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| C+ | South Dakota |
• Population (rank): 781,919 (46)
• Average per capita income (rank): $22,066 (38)
• Total state spending (rank): $3,465,272,000 (50)
• Spending per capita (rank): $4,432 (38)
• Governor: Mike Rounds (R)
• First elected: 11/2002
• Senate: 35 members: 15 D, 20 R
• Term limits: 8 years (consecutive)
• House: 70 members: 20 D, 50 R
• Term limits: 8 years (consecutive)
South Dakota has never shown much interest in long-term planning or performance measurement. Quite a few other states are in a similar boat, but many of them make up for it, at least in part, by using specialized agencies or departments to do performance audits and evaluations. This effort is non-existent in South Dakota and has little chance of developing.
Leaders here don't think this is much of a problem. They argue that this small rural state doesn't need the same kind of management expertise that bigger states do. "It's easier to feel the pulse" of programs and the staff that run them in South Dakota, says Auditor General Martin Guindon. He adds that the kind of expertise necessary to do top-flight performance auditing just can't be found in South Dakota's tiny capital, Pierre. The fact is, though, that several small states do manage to practice solid performance measurement, and there's a case to be made that even the smallest can benefit from at least a modicum of introspection.
Still, it's undeniably true that many of South Dakota's governmental functions run smoothly. That's certainly the case when it comes to finance. The state has one of the best-funded pension systems in the country, maintains low debt loads and has a budget comfortably in structural balance. With one of the broadest sales taxes in the country — one that includes many services — and a heavy inflow of federal dollars for agriculture, the revenue base is extremely strong. "We don't have the huge bumps up or down when income tax is hot or when the economy goes in the can," says James Fry, director of the Legislative Research Council.
Given that kind of stability, it might seem that the state wouldn't need a large reserve fund. But it has one. South Dakota has nearly $1 billion in the bank to back up a total budget of only $3.5 billion. According to Fred Schoenfeld, chief fiscal analyst for the Legislative Research Council, that cushion isn't intended for temporary downturns, as in many other states. Rather, it's for major emergencies, such as natural disasters.
Of course, like all states, South Dakota does run into financial trouble now and then. In fiscal 2007, the federal government blew an $11 million hole in the budget by requiring the state to boost the portion of Medicaid payments it had to make. "That's a big number for South Dakota," says Fry.
South Dakota also is taking steps to improve its procurement practices. It's instituted a new e-procurement system, complete with an online catalog, which saves the state and its vendors money and time. "We hope to pretty much eliminate paper from the process," says Jeff Holden, director of the Office of Procurement Management.
If there's one area that cries out for long-term planning, it's transportation. Although the state has an efficient system to track routine maintenance needs, most of its interstate highways were built in the 1960s and need new pavement. The state has $756 million in deferred-maintenance and construction needs. With rising construction costs tightening the transportation department's budget, the maintenance-and-construction backlog isn't likely to decline anytime soon.
Another bill that may be coming due has to do with the schools. A 2006 lawsuit brought by a coalition of parents in 59 school districts charged that the state's education system was underfunded. South Dakota teachers are the lowest-paid in the nation.
"If we get whacked with a major judgment" in the school case, Fry concedes, it might cause the state to rethink the way it uses its reserve funds. And that's why even some South Dakotans now think that it's time for long-range planning.
For additional data and analysis, go to pewcenteronthestates.org/gpp.