PIERRE — A proposal to change how the state collects the fee used to finance South Dakota’s governor-controlled economic development fund failed on a 31-36 vote Monday in the state House of Representatives. 

The Future Fund was created in 1987 at the request of then-Gov. George Mickelson. It was placed under the governor’s exclusive control, enabling quick responses when economic opportunities arise. Republican former Gov. Kristi Noem incited bipartisan backlash with her uses of the fund, which included paying for a fireworks show at Mount Rushmore, a Rapid City-area shooting range that legislators refused to fund, a Sioux Falls rodeo, and a workforce recruitment campaign in which Noem starred. 

South Dakota employers contribute fees to the fund when they remit payroll taxes for unemployment benefits. The bill would shift the “employer’s investment in South Dakota’s future fee” from automatic collection to a voluntary system by requiring employers to opt in. Employers who do not opt in would be treated as having opted out and would not have to pay the fee. It would also require the Department of Labor and Regulation to create an opt-in/opt-out form and post it online.

Lawmakers reject effort to remove governor’s exclusive control of economic development fund

Rep. Karla Lems, R-Canton, told lawmakers that some small employers don’t realize they’re paying the fee with their unemployment remittances. 

“It’s about transparency and choice for our South Dakota employers,” Lems said. 

Rep. Eric Muckey, D-Sioux Falls, voted against Lems’ legislation. He previously voted for a separate bill to put more guardrails on how the governor can award Future Fund dollars. 

That bill, which passed the House and awaits action by a Senate committee, would clarify the definition of “purposes related to research and economic development,” which is the only current limitation on Future Fund awards under state law. The new definition would include monetary awards for industry research and equipment; scholarships, apprenticeships and career training; recruitment of out-of-state companies and workers; and development of infrastructure and projects aimed at business retention and expansion. 

Muckey said that bill will fix the poorly defined parameters that enabled abuses in prior years. 

Opponents of Lems’ bill also warned the change could reduce funding for economic development and various programs supported by the Future Fund, such as the Build Dakota Scholarship Fund. That was created for scholars entering high-demand programs at technical colleges in the state.

Earlier this legislative session, lawmakers rejected a bill that would have required Future Fund awards to be approved by the Board of Economic Development, instead of the governor alone.