South Dakota Gov. Dennis Daugaard has proposed a constitutional amendment to require a structurally balanced budget every year and prohibit the state from issuing debt to cover operating expenses.
Daugaard said rating agencies told him the amendment could help win a coveted triple-A rating for the state, according to local reports.
Standard & Poor’s rates South Dakota AA-plus. Neither Moody’s Investors Service nor Fitch Ratings maintain underlying ratings on the state.
The state’s constitution now limits state debt to $100,000 and provides for an emergency tax to erase any deficit, but does not specifically require a balanced budget, reports said. South Dakota does not issue general obligation debt but several state agencies do, and Daugaard told lawmakers that a balanced-budget measure would lower borrowing costs.
Daugaard proposed the amendment at the same time that he unveiled his fiscal 2013 budget. The spending plan totals $4.1 billion, with general fund revenues of $1.2 billion, $1.7 billion of federal funds, and $1 billion of other funds.
The spending plan includes a 2.3% increase in K-12 education as well as a $12 million one-time spending increase. All state employees would receive one-time bonuses equal to 5% of their salary this fiscal year and ongoing 3% raises starting next year.
The state would tap $20.2 million in reserve funds to help repair damage from the Missouri River flooding last year.
“My proposed budget heeds the principles I put forth last year,” Daugaard said. “Ongoing revenue pays for ongoing expenses, one-time funds pay for one-time expenses, and reserve funds are used only for emergencies.”
