MERCER: State budget plan spends heavily from other people’s money
PIERRE — South Dakota has a new source of financial sugar. It’s called unclaimed property.
In his budget speech, Gov. Dennis Daugaard sounded Tuesday like the winner of a jackpot lottery — minus the giddiness, of course, because that wouldn’t be financially prudent.
He proposed spreading millions around, to pay off existing debt, and to fix the old cement-plant retirement system, and to pay cash for a new State Veterans Home…
And to give a 3 percent raise to K-12 school districts and Medicaid providers and state workers that was nearly double the most recent annual rate of inflation…
And to freeze tuition at the state universities and technical institutes for South Dakota students who take classes on campus…
And to cover the hole in state government’s self-insurance system for employees, and to shore up the railroad bridge over the Missouri River at Chamberlain…
And to add more slots to train future doctors at the medical school, and to repair more state buildings…
And, well, there’s more — $125 million in all — but you get the picture.
He felt so secure because of this new-found money that he did the previously unthinkable for a Republican governor. He proposed spending $19 million from state reserves and declared his policy that reserves shouldn’t exceed 10 percent of state general-fund spending.
The catch is the state of South Dakota merely is the holder of all of this unclaimed property. Many of the dollars legally belong to unfortunate souls who somehow left money behind in a bank account or an overlooked refund or uncollected gift.
And many of the dollars belong to seemingly no one, as the result of businesses rounding off amounts to the nearest penny in thousands or millions of transactions.
The state Bureau of Finance and Management publishes this disclaimer: “These unclaimed funds are a perpetual liability of the State of South Dakota and if the owner of such funds is identified, they must be paid to the rightful owner.”
Nonetheless the Legislature through its Building South Dakota program that was passed last winter and now the governor, through his proposed fiscal 2015 budget, together plan to spend these monies, rather than hold them in trust and use just the interest earnings.
Looking back, we can now see the strategy behind a change made by the Legislature at the governor’s request in 2012. Businesses previously were required to submit unclaimed property after five years of dormancy in most instances. They changed the law to three.
For 2013 that meant three years’ worth rather than one year would come in. Expected to add $29.2 million on a one-time basis, the latest revised estimate shows more than $54.5 million came in on a one-time basis.
Meanwhile, several major banking companies moved their charters to South Dakota.
Those mergers were expected to add $12.6 million in unclaimed property on a one-time basis in the 2013 fiscal year that closed June 30, 2013. The state treasury instead saw $17.4 million more.
The $125 million that State Treasurer Rich Sattgast announced Nov. 1 was approximately 10 times as much as for any year last decade.
The $125 million likely won’t be repeated next year. But the governor estimates it could be $60 million or more.
He’s being innovative for now — and might need to be much more so in the future, if some enterprising lawyers ever figure out how to get at this money in serious amounts for its rightful owners.