Penny Wise, Pound Foolish: What South Dakota's "Surplus" Really Tells Us

One thing I hear over and over when I talk to families in District 9 is concern. Concern about where the money for both medications and groceries is going to come from. Concern about where they can find affordable behavioral health treatment for loved ones. Concern about the cost and availability for elder care.

So when I read that South Dakota just closed the books on a $69 million surplus, my first reaction wasn't celebration. It was a question: where did that money come from, and who needed it more than the reserve fund did?

The number that should give us pause

Gov. Larry Rhoden's office announced the surplus with the kind of language you'd expect: "good stewardship of taxpayer dollars," "the South Dakota way." And to be fair, some of it is good news: sales tax revenue grew faster than expected, which reflects a state economy that's holding up.

But $32 million of that $69 million surplus — nearly half — didn't come from unexpected revenue. It came from the Department of Social Services simply not spending money that had already been budgeted for it.

This is the department responsible for Medicaid, SNAP, and addiction and behavioral health services. Money that was allocated, presumably because someone determined it was needed . . . and then it sat unused. That seems strange, right?

The state's own Bureau of Finance and Management commissioner declined to explain exactly why when asked directly, saying the details would come later to the Legislature's budget committee. As of this writing, we still don't have that breakdown. But the size of the number, on its own, is worth sitting with.

Whose money is this, anyway?

Before we even get to the question of funding reserves versus public need, I think it's worth naming something plainly: this is our money. It didn't originate as a government asset that the state is generously choosing to spend on us. It came out of South Dakotans' paychecks and purchases, handed over with the expectation that it would come back in the form of roads, schools, healthcare, and support when people need it.

When a state agency leaves $32 million of that unspent — money that was already earmarked to help people — it's not "saved." It's money that didn't do the job it was collected to do. That's a different thing than fiscal discipline, and we shouldn't let the two get confused.

‍I work in marketing, and one thing I learned early on is that if I underspend on a Facebook ad budget, that’s not a good thing. That means I’ve really missed the assignment. Something went wrong, and I didn’t reach the people I needed or wanted to. Again, we don’t know why DSS came in so under budget. But we do know that this agency serves South Dakotans who are most in need, and by many accounts, is understaffed and stretched thin.

Maybe there’s a good reason why they didn’t spend their full budget. But maybe it didn’t do all the good it could have.

Saving is not the same as hoarding

South Dakota's reserve funds now total $325 million — 12.7% of the current budget, above the traditional 10% target the state has held for years. I want to be clear about something: I believe in a healthy reserve. Any household, business, or government that doesn't plan for a downturn is being reckless. That's not in dispute.

But there's a meaningful difference between responsible saving and hoarding. A rainy-day fund is supposed to be there for the rainy day. And for a lot of South Dakota families, it's already raining — in an addiction and behavioral health crisis that providers describe as urgent, in rural communities where the nearest hospital keeps getting farther away, in schools that have gone another year without a real increase in support.

Here's the contrast worth sitting with: Gov. Rhoden's original budget proposal in December called for flat, 0% funding for the "big three" — our schools, our state employees, and our Medicaid providers. Lawmakers eventually pushed that up to a 1.4% increase before passing the budget — but that's still below the rate of inflation, and it took legislative pressure to get there. The governor's starting position was zero.

Meanwhile, the state grew its reserves beyond where they've traditionally sat and left $32 million in social services funding unspent.

‍ That's the part that reads as penny wise and pound foolish to me. We're protecting the bottom line today in a way that risks costing us more down the road — in ER visits that could've been prevented care, in kids who fall further behind, in a workforce that leaves the state because we won't invest in the people who make it run.

Accountability cuts both ways

Rep. Erik Muckey, a Democrat on the Legislature's budget committee, raised exactly this concern when the surplus was announced. His point wasn't that South Dakota should abandon fiscal discipline — it was the opposite. He's asked, consistently, whether the state is really doing enough to help the people these programs are meant to serve, even while keeping the state on solid financial footing. Those two goals aren't in tension. You can run a tight, responsible budget and make sure the money set aside for people in need actually reaches them.

That's the standard I think we should hold every state agency to — not just "did we stay under budget," but "did the money we set aside actually do what it was supposed to do." Underspending on addiction treatment or economic assistance isn't automatically a win just because it makes the year-end numbers look tidy. Sometimes it means people who needed help didn't get it, or couldn't navigate the system to access what was already theirs.

What I'll be watching for

The real answers are still coming. The Legislature's Joint Appropriations Committee is expected to get a line-item breakdown of exactly where that $32 million in DSS reversions came from. I'll be watching closely, and I'll share what I learn — because "the department didn't spend the money" is not the same answer as "the department spent the money wisely" or "the department made it harder for people to access what they were owed."

In the meantime, here's where I land: fiscal responsibility means both parts of the sentence. Save for tomorrow. Show up for today. South Dakota is currently only doing the first one, and calling it a full sentence.

That's the kind of accountability I want to bring to Pierre.