CHICAGO — Double-A rated South Dakota closed fiscal 2010 without tapping into state reserves to wipe out an estimated $3.5 million deficit.

The state closed the shortfall mostly with higher-than-expected sales tax revenue.

The additional dollars came despite last year’s overall decline in sales tax revenue, which makes up 60% of the state’s general fund and fell last year for the first time in decades.

Credit analysts praise South Dakota for its strong fiscal management, above-average fund balances, and low debt obligations despite the ongoing economic downturn. The state does not issue general obligation debt.

Gov. Mike Rounds warned that South Dakota, like most states, will have a tough time balancing its fiscal 2012 budget without the support of federal stimulus money.

South Dakota relied on $101 million in stimulus dollars to balance its $1 billion 2010  budget.

“We’re pleased that fiscal year 2010 was closed successfully, and our budget for the current fiscal year anticipates no increase in taxes or use of reserves,” Rounds, who is finishing out his final year in office, said in a statement.

“But we must remember that fiscal year 2012, beginning a year from now, will be very difficult. Through sound management, we’ve been able to preserve most of our tools to address the challenge of the fiscal year 2012 budget.”

The state’s budget reserve fund has a balance of $43.4 million and its property tax reduction fund has a balance of $63.6 million.

Together the two funds total 9.5% of general fund spending for 2010.

Sales tax revenue in 2010 fell 2.4% from 2009, budget officials said. But the decline slowed throughout the year, and by the end of fiscal 2010 sales tax revenue actually brought in $2.5 million more than originally expected.

The additional $2.5 million in revenue, combined with just under $1 million in cuts, helped offset a $3.5 million 2010 shortfall and allowed South Dakota to avoid using its reserves.

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