South Dakota’s governor has reported a surplus in the state budget for the first time since 2002, according to The Washington Post.
Surpluses are a good thing for government. They show that government is managing its money well and not overspending. Surpluses can be used in future budgets or to cut taxes, which is an even better thing!
The state budget runs from October of one year to October of the next. The state’s fiscal year starts in July, so the 2017 budget was just approved last month.
South Dakota’s fiscal year 2017 (starting in July 2016 and ending in June 2017) had a $92 million surplus, The Post reported, based on figures from the Governor’s Office of Budget Management. That figure includes about $86 million in the general tax fund and about $6 million in other funds. Bloomberg reported that this was due to lower than expected Medicaid costs and tax revenues coming in higher than projected.
Had a deficit
In 2011, South Dakota Governor Dennis Daugaard reported a surplus of nearly $40 million. However, that same year, the state government had a deficit of nearly $200 million.
How can that be? It’s because the state government only reports one budget – not separate budgets for education, health care, transportation, and other services it provides.
The governor’s surplus only referred to the general fund budget, which covers things like education and health care. In fact, in 2011 South Dakota cut funding for higher education by almost 10%, according to Inside Higher Ed.
Surpluses occur when government takes in more money than it spends. Deficits happen when spending exceeds income. A balanced budget is one in which spending equals income – there is no surplus or deficit.
Governors typically report surpluses at the end of their term as part of their exit strategy.
Is not likely to have a surplus in 2011
The state of South Dakota did not have a surplus in 2011, nor did it in 2012 or 2013. Surpluses are very rare for South Dakota, and the state government does a good job of managing its funds.
Surpluses occur when money is left over in a budget after expenses are paid. A surplus can be held in an account or deposited into the state’s savings account, the internal revenue fund.
According to the National Conference of State Legislatures, South Dakota had a total budget of $4.8 billion for fiscal year 2011. Of that, 96 percent was spent on services and programs, leaving just 4 percent left over.
This is explained by NCSL representative Tim Halsey-Brand New Balance Trainers For Women Sale Online Cheap Sale Marketable Cheap Marketable Buy Cheap Sale Online gWpJpwzd, who notes that the state’s general fund balance was negative $2 million at the end of fiscal year 2011 due to revenues exceeding expenditures.
Would invest the funds for future use
South Dakota’s government has a history of being careful with its budget. The state almost always reports a surplus, and almost always returns the funds to the state’s coffers.
According to CNBC, South Dakota returned nearly half of its budget surplus in each of the last four fiscal years. Only once in that time did the state spend more than it took in, and even then it only spent about 1 percent more than it had.
By investing the funds, South Dakota’s government is preparing for any financial emergencies that may come up. By having a surplus in its coffers, the state can quickly use these funds to address issues that arise.
However, if South Dakota Governor Dennis Daugaard reports a budget surplus in 2011 (the year he was elected), that state government likely returned funds to the public.
All of the above
In the United States, most states have what’s called a balanced budget requirement. This means that state governments are required to end their fiscal years with a zero or deficit balance in their spending and revenue accounts.
This does not apply to South Dakota, however. The Mount Rushmore State is one of just two states that do not require a balanced budget. The other is Kansas, which has suffered repeated downgrades of its credit rating due to repeated deficits caused by tax cuts.
South Dakota passed a law requiring a balanced budget in 1994 but repealed it in 1995 after the farm economy went into recession at the time.
The lack of a balanced budget requirement may explain why Governor Kristi Noem reported a surplus for fiscal year 2011 (July 1, 2010 through June 30, 2011), when the state faced an economic downturn for the first time since then.
A surplus happens when spending is lower than revenue for the period, and it can be used to either reduce future taxes or pay down debt or expenses from previous years.
