A provision in South Dakota's state budget bill will increase the cost of doing business with state agencies starting next fiscal year.
Most South Dakota restaurant owners don't realize that changes buried in the state budget bill can directly affect what they pay when they contract with state agencies—whether for food service at state institutions, catering for state events, or supply agreements.
HB1326, the state's appropriations bill for ordinary expenses of the legislative, judicial, and executive departments, contains a provision that will raise those costs for you.
Section 4, subsection (0117), titled "Employee Compensation and Billing Pools," authorizes a 1.4% across-the-board compensation increase for state employees. That increase doesn't stay internal to state government. It flows directly into the state's centralized billing pool—the mechanism state agencies use to charge vendors and small businesses for services or to set contract rates.
In plain terms: when the state raises employee pay, it raises the cost baseline it charges back to businesses that work with it.
If your restaurant currently holds a contract with a state agency—to supply food to a state institution, provide catering services, or deliver products—your costs will increase. The same applies if you're bidding on a new state contract. The higher billing pool rates will be built into the state's pricing from the start.
This matters most to restaurants in or near state capitals and university towns, where state institutional food service contracts are common. But any restaurant with state contracts should review their agreements and budget accordingly.
The provision becomes effective for the fiscal year ending June 30, 2027. That gives you time to plan, but not indefinitely. If you're currently negotiating a multi-year contract with a state agency, ask whether the rate includes this adjustment or whether it will be passed through as a separate line item.
Review any active state contracts now. Look for language about rate adjustments tied to state employee compensation or billing pool changes. If you're bidding on new state work, factor in the 1.4% increase to your cost estimates. Ask the state agency explicitly whether their quoted rate already includes this adjustment or whether it will be added later.
The increase itself is modest—1.4%—but it's real money on large contracts. On a $100,000 annual state food service contract, that's $1,400 in additional annual cost. On a $500,000 contract, it's $7,000.
This is a standard budget mechanism, not a surprise or a penalty. But it's one most restaurant owners never see coming because it's buried in a 100-page appropriations bill. Being aware of it now means you can adjust your pricing strategy and contract negotiations before the change takes effect.
Source: HB1326, Section 4, (0117) Employee Compensation and Billing Pools, Page 4.