Previewing the state legislative session

The new year is right around the corner, and lawmakers and lobbyists across the state are gearing up for the next South Dakota Legislative Session. The first day of session is January 8 and as usual it will kick off with the Governor’s State of the State address. While only the Governor and her team know what will be contained in 2024 State of the State address, we can guess at some of the major topics that lawmakers will wrestle with during the upcoming legislative session.

One topic that will likely steer most of the fiscal policies will be the “Sales Tax Cut Holiday” that was implemented this fiscal year (FY) after passage during the 2023 Legislative Session. Today, the state’s FY24 budget is coming in slightly above adopted projections overall. However, the Sales Tax numbers have come in below the legislature’s adopted projections thus far. The lagging Sales Tax numbers may give legislators some pause when it comes to passing any significant ongoing increases for state funded programs in the next fiscal year. There will likely be discussion on both ends of the tax cut. Some will propose to make the Sales Tax cut permanent, and conversely, others may advocate to shorten the tax holiday to an earlier date in fear of potential budget deficits in the future.

During the summer of 2023, legislators participated in two different summer studies that were authorized during the last session. Summer studies allow a small group of lawmakers to take a deep dive into a specific subject matter and bring information, and sometimes legislation, back to the entire body for consideration during the next session.

In 2023, one summer study focused on “County Funding and Services” and the other on “Sustainable Models for Long-Term Care.” The major takeaways from the county funding summer study were a handful of proposals to find ways for counties to save money, and to look at some options to provide more ongoing revenue to them as well. A few of the notable proposals from the study were to allocate more of the Alcohol Tax to counties, allowing additional fees to be collected, and funding some services through the state instead.