PIERRE, S.D. – (Todd Epp-SDBA) – Gov. Larry Rhoden proposed his first state budget Tuesday, asking lawmakers for $51.6 million in new ongoing revenue while holding K-12 education, healthcare provider rates, and state employee pay flat during a year of slower sales-tax growth, according to his budget address delivered at the Capitol.
Why it matters
Rhoden’s plan maintains the state’s 137-year streak of balanced budgets, increases reserves to 12.5 percent, invests heavily in prison staffing and infrastructure, and sets aside $14 million for legislators to allocate. The proposal signals a caution-first stance heading into the 2026 session as revenues normalize after pandemic-era highs.
Revenue Picture and Big Three Compensation
Rhoden said the state expects 4.4 percent sales-tax growth this fiscal year and $60.3 million in new sales-tax revenue next year. Because total ongoing revenues lag projections by $7 million, the governor said the Big Three categories must remain flat.
Reserves and Economic Conditions
The budget raises general-fund reserves to 12.5 percent, or $413 million. Rhoden said the increase prepares the state for slower growth tied to weak crop prices, flat sales-tax performance, and lower one-time revenues.
Prison Staffing and Public Safety
A major increase involves $13.2 million in ongoing funding and 133 full-time employees for the new Rapid City women’s prison. The facility emphasizes treatment-based programming to reduce recidivism.
Infrastructure, Maintenance, and IT Upgrades
The budget includes $30.6 million in one-time funds to bring statewide maintenance and repair spending to 2 percent of asset value; $10 million for the IT Modernization Fund; $260,000 for a cloud-based State Radio backup; and $300,000 for a nuclear-energy study.
Airport Loans and Rural Healthcare
Rhoden proposed up to $15 million each in zero-percent interest loans for airport expansions in Sioux Falls and Rapid City. He also requested $500 million in federal authority for rural healthcare transformation.
Education and Workforce
Education-related items include $6 million in one-time funding for an Advanced Manufacturing Center at Southeast Technical College; $4.3 million for tech college equipment; and $1.7 million in ongoing aid tied to enrollment growth.
Unallocated Funds and Upcoming Tax Debate
Rhoden left $14 million unallocated for lawmakers and said he will outline a property-tax relief proposal during his State of the State address.
