to the state’s median household income five years ago.
Lawmaker’s pay is designed to cover their time away from home and their work during the ten-week session. They also receive a stipend for food and housing. Pinnow said between that and the legislative salary, he’s able to cover his costs.
However, it’s essential he has the right staff in place to keep his business going.
“Without those pieces of the puzzle in place, there would have been no way to even think about doing it,” Pinnow added.
When state lawmakers raised their salaries in 2018, the issue inspired passionate debate. That’s when they also voted to tie their compensation to the state’s median household income. It was the first pay raise for legislators in 20 years. For decades, it was stuck at $6,000.
Former Sen. Deb Soholt (R-Sioux Falls) spoke in favor of the idea at the time.
“If you look around, we do not represent the demographic of the people South Dakota,” Soholt said during a 2018 Senate floor debate. “I would say that people in their prime earning years, they simple cannot do this. Either you’re doing really well in your own business, or you’re retired, or you’ve got support coming from somewhere. But it would be difficult to step away.”
When the law went into effect a year later, legislator salaries nearly doubled.
However, the salary increase has changed the demographic makeup of the state legislature little. It remains mostly business owners, retired individuals, lawyers, farmers and ranchers.
South Dakota is one of ten states where median household income dropped in 2022. Other states include Idaho, Illinois, Mississippi and Vermont.
That decline in median household income counters what Republican Gov. Kristi Noem touted during much of 2022. Here's a comment from the governor’s annual budget address last year.
“The last four years, we have made South Dakota the strongest state in America,” Noem said in 2022. “We lead the nation in almost every single economic metric. Our personal income growth is number one.”
At the time, U.S. Bureau of Economic analysis had South Dakota’s personal income growth just ahead of Texas and behind North Dakota.
But a recent report from the U.S. Census shows the median household income has declined by nine percent.
One regional economist, Ernie Goss who teaches economics at Creighton University, said he expects slow wage growth for state workers in the coming years.
"In South Dakota you got two sectors that are much larger relative to other states in the U.S. and that would be agriculture and banking and finance," Goss said.
He said higher interest rates can negatively affect both those sectors. For farming, a stronger dollar means higher priced commodities overseas. For banks, higher interest rates mean fewer people are taking out loans or refinancing.
However, Goss said the state’s economic outlook has some bright spots.
“Looking long-term—that’s beyond the next several quarters—the South Dakota economy is a strong economy," Goss added. "Agriculture will do quite well when the global economy improves and when the dollar weakens a bit.”
In a few weeks, state lawmakers will hear from Gov. Noem about the state’s fiscal health in her proposed budget. Noem’s already indicating revenues will come in lower than previous years. She’s cautioning lawmakers to stick to a “tight budget.”
In January, state legislators will kick off the 2024 session. This time with smaller checks.