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South Dakota receives AAA credit rating in part for staying open during COVID

Gov. Kristi Noem said the rating is the result of the state's conservative fiscal policy.

Published: September 27, 2022 7:33pm

Updated: September 27, 2022 10:37pm

(The Center Square) -

South Dakota's long-term issuer default rating received a AAA designation from Fitch Ratings, the credit rating company said Tuesday.

South Dakota's vocational education program's revenue bonds issued by the South Dakota Health and Educational Facilities Authority received an AA+.

The state's fiscal operations, dubbed "conservative" by Fitch and its history of balancing budgets led to the AAA rating for the state, Fitch officials said in a news release.

"South Dakota's economy is diverse with important concentrations in agriculture, manufacturing, trade, finance and tourism," company officials said. "Although the state's population is relatively small, population gains have exceeded the U.S. average in recent years. During the economic expansion that preceded the pandemic, employment gains were steady and positive, albeit below national averages."

State officials raised revenue projections for fiscal year 2023 in July to $2.25 billion. The state has also made wise use of funds from the American Rescue Plan Act, Fitch officials said.

"The state has allocated almost two-thirds of its $974 million in ARPA funds to water and wastewater infrastructure projects," the company said. "Other priorities include broadband expansion, tourism marketing support, public health, and general government operations. Given the state's sizable surpluses and intention to primarily use ARPA for one-time purposes, the limited use of ARPA for general government operations does not create a structural budget issue for future years."

South Dakota performed better than other states economically because it did not mandate restrictions during the COVID-19 pandemic.

"Nonfarm payrolls declined by about 10% at the pandemic's start (from February to April 2020) below the national decline of 15%, and the state's labor market recovered faster than the national average," company officials said in the news release. "As of August 2022, non-farm employment in South Dakota exceeded pre-pandemic levels by 2%, led by strong growth in construction, professional and business services, and health care and social assistance."

Gov. Kristi Noem said the rating is the result of the state's conservative fiscal policy.

"Our administration has made it a priority to not raise taxes," Noem said. "We've paid off bonds and debt, balanced our budget, and grown our economy, which has resulted in this good news."

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