Unexpected Windfalls: South Dakota Sees $115M Revenue Boost Despite Tax Cuts

South Dakota unclaimed money

South Dakota has collected about $115 million more in total revenue this year, despite a $32 million decrease in sales tax revenue compared to the previous year (July 2023 through April 2024).

Derek Johnson, an economist from the state Bureau of Finance and Management, shared this information with the Governor’s Council of Economic Advisors on Tuesday. This council consists of economists and businesspeople who evaluate the department’s financial forecasts.

The fiscal year in South Dakota starts on July 1 and ends on June 30 of the following year.

The main reason for the revenue increase is the state’s unclaimed property fund. South Dakota has gained about $62 million more this year from unclaimed bank accounts, stocks, life insurance payouts, uncashed checks, and safe deposit box contents. After three years of dormancy, these funds revert to the state but remain a liability, as the state must pay the rightful owner if they come forward.

Johnson described unclaimed property as an unpredictable revenue source. South Dakota Bankers Association President Karl Adam, also on the council, noted that while the state relies heavily on this revenue, its sustainability is uncertain and may warrant caution in future years.

In addition to unclaimed property, the state’s investment earnings have increased by $35 million this year, boosting the general fund. These earnings come from assets like bonds and stocks, generating income through interest payments or dividends.

The contractor’s excise tax revenue, which contractors pay based on earnings from construction and repair projects, has also risen by about $24 million.

The $32 million drop in sales and use tax revenue is mainly due to a reduction in the state sales tax rate from 4.5% to 4.2% in July 2023.