Economy

Although the unemployment rate in South Dakota remains low, sales tax revenue has fallen short of projections and the state’s projected budget deficit has increased substantially over the past four months, reports the Capital Journal. The combination of these conditions means that Governor Dennis Daugaard and the legislature will either have to find additional revenue or make cuts to balance revenues and expenses before the end of South Dakota’s 2017 fiscal year in July.

After the Legislature approved a 0.5 percent increase in sales tax to supplement teacher pay, lawmakers anticipated a 16.9 percent increase in sales tax revenue, but so far sales tax revenues are up only 9.4 percent. To ensure that educators’ salary increases are maintained and property tax burdens are relieved, the state needs an additional $19.9 million.

Sales tax revenues have been hit by a slowdown in agriculture, which has resulted in a significant decline in farm equipment purchases. Alongside the decline in the agricultural economy, an increase in online sales may be contributing to the declining retail industry in South Dakota, according to KSFY News. State Economist Jim Terwilliger noted that out-of-state online retailers are not required to charge state sales tax. Although consumers are supposed to pay use tax for these purchases, many do not. Last year the Legislature passed Senate Bill 106 to force large out-of-state online retailers to collect and pay sales tax. The law seeks to challenge a 1992 US Supreme Court case that bars states from imposing tax collection on retailers who do not have a physical presence in the state. The issue is currently being considered in state court. 

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Sales tax revenue collected in South Dakota rose by roughly 9 percent in the first quarter of fiscal year 2017 relative to the first quarter of fiscal year 2016. Normally an increase of this magnitude would send legislators scrambling for ways allocate new found revenue. However, the increase can largely be attributed to the 0.5 percentage point increase in the sales tax enacted in June. As a result of the increase, sales tax revenues were expected to climb by approximately 16 percent

Why did revenue fall short of expectations? The baseline forecast of taxable sales might be to blame. While budget analysts forecasted around a 3 percent annual increase in taxable sales, the first quarter of fiscal year 2017 saw taxable sales decline by 1.8 percent relative to the first quarter of last fiscal year.

How did budget analysts arrive at a 16 percent growth in revenue from a half-point increase in the sales tax rate and 3 percent forecasted growth in the base? A half-point increase in the rate (from 4.0 percent  to 4.5 percent) represents an increase of 12.5 percent. Coupled with modest growth and moderate inflation, revenue growth of 16 percent isn't out of the question.

What caused the decline in taxable sales? This is more complicated. Slower economic growth, more un-taxed e-commerce sales, and shifting big purchases forward to avoid the higher rate all might have contributed. In the first edition of our forthcoming monthly newsletter, we plan to explore these potential factors in greater detail.

For more information on the economy in South Dakota, visit the South Dakota Dashboard economy page

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On September 29, Minneapolis Federal Reserve Bank President Neel Kashkari participated in several listening sessions with community leaders and a town hall luncheon on the School of Mines & Technology Campus. Listening session topics included new developments in the Rapid City Collective Impact initiative, highlights of the Rapid City Downtown Master Plan, an economic impact analysis of Main Street Square, and the outlook for wages and employment in Rapid City.  

During the town hall luncheon, Kashkari and former Congresswoman Heather Wilson (now president of the South Dakota School of Mines & Technology) shared dramatic stories of their roles in the historic 2008 bailout, when Kashkari led the Troubled Asset Relief Program at the U.S. Department of the Treasury. Kashkari also provided an overview of the Minneapolis Fed's initiative to end Too Big To Fail (TBTF) banks

When asked about the survival of community banks facing regulatory compliance issues, Kashkari emphasized the importance of ending TBTF banks first. “If we don’t change anything, more consolidation is coming. Unless somebody does something, that trend is going to continue. My hope is that if we as a country can do something about the biggest banks, and have confidence that we’ve done that, then there will be the opportunity to then relax some of the regulations that are smothering the community banks.”

The Minneapolis Fed has also established the Center for Indian Country Development. The center’s work focuses on outreach and collaboration with tribal communities on efforts including increasing access to credit, business development, housing and homeownership, and education.

If you missed the town hall luncheon, which was hosted by the Black Hills Knowledge Network, the Rapid City Economic Development Partnership and the Rapid City Chamber of Commerce, a recording of the event is available on the Minneapolis Fed's YouTube channel

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While the national economy is currently 4.8 percent, Sioux Falls has the lowest unemployment rate of any city in the nation at 1.9 percent. As reported by CNN Money, part of the low unemployment rate is attributed to the location of Wall Street banks in the city, especially Wells Fargo and Citibank.

Healthcare is another contributor to the low unemployment rate in Sioux Falls. Employment in that sector has almost doubled since 2000. Mayor Mike Huether adds that there are currently 3,000 job vacancies in Sioux Falls. However, with so much of the city already employed, it is difficult to fill those jobs.

To learn more about jobs in South Dakota, please visit please visit the South Dakota Dashboard resource page.

If you’d like more information about Sioux Falls, including data on housing, health insurance coverage and more, visit the South Dakota Dashboard’s Sioux Falls city profile page

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Economic growth in South Dakota’s two major metropolitan areas in 2015 paints a tale of two cities, according to figures released today by the U.S. Bureau of Economic Analysis.  While growth slowed to 1.0 percent in the Rapid City metropolitan area, Sioux Falls enjoyed a modest 2.2 percent expansion. Even the stronger economy in Sioux Falls, however, finished below the national average. Real gross domestic product (GDP) in the nation's 381 metropolitan areas increased by an average of 2.5 percent in 2015.

In the Rapid City metropolitan area, GDP grew from $6.23 billion to $6.41 billion in current dollars., while in Sioux Falls total GDP increased from $17.92 billion in 2014 to $18.73 billion.

In Rapid City, economic growth was driven primarily by activity in Trade, Education/Health Care/Social Services, Construction and Natural Resources/Mining, while Services suffered a decline. Meanwhile in Sioux Falls, Finance/Insurance/Real Estate was the leading growth sector with Professional Business Services and Education/Health Care/Social Services also making substantial contributions to make up for declines in manufacturing.

Sioux Falls and Rapid City both generally outperformed surrounding areas in the Northern Great Plains. Casper, WY experienced 0.4 percent growth while Cheyenne, WY saw only a 0.3 percent increase. Fargo, ND experienced a significant decline from its 3.1 percent growth rate in 2014 to only 1.3 percent growth in 2015. Sioux City, IA and Bismarck, ND both saw significant growth at 2.8 and 5.7 percent respectively.

With its release of 2015 data, the BEA also revised its calculation of economic growth in prior years based on new information. For Rapid City, the revised numbers indicate that the post-Great Recession recovery slowed in 2012 to 1.5 percent.  In 2013, the economy contracted and GDP was negative 1.4 percent, rather than the previously reported 0.9 percent decrease. And when the economy recovered in 2014, the recovery was stronger, with economic growth at 3.5 percent, compared to the 1.3 percent previously reported.

For Sioux Falls, the new numbers indicate that the metro area’s economy was much weaker than previously estimated. Growth slowed considerably in 2013 and 2014 to 0.2 and 0.5 percent respectively, compared to 1.5 percent and 1.7 percent reported earlier by the BEA.

Like Sioux Falls, Cheyenne, WY showed less recovery in 2014 than previously recorded. Estimates for 2013-2014 showed a 2.2 percent increase which was revised to 0.4 percent increase this year. Additionally, estimates in Casper were revised to show a two-year economic slump from 2011 to 2013. Previously a decline was only shown from 2011 to 2012. Estimates in Billings, MT and Fargo, ND remained similar to 2014 figures.

This post has been revised. The original version incorrectly stated that the Rapid City Metropolitan Area’s GDP in 2012 was 3.5 percent; it was actually 1.5 percent. 

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South Dakotans experienced the lowest real personal income growth in the United States in 2014, according to a new retrospective study by the U.S. Bureau of Economic Analysis. Adjusted for regional prices, real personal income rose only 0.2 percent, compared to 2.9 percent for the country. On a per capita basis, real personal income in South Dakota (in 2009 dollars) declined from $47,456 in 2013 to $47,235 in 2014.

The statewide decline was driven by a sharp drop in farm incomes. In non-metropolitan South Dakota, real personal income dropped 0.8 percent in 2014. Declines in farm income also fueled weak growth in real personal income in Nebraska, Kansas, Iowa and Montana.

Meanwhile, in the state’s two major metropolitan regions, after declines in 2013, real personal income growth rebounded by 2.2 percent in Sioux Falls and 4.0 percent in Rapid City in 2014. On a per capita basis, the increases were smaller, but still positive—0.2 percent in Sioux Falls and 2.3 percent in Rapid City. 

Among major cities in the Northern Great Plains, Sioux Falls’ real per capita personal income was the third highest at $48,169, compared to $56,274 in Casper, Wyoming and $49,146 in Bismarck, North Dakota. At $42,182, Rapid City trailed all other cities except Billings, Montana, which had a per capita real personal income of $40,148.

For other recent figures on personal income in South Dakota from the Bureau of Economic Analysis, see the South Dakota Dashboard’s June 22, 2016 post.

 

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Personal income rose 0.3 percent in South Dakota in the first quarter of 2016, compared to a 1.0 percent increase for the US, according to new data released by the US Bureau of Economic Analysis. South Dakota ranked 47th among the fifty states, trailed only by Louisiana, Wyoming and North Dakota.

Substantial declines in income from farming and mining hammered the Plains region, which lagged the rest of the country in the first quarter. Nationally, farm earnings dropped 3.5 percent in the first quarter, after falling 9.2 percent in the fourth quarter of 2015. Meanwhile, mining earnings declined for the fifth consecutive quarter and were a major contributor to income losses in Wyoming and North Dakota. According to the BEA, “Since peaking in the fourth quarter of 2014, mining earnings have declined 15.8 percent nationally, 21.8 percent in Wyoming and 44.7 percent in North Dakota.”

South Dakota’s limited income growth was primarily driven by increases in transfer payments, which includes Social Security and other government benefits paid to individuals for which no current services are performed. Increases in these transfer payments accounted for 53 percent ($67 million) of the $126 million increase in personal income in the state.

Earnings by sector rose in Construction (up $68 million), Health Care and Social Assistance (up $66 million), as well as Finance and Insurance (up $42 million) and accounted for the most significant gains in South Dakota, while earnings from Farming fell by $255 million.

For more information on trends in personal income in South Dakota, visit the Bearfacts page at the US Bureau of Economic Analysis. Trends in Median Household Income are available on the South Dakota Dashboard.

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South Dakota experienced its strongest economic growth since 2011 as the economy expanded by 1.8 percent in 2015, according to new data released by the U.S. Bureau of Economic Analysis (BEA). While the U.S. economy grew by 2.4 percent, the state’s inflation-adjusted economic growth rate was good enough to rank 22nd among the 50 states, and 24th on a per-capita basis. The state’s total GDP in inflation-adjusted dollars was $40.7 billion.

During all of 2015, growth in South Dakota’s gross domestic product was led by expansion in the agriculture, forestry, fishing and hunting sector, which increased on an inflation-adjusted basis from $3 billion to $3.2 billion, and retail trade, which rose from $2.9 billion to $3.1 billion. Other sectors showing positive growth in 2015 included construction (from $1.6 to $1.7 billion), health care and social assistance (from $3.6 to $3.7 billion), professional and technical services (from $1.1 to $1.2 billion), real estate and rental and leasing (from $4.1 to $4.2 billion), and wholesale trade (from $2.9 to $3.0 billion). Declining sectors included manufacturing (from $3.9 in 2014 to $3.8 billion in 2015) and transportation and warehousing (from $1.0  in 2014 to $0.9 billion in 2015).

South Dakota’s growth in 2015 was the fourth best among surrounding states, topped by Montana (3.5 percent), Minnesota (2.4 percent) and Nebraska (2.1 percent). Meanwhile, a significant decline in mining activity contributed to a contraction of gross domestic product in North Dakota (-2.1 percent).

Fourth Quarter 2015

In the fourth quarter alone, South Dakota’s gross domestic product grew by 2.3 percent, buoyed by the agriculture, forestry, fishing and hunting sector; as well as construction, wholesale trade, professional services, management, health care, and information.

South Dakota’s economy grew in the fourth quarter despite significant setbacks in key sectors and neighboring states. A national decline in the finance and insurance sector in 2015, for example, resulted in a drop in this sector in the fourth quarter in South Dakota. Other declining sectors included real estate, accommodation and food service, mining, utilities, non-durable goods manufacturing, transportation and warehousing, and government.

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The economy in West River South Dakota is being affected by depressed grain and energy prices. Hear about how major layoffs in the coal fields of eastern Wyoming, declining oil production in North Dakota and and plummeting farm incomes in eastern South Dakota will ripple through the Black Hills region from economist Jacob Mortenson

Jacob Mortenson photoMortenson, a consulting economist with the Black Hills Knowledge Network and South Dakota Dashboard, will speak at noon, Monday, June 27, at the South Dakota School of Mines & Technology's King Hall in Rapid City. Tickets are $25. You can register online

Mortenson, a native of Fort Pierre, has worked for a non-partisan agency in the U.S. Congress forecasting federal income tax revenue. His research, primarily on tax policy, has appeared in academic journals, as part of the Federal Reserve Board's working paper series, and has been featured by the Wall Street Journal. He lives in Sioux Falls.

Mortenson’s presentation is made possible with funding from Regional Health, Security First Bank, Black Hills Community Bank, West River Electric, Golden West Telecommunications, Wells Fargo Bank, the City of Rapid City, Rapid City Economic Development Partnership and the Bush Foundation.

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South Dakota's Black Hills might be a world-famous tourism destination, but when it comes to visitor spending it's Minnehaha County in southeast South Dakota that ranked No. 1 in 2015, according to a study published by the South Dakota Department of Tourism.

Minnehaha County accounted for about a fourth of all tourism spending in 2015. Pennington County, home to Mount Rushmore, was No. 2, and accounted for about a fifth of all tourism spending that year. 

Minnehaha County is home to the state's largest city, Sioux Falls, which dominates the state economically and drives growth in surrounding counties. The city's financial sector fuels a vibrant business environment, the state's highest wages and low unemployment. 

On the other side of the state is Pennington County, home to the second-largest city of Rapid City and longtime anchor to the state's tourism industry. Tourism is often referred to as the second-largest industry behind agriculture. As a region, the 15 counties that make up the Black Hills & Badlands region remained the leader in tourism followed closely by the 14-county Southeast region. 

The study defines tourism spending as money spent on lodging, food/beverage, retail, recreation and transportation based on a survey of visitors cross-checked against several other statistical sources that measure taxes, travel and employment data.

Here's a look at 2015 tourism spending by region: 

The Southeast region grew faster than the Black Hills & Badlands region from 2014 to 2015, 4.8 percent compared to 2.1 percent. The Black Hills & Badlands region accounted for more than half of all 2015 lodging sales. 

The Black Hills & Badlands region also includes the state's No. 3 county for tourism spending, Lawrence County, where tourists spent $475 million in 2015. Lawrence County is home to the historic Wild West and modern-day gambling town of Deadwood along with winter skiing and snow sports plus the town of Spearfish along Interstate 90.

Here are the top 10 counties for 2015:

  • Minnehaha -- $998 million
  • Pennington -- $701 million
  • Lawrence -- $475 million
  • Brown -- $180 million
  • Davison -- $107 million 
  • Custer -- $102 million
  • Codington -- $99 million
  • Brookings -- $91 million
  • Hughes -- $80 million 
  • Yankton -- $71 million 

 The study concluded that the tourism industry directly supported 36,377 jobs statewide in 2015 and generated $734 million in wages. 

 

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