SOUTH DAKOTA BUDGET COMMISSIONER WARNS OF ANOTHER DIFFICULT YEAR AS REVENUE LAGS PROJECTIONS | Radio 570 WNAX

PIERRE, S.D. — South Dakota’s top budget official says the state is on track for another belt-tightening year, as revenues continue to trail expectations and economic signals remain mixed.

Bureau of Finance and Management Commissioner Jim Terwilliger told the Governor’s Council of Economic Advisors that a cautious approach is warranted in the months ahead. Through September, general fund revenue was 2.5% below projections—about $17.4 million short—with sales tax receipts $6.1 million under estimates. State economists are closely watching October tax collections for clearer direction.

Revenue picture: slower spending despite higher incomes

State economist Derek Johnson noted that consumer spending has cooled even as personal incomes have risen. Weaker consumer sentiment and higher prices are contributing factors, he said, dampening discretionary purchases and weighing on sales tax collections.

Farm economy pressures

A softer agricultural sector is further dragging revenue. Taxable sales of farm machinery dropped 21% in fiscal year 2025 and were down about 20% in the first quarter of fiscal 2026, which began in July. Prices for corn, soybeans, and wheat are lower than a year ago, though cattle prices are up, offering some offset.

City snapshots: uneven conditions across the state

Local reports underscore a patchwork economy:

• Sioux Falls: City Finance Director Shawn Pritchett said sales tax revenue will miss the target. The city has already cut $6 million in ongoing expenses and is considering fee increases to close an additional $4 million gap. Softer restaurant traffic, event ticket sales, and hotel occupancy are evident.
• Rapid City: Growth tied to the Ellsworth Air Force Base expansion and continued in-migration to the Black Hills is providing a lift. City sales tax collections are up just over 3% so far this calendar year, a pace that roughly matches inflation, according to Marnie Herrmann of Security First Bank.

Retail braces for a lean holiday season

Retailers anticipate a tight holiday. Kevin Nyberg of Nyberg’s Ace Hardware, with stores in Sioux Falls and Watertown, cited national surveys indicating households plan to spend about $1,600 less on Christmas gifts this year. He hopes promotions—discounts, rewards, and rebates—can keep customers coming through the door. “Call it a gimmick, call it a marketing ploy — either way, it works,” he said.

Workforce and cost pressures persist

In the Brookings area, manufacturers and other employers face multiple headwinds. Carla Gatzke of Daktronics pointed to tariff impacts, child care costs and eligibility, and ongoing workforce shortages as key challenges. South Dakota’s unemployment rate is 1.9%, the lowest in the nation, with roughly three job openings for every unemployed worker—conditions that can constrain growth even as they signal a strong labor market.

Outlook: cautious path ahead

State budget writers are preparing for the possibility that revenues may continue to lag, at least in the near term. With mixed signals from consumers, agriculture, and regional economies—and inflation still a factor—the administration is signaling prudence as it awaits more data from the fall tax collections.