South Dakota

How Does South Dakota Compare to Other States?

South Dakota ranks 3rd among US states for its fiscal health, based on its fiscal solvency in five separate categories.

South Dakota’s strong fiscal position in FY 2013 was driven by very high revenues relative to spending and by low levels of debt. The state’s cash position indicates that South Dakota had between five and eight times the amount of cash needed to cover short-term spending in FY 2013. South Dakota’s revenues exceeded expenses. Long-term liabilities accounted for 9 percent of total assets, and the state had excess assets after meeting its debts. Debt levels were among the lowest in the nation at 1.3 percent of state personal income. Under its own accounting assumptions, South Dakota’s pension system was fully funded. However, when calculating the pension liability on a guaranteed-to-be-paid basis, the unfunded liability amounted to $6.7 billion.

See “Ranking the States by Fiscal Condition” for a complete explanation of the methodology used to calculate South Dakota’s fiscal health rankings.

1. South Dakota ranks 3rd in terms of cash solvency.

Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. In FY 2013 South Dakota held between five and eight times the cash needed to cover short-term liabilities, well above the national average.

2. South Dakota ranks 13th in terms of budget solvency.

Budget solvency measures whether a state can cover its fiscal year spending out of current revenues. Did it run a shortfall during the year? South Dakota’s operating ratio of 1.07 indicates revenues exceeded expenses by 7 percent in FY 2013, and the state realized a surplus of $323 per capita. 

3. South Dakota ranks 5th in terms of long-run solvency.

Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are there enough assets available to cushion the state from potential shocks or long-term fiscal risks? South Dakota’s net asset ratio indicates that after debts had been paid, the state had excess assets representing 31 percent of all assets. (Net assets are those left over after the government has paid its debts. They are a subset of total assets, which also include capital and government buildings. The net asset ratio measures the total of restricted and unrestricted assets, or net assets, as a portion of total assets.) South Dakota’s long-term liabilities represented 9 percent of total assets and $741 per capita, both about a quarter of the national average. 

4. South Dakota ranks 3rd in terms of service-level solvency.

Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? South Dakota’s total taxes as a percent of total state personal income were 4 percent. Total revenues represented 10 percent of state personal income, indicating South Dakota relied heavily on sources other than taxation to cover expenses in FY 2013.

5. South Dakota ranks 8th in terms of trust fund solvency.

Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities, other postemployment benefits (OPEB) liabilities, and state debt compared to the state personal income? South Dakota’s unfunded pension liabilities were 17 percent of state personal income, approximately half of the national average. (Pension benefits are recalculated based on a discount rate of 3.38 percent to account for the government’s guarantee to pay employees earned benefits.) OPEB and debt as a percentage of state personal income were insignificant.

State debt 

State debt is calculated from each state’s Comprehensive Annual Financial Report. South Dakota held no general obligation debt in FY 2013 and carried $0.50 billion in total state debt, representing 1.3 percent of state personal income or $595 per capita.

Pension liability 

Pension liability is calculated from each state’s pension actuarial reports. Under its own assumptions, South Dakota’s pension system was fully funded. However when calculating the state’s pension liabilities on a guaranteed basis, the unfunded pension liability was $6.4 billion, which was still better than the pension funds in most states.

OPEB liability

OPEB liability is calculated from each state’s Comprehensive Annual Financial Report. South Dakota’s total unfunded OPEB amounted to $0.07 billion in FY 2013. Relative to state personal income, this liability was very small and much lower than in most states.