PIERRE, S.D. (KELO) — Governor Kristi Noem delivered her 2022 budget address Tuesday. Her plan includes 5% increases for education and state workers. It also includes relief at the grocery store. 

The address focused on several other items, but two things a lot of people are interested in are how she’ll pay for Medicaid expansion and how she plans to replace the grocery tax.

The Governor’s $7 billion budget includes following through on a campaign promise.

“Eliminating the sales tax on groceries is the biggest way in my budget that we can help South Dakotans tackle the challenge of Joe Biden’s inflation and protect their hard-earned money. Unfortunately, food costs have risen by far too much. Families are struggling to make ends meet as a result of that,” Noem said.

Noem says the state has $310 million in permanent revenue growth, which would make up for the lost grocery tax.

“We still, even after this tax cut, will have $208 million that will be available to us to meet the needs that the state government is responsible for. We have been exceeding estimates by about $25 million per month. The people of South Dakota overwhelmingly want this tax cut, and they know that we can afford it,” Noem said. 

Noem also explained how she’d pay to expand Medicaid. She says the federal government incentivizes states to implement Medicaid by subsidizing costs the first few years.

“After that, the burden is going to fall on the state. The first year, the cost for Medicaid Expansion will be $66 million. The state’s responsibility will be $13 million because the rest will be covered by the federal government. In the second year, the cost will be $70 million, and the state will pay $16 million of that,” Noem said.

She says the program could cost more than $80 million after five years. 

“Our goal in policy should always be to give people the opportunity to have more freedom in healthcare options, not government-run programs. Let’s keep that in mind in the coming days and give people the dignity and the responsive and responsible health care that they can control – not the government,” Noem said. 

KELOLAND News spoke with two lawmakers – a Republican and a Democrat – after the budget address today.

“The keynote of her speech had to do with the repeal of the sales tax on food and groceries, and that will be approximately $102 million, so that leaves about $208 million in ongoing revenue, and then there’s a $216 million in one-time funds that will be used for big projects such as upgrading the software for state government,” Mike Derby (R-Rapid City) said. 

“I look forward to working with the governor. The governor brought forward three things today that have been democratic priorities for years. The first time I was ever in this building was to advocate to eliminate the sales tax on food. I’ve been working on that since 2004, and I’m optimistic that we can get that done this year,” Reynold Nesiba (D-Sioux Falls) said. 

We had a team of reporters working on coverage of the budget address. You can find in-depth reports on the Governor’s proposed budget from KELOLAND’s Bob Mercer and Eric Mayer.