State Budget Practice Report Cards and Budget Resource Guide
South Dakota was one of only four states with no average budgetary grade below B for fiscal 2015 through 2019. It earned As in two categories: legacy costs and budget maneuvers.
It was one of seven states receiving the top grade in legacy costs and, alongside Wisconsin, one of only two with a fully funded pension system in 2019. Unlike most states, South Dakota does not need to put aside money to fund other postemployment benefits (OPEB), primarily health care, as it stopped subsidizing them in 2015.
Its budget maneuvers grade reflected the state’s avoidance of one-time actions to achieve balance. The accomplishment was aided by South Dakota’s frugal spending habits and stable tax base, which relies heavily on a sales levy that covers more services than most states.
South Dakota’s biggest improvement came in budget forecasting. In 2015, the legislature unanimously passed a bill designed to “strengthen the financial practices of the state.” The measure requires annual publication of a long-term financial plan, including three years of revenue and expenditure projections. Despite the change in long-term estimation procedures, the state’s continued lack of consensus revenue forecasts held its category average to a B.
Its B average in reserve funds reflects policies for disbursement and replenishment of the Budget Reserve and General Revenue Replacement funds. Combined, they had a 2019 balance of $170 million, equivalent to 10.4 percent of general fund expenditures.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.