SD Budget Outlook Improves Amid Farm Income Rebound

The South Dakota Governor's Office is preparing for the state's next budget-writing season with a more optimistic revenue picture, but economic advisers warn of uncertainty due to federal policy shifts, drought, and labor shortages.

According to the latest revenue reports, the state finished last fiscal year with $29.7 million more than predicted, a 1.08% increase.

State sales tax revenue in July was up 12.8% compared to the same period last year, with average debit card transactions exceeding $50 for the first time this summer, reflecting gas and grocery purchases.

Farm income has rebounded from a difficult stretch based on first-quarter 2026 reports, with beef prices rising and grain prices increasing recently.

However, drought is affecting roughly 75% of the state, and extreme heat during corn's pollination stage will impact yields. Federal farm program payments make up between 25% and 30% of net farm income, and federal budget pressures could put those payments at risk.