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State Supreme Court: Constitution does not offer 'categorical bar' on all contracts funded by the state

The South Dakota Supreme Court is located in the state Capitol building in Pierre.
The South Dakota Supreme Court is located in the state Capitol building in Pierre.

The South Dakota Supreme Court has answered Gov. Kristi Noem’s questions regarding what kinds of contracts constitute a conflict of interest for state lawmakers.

The opinion issued Friday afternoon said the constitution, “prohibits a legislator, or former legislator within one year following the expiration of the legislator’s term, from being interested directly or indirectly, in contracts that are authorized by laws passed during the legislator’s term.”

However, the court concludes the state's constitution in Article III, Section 12 does not prohibit all contracts between legislators and the state.

At issue was whether a lawmaker voting on the general appropriations bill to fund state government is authorizing a state contract.

The 1986 state Supreme Court ruling Asphalt Surfacing said voting on the general appropriation bill "authorizes specific contracts."

Now, the state's high court calls that decision "acutely unworkable" and conflicts with other rulings.

"Detaching authorization from general appropriation, on the other hand, creates a workable rule under which legislators, and any other interested party, can know with much greater certainty whether a contract is prohibited or not," the court said. "If a contract was authorized in a special appropriation bill or other legislation passed during a legislator's term, it is prohibited by Article III, Section 12 for the length of the legislator's term and one additional year."

The Supreme Court added 'overruling Asphalt Surfacing and Pitts will not disrupt the overall state of our law; it will reconcile it."

Noem asked the Supreme Court to weigh in on nine hypothetical questions about what does and does not constitute authorizing a contract with the state. Lawmakers have also expressed concern that voting on the general appropriations bill, which funds all functions of state government, could constitute a conflict of interest for many legislators.

Regarding those appropriations, the court clarified, “The purpose and effect of general appropriation legislation is restricted to simply allocating money to fund state government; it does not, itself, authorize specific contracts relating to ordinary or current expenses.”

Justice Janine Kern dissented, in part, from the majority opinion. Kern disagreed with the overruling of "decades of established precedent to exempt general appropriations from Article III, § 12 of the South Dakota Constitution." She also called into question the court’s role in the matter.

“I question whether the submitted interrogatories present ‘important questions of law involved in the exercise of [her] executive power,’” Kern wrote in her partial dissent. “Rather, they seem more akin to questions from legislators regarding their individual concerns, which is not properly within the purview of an advisory opinion.”

In a statement, Attorney General Marty Jackley praised the court's "very thorough decision."

“The Attorney General will continue to enforce our State’s conflict of interest laws as defined by statute and interpreted by the South Dakota Supreme Court," Jackley said. “To the extent questions remain concerning the application of the Supreme Court’s decision, the Attorney General will continue to be guided by the principle formulated by then-Attorney General Bill Janklow that an actual conflict of interest will exist if a public servant’s financial interest in a public contract influences or affects his or her decision-making in carrying out public duties.”

Noem called for clarity into the issue after former Sen. Jessica Castleberry was found to have inappropriately received hundreds of thousands of dollars in federal pandemic aid through the state. Castleberry resigned and Noem has yet to name a replacement for Castleberry’s District 35 seat. It's one of two legislative seats currently open.

Gov. Noem is appointing former House lawmaker Kristin Conzet to fill a vacancy in District 32. Conzet servied in the state legislature from 2010 to 2018.

“Drawing from my previous legislative experience, I am confident in my ability to serve effectively, even with the limited time remaining in this year's legislative session," Conzet said in a statement.

The bulk of session runs until March 7.

Read the full court opinion here.