State budget committee adopts ‘conservative’ fiscal year 2024 revenue estimates

PIERRE – The Legislature’s Joint Committee on Appropriations officially adopted the revenue projections for the remainder of fiscal year 2023 and fiscal year 2024 on Wednesday morning at the Capitol.

The committee adopted an ongoing revenue estimate of $2.3 billion for the remainder of the current fiscal year, which is an 8.2% increase over last fiscal year’s revenue. And the committee adopted a revenue projection of $2.39 billion for fiscal year 2024, which is a more conservative 3.8% growth.

The adopted revenue projections are used to set the fiscal year 2024 budget. The fate of several tax cut bills is dependent on the numbers in that budget, including three major tax cut proposals: a food sales tax repeal, a property tax reduction, and an overall sales and use tax reduction.

While South Dakota has seen a “very strong economy” over the past couple of years with record revenues, said Sen. Bryan Breitling, R-Miller, legislators are cautious heading into a projected mild recession in 2024.

“I think we’re continuing to see South Dakota as a strong economy going forward, yet we’re conservative knowing there are a lot of changes coming in the economic climate,” Breitling said, who is chairman of the Revenue Projection Subcommittee, which recommended the adopted revenue projections.

The projections were a compromise between two revenue projections provided by the Legislative Research Council, which works for the Legislature, and the state Bureau of Finance and Management, which is under the governor in the executive branch.

For the fiscal year 2024 revenue, legislators primarily adopted the average of the LRC and BFM’s revenue projections, except for the projected sales and use tax expected for the year. The adopted sales and use tax ongoing receipts for fiscal year 2024 represent 5% growth over the remainder of the fiscal year 2023 revenue, and just over $4 million more than the average of the two projections.

Rep. Chris Karr, R-Sioux Falls, pointed out that the adopted fiscal year 2024 revenue projection is slightly below the average growth for the last 20 years, excluding outlier years such as 2010, 2017 and the COVID-19 years.

“I think this is a good, conservative number at a time when our economy is at its strongest,” Karr said.