By: Makenzie Huber, South Dakota Searchlight
The South Dakota Legislature allocated the last of its federal pandemic aid earlier this month, marking a shift in state spending and budgeting.
The federal government infused billions of dollars into the state through several rounds of congressional legislation intended to help the country through the COVID-19 crisis. The last of those efforts brought nearly $975 million to the state through the 2021 American Rescue Plan Act, known by the acronym “ARPA,” with most of the money used for water and wastewater projects. The state Department of Agriculture and Natural Resources has been rushing to fund projects across the state.
With the last of the money appropriated, South Dakota is nearly “back to normal,” as Gov. Kristi Noem warned legislators late last year in her budget address, and will have to prepare future budgets without the cushion of federal pandemic money they’ve had for the last several years.
The 2024 legislative session ended March 7, except for a day on March 25 to consider vetoes. Lawmakers approved uses for the remaining $130 million from ARPA, including:
- $5 million in telemedicine grants to nursing homes and assisted living facilities.
- Over $100 million to water and wastewater projects for state government and local projects statewide (with authority to spend more if other approved ARPA uses aren’t spent by federal deadlines).
- Over $12 million for water and sewer infrastructure at the sites of the future men’s prison in rural Lincoln County and future women’s prison in Rapid City.
The money had to be appropriated by the end of this year and must be spent by the end of 2026, or it reverts back to the federal government.
Overall, South Dakota received nearly $14 billion of pandemic relief funds from March 2020 through January 2023, according to South Dakota News Watch. State government received about $4.2 billion while the remaining $9.6 billion went to local governments, health care providers, schools, businesses and individuals.
Most of the state’s ARPA funds went toward one-time projects, said Yankton Republican Sen. Jean Hunhoff, who co-chairs the legislative Joint Appropriations Committee.
“I think South Dakota had the wisdom and the leadership of both the governor and the Legislature to realize we’re not going to start anything new,” Hunhoff said. “We’re going to support what we have, meet some of those short-term needs, but we’re not going to grow our programming simply because those dollars flowed in.”
In addition to the water projects, the state supported $50 million in broadband expansion with ARPA funds, $50 million in workforce housing, $35 million in tourism marketing, $20 million in ambulance system improvements, and $15 million to expand regional behavioral health facilities.
Not all states did that. Illinois, for example, allocated 32% of its ARPA funds as of July 2022 toward ongoing, operational expenses, according to a Pew Charitable Trusts analysis published in December.
Using one-time funds for ongoing projects could lead to “uncertainty,” the report said. According to Illinois Public Media, the state’s ARPA-funded programs will end once federal funding runs out or will require new funding from the state or other sources.
South Dakota won’t have that problem, Hunhoff said.
“That’s the concern when the federal dollars are gone,” Hunhoff said. “It is not the state’s intention and it’s not its responsibility to start spending general funds to keep those new programs going.”
The influx of federal funds will continue influencing the state’s economy for the next few years, since the money won’t have to be spent until the end of 2026. The state has seen an increase in contractor’s excise tax in recent years due to increased construction spurred by federal funding.
Before the pandemic, less than 40% of the state budget came from federal funds. That percentage spiked to 56% in 2021 and has been above 40% in most years since.
With federal support receding to pre-pandemic levels, Hunhoff hopes legislators turn their attention to economic development next session.
“If we can continue to encourage people to come and relocate to South Dakota, get big businesses in here and expand that base for economic development, that’s what you look at for your return on investment,” Hunhoff said. “If you don’t have the federal dollars, you need to keep growing in economic development and our major industries with tourism and agriculture.”
South Dakota Searchlight is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. South Dakota Searchlight maintains editorial independence.
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