A bill to provide more oversight into the Employer’s Investment in South Dakota’s Future Fund, is in limbo due to an absence on the Senate State Affairs Committee on Friday. The bill failed due to a 4-4 vote, with one excused.
This comes as Gov. Larry Rhoden issued an executive order Thursday creating guard rails on the Future Fund. The fund is supported by a tax on employers and was created in 1987 during the Gov. George Mickelson Administration.
By statute, the fund is at the governor's disposal, so long as the funds are "used for purposes related to research and economic development for the state."
Executive Order
"Here it is folks, this is how we do business, and this is the process we go through when we're making these decisions," Rhoden said at a press conference Thursday.
Rhoden’s executive order includes further guidelines on the fund for his administration:
- Each Future Fund grant will be awarded on a reimbursement basis, requiring receipt of itemized invoice of expenditures and reasonable proof of payment prior to any disbursement of funds;
- The Governor’s Office of Economic Development (GOED) should require a matching commitment or in-kind consideration for the benefitted entity when feasible;
- Each agreement shall require a grant recipient to have a conflict of interest policy in place;
- Each grant must have a written, signed agreement prior to disbursement of funds;
- GOED shall ensure that all executed Future Fund agreements are posted on OpenSD in compliance with SDCL 1-27; and
- GOED shall provide a report to either the Joint Committee on Appropriations or the Interim Committee on Appropriations on a biannual basis about each Future Fund award.
Rhoden explained his thinking.
“For the most part, this is exactly the way we’ve done business and, I support what we’ve done in the decisions we’ve made in the past," Rhoden said. "In my view, the executive order I think is just to put in writing and give the legislators a comfort level this is what we’re looking at when we’re making these decisions on future fund projects.”
When asked if he would support a bill with the same guidelines if it were drafted this session, Rhoden said while he "hates to commit on hypotheticals..."
"I don't know why I wouldn't," Rhoden said. "If there was a bill with the exact language, I don't know what would cause me any concern whatsoever."
Rhoden said he didn't know how a bill would have any more or less affect than his executive order. Some legislators have looked at creating more accountability over the fund.
Lt. Gov. Tony Venhuizen said that waters down accountability.
“You need to have a tool that is flexible and can act quickly. And I think a positive thing about the future fund is that there is one person who’s accountable: the governor. It’s not the governor and some committee, it’s not the governor and some board and it’s not diffused across a lot of people. There’s one person calling the shot. If you like a grant you know who gets credit, and if you have questions about the grant, you know who to talk to about it. It’s one person. So, there are bills that would say, ‘Oh this board or that board.’ I actually see that as taking a step back in terms of holding people accountable.”
Legislative Accountability Attempt
Senate Bill 1, introduced on behalf of the Government Operations and Audit Committee, looked to reel that in. It would require the Governor’s Office of Economic Development to create rules around the fund, and make any disbursements be approved by the state’s Board of Economic Development.
Sen. Taffy Howard, the bill’s prime sponsor, told the Senate State Affairs Committee Friday the bill doesn’t address the validity of the fund, which some legislators call into question.
“What it does is impose bare minimum safeguards necessary to limit potential abuse,” Howard said. “I’m not saying there has been abuse, I’m saying we need these safeguards in place to prevent possible abuse…Unchecked discretion over public money is unacceptable.”
Rep. Marty Overweg, chair of GOAC, echoed similar words.
“This bill is not about, and we did not bring it to kill the Future Fund. It’s not about that,” Overweg said. “It’s about legislative oversight, and that’s what we’re here for.”
Overweg discussed Rhoden’s executive order.
“I think the governor even spoke himself with his executive order that we need guard rails up,” Overweg said. “But it can’t be the person who’s distributing the money setting up the guard rails.”
During public comment, multiple legislators spoke in favor of the bill to some extent: Rep. Erik Muckey—he noted he had some reservations on specific portions of the bill but believed in its intent. Other supports include Rep. Julie Auch, Rep. Eric Emery and Sen. Red Dawn Foster.
Also, during public testimony, a slew of people representing organizations that had received dollars from the funds spoke in opposition.
That includes Bill Even, Commissioner of the Governor’s Office of Economic Development. He told the committee the bill inhibits the “speed of business” and doesn’t allow businesses to speak with the decision-maker. He likened it to shopping for a car.
“How many of us have bought a car or a pickup? And when you go to the dealership and talk to the salesperson and try to negotiate a deal, if you get told, “Well, I can’t work with you, I need to go talk to my manager.’ And then come back a half an hour later,” Even said. “And then you negotiate some more, and then [get told], ‘Well, I can’t decide on a price here. I need to go talk to my manager. Those sort of situations in the business world often lead these businesses that we’re working with to question, ‘Am I talking to the decision maker or not?’”
Even said requiring the governor to answer to the Economic Development Board would affect the speed at which funds need to be disbursed. He would later confirm to the committee during questions that the board can meet via phone or zoom at the request of the board chair, though they typically only meet once a month.
Another hinted at a debate that’s plagued the Legislature in recent years: decisions over economic development. Ryan Budmayr is the President and CEO of the South Dakota Chamber of Commerce and Industry.
“In recent years, it feels like we’ve become a state that’s excited about saying no or making things difficult. We look for reasons to stop things. We look for reasons to restrict. This isn’t what made the South Dakota I grew up in through the‘80s, the‘90s, the 2000s,” Budmayr said. “The economic environment that allowed me to be standing here today was built by bold leaders who looked for opportunities and worked to find a yes.”
Julie Johnson spoke to the committee. She was the Secretary of the Department of Labor under Gov. Mickelson and said she “pretty much wrote the bill” that created the Future Fund in 1987.
“It’s a great program. I would urge you to do no harm to the South Dakota’s Future Fund, and the governor’s executive order perhaps does more than this bill does anyway,” Johnson said.
In her rebuttal, Sen. Taffy Howard reaffirmed the bill doesn’t eliminate the fund.
“You would think based on the opposition that this bill would eliminate this fund,” Howard said. “Again, it does not. I enjoyed hearing the stories of success, but frankly I was confused. Do these opponents not want more transparency and oversight of these tax dollars? Do they not want more guard rails?”
Howard said she supports Gov. Rhoden’s Executive Order but noted it’s not a codified law and could be undone by any governor at any time.
Senate Pro Tempore Chris Karr made the motion to pass the bill to the Senate floor. He first commended Gov. Rhoden’s Administration for the executive order, calling it “great to see,” before moving why he was in favor.
“I know we’ve had this conversation a few times, and I’ve brought some bills that impact the future fund. And it was only a few years ago that here were real concerns. I’m not gonna tap dance around this, if we’re going to talk about it we’ve got to talk about it honestly too,” Karr said. “There were concerns about taxpayer dollars and whether they were used appropriately to fund things that I’m not sure the future fund was built and created for.”
The bill resulted in a tie 4-4, with one excused. The legislation is expected to be picked up again during session due to the excused member of the committee.
