CHICAGO — Lawmakers in South Dakota, typically one of the first states to complete its budget, last Friday approved a $4 billion, all-funds fiscal 2013 budget that reflects the state’s strengthening fiscal position.

The budget restores last year’s deep cuts to education funding and increases spending on Medicaid. The spending plan also features 3% raises for state employees and a one-time bonus raise of 5%.

Separately, the Legislature approved a $206 million, 10-year capital plan for the state’s higher education facilities. The South Dakota Building Authority will issue the bonds on behalf of the South Dakota Board of Regents.

South Dakota does not issue general obligation bonds and does not have a capital budget. Maintenance and capital projects are approved on case-by-case basis.

The 2013 general fund budget totals $1.2 billion, up from $1.1 billion in the current year. School districts will see a 2.3% spending increase as well as a $8.7 million one-time cash infusion and $8.4 million for curriculum funding.

Most of the state’s higher-than-expected revenue growth was plowed into one-time measures in the new and existing budgets, according to Annie Mehlhaff, principal fiscal analyst for the Legislative Research Council. “A lot of the increase in revenues we spent only on one-time things, and didn’t build it into the base because we were cautiously optimstic,” she said. “We didn’t want to count on it forever.”

Just a year after the state suffered from devastating floods and widespread rainfall, residents are now fearful of a drought. It could snuff out the state’s nascent recovery, Mehlhaff said.

“Agriculture is our number-one economic driver, and the prices are through the roof for us,” she said. “So if that takes a sharp turn down, then our recovery is going to be much, much harder.”

Lawmakers also approved a voter referendum on a constitutional amendment that would require the Legislature to pass a balanced budget every year. Proponents, including Gov. Dennis Daugaard, who proposed the measure, said it would improve the state’s credit rating.

Also in November, residents will vote on a measure to raise the state’s sales tax by one cent, raising the rate to 5%. The state would use half of the new money for Medicaid funding and half for state education aid. The new dollars would have to be on top of a baseline spending established in the fiscal 2011 budget.

Standard & Poor’s maintains an issuer rating of AA-plus on South Dakota. Fitch Ratings rates the state’s lease-backed debt AA-minus. Moody’s Investors Service has no underlying ratings on the state.

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