South Dakota's discipline: A balanced budget since 1889

South Dakota Gov. Dennis Daugaard
Source: Office of the Governor
South Dakota Gov. Dennis Daugaard

Editor's note: This commentary was written before the release of the Top States 2015 data. The governor did not have knowledge of the rankings or the comprehensive data.

When people around the country think about South Dakota, the first image that comes to mind is probably Mount Rushmore. Though we're proud to be the home of Gutzon Borglum's masterpiece, the truth is that we are much more than the stone-carved presidential tribute. South Dakota is a great place to do business.

We have long strived to make our state business friendly, and people are beginning to notice. A number of independent groups who conduct state-by-state studies are rating South Dakota at the top, and businesses are looking to South Dakota.

In 2013, CNBC named us America's Top State for Business. We ranked second in the Tax Foundations' State Business Tax Climate Index. We also ranked first in the Small Business & Entrepreneurship Council's 2014 Small Business Policy Index.

Walter Bibikow | The Image Bank | Getty Images

Low tax burden

We're seeing success in South Dakota because we believe in allowing businesses to prosper. We have no corporate income tax, no personal income tax, no business inventory tax, no personal property tax and no inheritance tax. This puts more money in the pockets of our businesses and citizens, creating a more favorable environment for growth.

Low cost of doing business

Things are just as impressive when it comes to actually doing business in South Dakota. The costs of doing business—utility costs, unemployment insurance costs, workers' compensation costs, land costs—are low. Productivity of our workers is high. In fact, many multistate employers that have locations in South Dakota tell us their location here is their most productive.

Less red tape

In South Dakota we don't place unnecessary hurdles before our citizens or entrepreneurs, and things aren't overly complicated for people who are trying to know and obey laws. It's the nature of government to add to the body of laws. Some tend to perceive productivity as the amount of legislation that is passed.

But when it comes to laws, more isn't always better. There's merit to throwing out regulations no longer needed and repealing over burdensome laws. That's exactly what we've done in South Dakota. When I took office, I began a red-tape review to eliminate unnecessary statutes and rules. To date, under this initiative, we have eliminated more than 440,000 words of red tape.

Balanced budget and no liabilities

Since we became a state in 1889, the South Dakota legislature has balanced the budget every year. We don't do it with accounting gimmicks, either. We don't push one year's expense into the next. We don't use one-time windfalls to fund ongoing expenses. We never issue general obligation bonds.

Many states are starting to balance their budgets again. But far too many of those other states have long-term liabilities—unfunded pension obligations and large general obligation liabilities. In South Dakota we have neither of those things. Our state's pension is more than 100 percent funded. Other states will eventually be forced to confront those liabilities—probably at the expense of entrepreneurs and businesses.

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It is because of these practices that Standard & Poor's upgraded South Dakota's credit rating to AAA last month. As the nation and some states have experienced downgrades, South Dakota's stewardship is paying off. The upgrade we received is another indication that we are on the right track.

Thanks to our history of fiscal responsibility, it is likely South Dakota will continue to be the place to do business. Businesses plan for the long term. When considering moving or expanding, they need stability and certainty. They need to know that government won't get in their way. That's what we can offer here in South Dakota.

—By South Dakota Gov. Dennis Daugaard