South Dakota’s top budget official, Jim Terwilliger, warned Thursday that the state is facing another “belt-tightening” budget cycle. Speaking at the Governor’s Council of Economic Advisors meeting, Terwilliger urged caution as general fund revenues through September fell 2.5% short of projections—$17.4 million below expectations. Sales tax collections alone were down $6.1 million.
State economist Derek Johnson cited weak consumer sentiment, rising prices, and slower spending as contributing factors. The farm sector is also under pressure, with taxable sales of machinery down over 20% and crop prices lower than last year, though cattle prices have risen.
Local governments are feeling the strain. Sioux Falls has already cut $6 million in expenses and may raise fees to cover a $4 million shortfall, citing reduced restaurant traffic and hotel stays. Meanwhile, Rapid City is seeing modest growth tied to the Ellsworth Air Force Base expansion, though its 3% sales tax increase barely outpaces inflation.
Retailers anticipate a lean holiday season, with surveys showing households plan to spend $1,600 less on gifts. Tariffs, child care costs, and labor shortages were also mentioned as key economic challenges.
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