South Dakota Governor Dennis Daugaard, Republican, signed a $4 billion state budget Friday that will make up for money cut a year ago that went toward education and Medicaid recipients.

Due to an improving economy and increased tax collections, Daugaard and the state legislature agreed to increase the budget that will begin July 1, according NECN.com.

The state cut spending last year to compensate for a $127 million budget gap. A large portion of the cuts affected aid for school districts and reimbursements for nursing homes, hospitals, doctors and others providing for Medicaid recipients.

The new budget allocates a 1.8 percent average ongoing increase in reimbursements for Medicaid providers. State aid to school districts will receive an ongoing 2.3 percent increase.

The budget also gives state employees a three percent salary increase after going three years without a raise.

About $1.2 billion will be spent in state general funds, a $93 million increase. Other state funds, such as highway construction and maintenance, were allocated $1 billion.