South Dakota State Finances Receive a Grade of “B”

Unlike in most states, South Dakota’'s elected officials have only promised the amount of benefits they can afford to pay. Because of this, the state’s finances are in good health. The state has enough money to pay all of its bills and a surplus of $684.6 million, according to Truth in Accounting's (TIA) analysis of South Dakota's most recent financial filings. When broken down, this equates to a taxpayer surplus of $2,300 for each South Dakota taxpayer, which makes it a Sunshine State according to TIA. Compare that to Kentucky, which TIA calls a Sinkhole State because it has a taxpayer debt burden of $39,000!

These statistics are good for South Dakota, but what's troubling is that state government officials continue to obscure large amounts of retirement debt on their balance sheets, despite new rules to increase financial transparency. This skewed financial data gives state residents a false impression of their state's overall financial health.

Truth in Accounting is a Chicago-based nonprofit think tank that analyzes state financial reports when they are published. According to its report for 2016, South Dakota has $3 billion of assets available to pay the state's bills totaling $2.3 billion. This means that the state has $684.6 million available after bills have been paid, which breaks down to $2,300 per taxpayer. TIA's Taxpayer Surplus™ measurement incorporates both assets and liabilities, not just pension debt.

Because of an accounting rule implemented last year, South Dakota has to report its pension debt on its balance sheet. This year, the state reported a net pension asset of $162.9 million. However, the state's pension plans are actually underfunded by $129.8 million. The state reports an asset because an outdated pension valuation was used in the preparation of the financial statements.

Unlike most states, South Dakota does not have any retiree health care debt. Therefore, it is likely that it will be unaffected by the new accounting standard that requires states to report this debt on their balance sheets.

The bottom line is that South Dakota has enough money to pay its bills, so it received a "B" for its finances from Truth in Accounting. A "B" grade is given to states with a taxpayer surplus™ between $100 and $10,000.

See how South Dakota compares to Nebraska, North Dakota, and Minnesota. http://www.statedatalab.org/c/b9YyTGAx4ed4c77
Click on the link to go to an interactive chart at Truth in Accounting’s State Data Lab.