A provision in South Dakota's budget bill will increase the cost baseline for any business bidding on or holding state service contracts starting in fiscal 2027.
Most South Dakota property managers and real estate owners don't realize that state budget bills can directly raise the cost of doing business with state agencies. HB1326, the state's ordinary expenses appropriations bill, contains one such provision buried in its compensation section that will affect anyone holding or bidding on state contracts.
Section 4, titled "Employee Compensation and Billing Pools" (page 4 of HB1326), authorizes a 1.4% across-the-board compensation increase for state employees statewide. That increase flows through the state's centralized billing pool system—the mechanism by which state agencies charge vendors and service providers for work performed or services rendered.
In plain terms: when state employees get a raise, the agencies that employ them recover that cost by raising the rates they bill to outside contractors and vendors. If you provide services to state agencies, or if you hold a contract with the state, your cost baseline goes up.
This matters most to real estate and property management firms that:
Even if you don't directly contract with the state, the increase may ripple through your supply chain if vendors you rely on pass along their own state billing cost increases.
The 1.4% compensation increase and the resulting billing pool adjustments become effective in the fiscal year ending June 30, 2027. This gives you roughly two years to factor the change into budget forecasts, contract renewal negotiations, and bid pricing strategies.
If you hold existing state contracts, review the terms to understand how billing rate adjustments are handled. Some contracts may allow automatic pass-through of state rate increases; others may lock in rates for a fixed term. Knowing which applies to your agreements will help you plan cash flow and margin expectations.
If you're preparing to bid on state work, don't assume current state billing rates will hold through 2027. Build the anticipated 1.4% increase into your cost models and timeline assumptions. State agencies will be aware of the increase and may adjust their budgets accordingly, but they won't necessarily advertise it in bid documents.
For property managers handling state leases or facilities, the increase may show up as higher service charges from state-employed maintenance or administrative staff. Track these changes as they occur so you can distinguish between operational inflation and the structural cost increase from the compensation adjustment.
HB1326 is a routine appropriations bill, and this provision is easy to miss. But for businesses with state contracts, it's a concrete cost factor worth understanding now rather than discovering later.
South Dakota property management and real estate trade associations can access a free, detailed summary of state budget provisions affecting the industry. Contact your local association office for details.