Amendment ‘O’ would change annual payout from fund

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• ATTORNEY GENERAL’S EXPLANATION OF AMENDMENT O

EDITOR’S NOTE: This is the third in a series of stories about the four constitutional amendments, two referred laws and one initiated law that South Dakota voters will consider on the Nov. 6 general election ballot.

PIERRE — The difficult and unpredictable ways of investment markets are why the Legislature wants the South Dakota Constitution changed regarding the annual payouts from the state’s Dacotah Cement trust fund.

The trust contains proceeds from the 2001 sale of the state cement plant and related properties. At the time, voters adopted language for the South Dakota Constitution, requiring $12 million to be transferred annually from the trust to be used for the operation of state government.

A second piece requires that if earnings meet a specific threshold, education funding receives a temporary boost for that year. Those two requirements would be eliminated under Constitutional Amendment O, which is on the Nov. 6 election ballot.

The proposed amendment would instead require that 4 percent of the trust’s value be transferred annually. The value would be based on a four-year average.

What’s happened in the past decade is the fund’s overall value has declined rather than increased. The $12 million had to be paid regardless of how the trust’s investments performed in the previous year.

Rep. Paul Dennert, D-Columbia, has worked on the issue for several years. He convinced the Legislature to put a different proposal on the 2010 statewide ballot. Voters rejected it 59 percent to 41 percent.

This year Dennert joined forces again with the governor’s office — now the Daugaard administration — and enlisted Sen. Corey Brown, R-Gettysburg, to help him get the new proposal through the Legislature and onto the 2012 ballot.

House members approved the resolution 64-3, followed by the Senate at 33-0.

The original $12 million payout was based on expectations a decade ago that investment earnings would exceed 5 percent annually. At the time, state government was receiving $12 million annually on a regular basis from the plant’s earning.

But huge fluctuations in the investment markets since then have diminished the trust fund’s value.

During the House discussion, Dennert acknowledged that only $9 million to $10 million might be transferred in the first year after the change. He said the change would allow the fund to grow gradually by retaining more of the earnings for re-investment and would be producing $12 million annually once it reached the $300 million mark.

The fund’s ending values have bounced between $195 million and $242.7 million during the past three fiscal years. Dennert described the change as “a logical thing to do.” The 4 percent method is used for determining payouts from two other state trust funds for education and health care.

Tags: election 2012, news, updates