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Future Fund fight deepens

PIERRE -- A state lawmaker retreated Thursday from trying to slightly reduce the fee that South Dakota employers must pay to support the Future Fund grant program.

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But the legislator, Sen. Ryan Maher, R-Isabel, said a bigger fight is coming in the weeks ahead on the program that the governor exclusively controls.

Pat Costello, state commissioner of economic development, his deputy Nathan Lukkes, and Dusty Johnson, the governor's chief of staff, went to the Senate Commerce and Energy Committee meeting Thursday.

Maher, a member of the committee, offered his amendment Tuesday and the panel's chairman, Sen. Ried Holien, R-Watertown, deferred further action for two days.

Costello said Maher's amendment would reduce the money available to the governor for economic development incentive and South Dakota already is behind other states.

"We are way outspent," Costello said. He said the most common incentives by other states are income-tax breaks as well as grants.

Various business and workforce lobbyists testified against Maher's amendment and against reducing the money available for Future Fund grants.

"It does its job. It's been doing its job for years," said Mark Anderson, who represents the South Dakota State Federation of Labor/AFL-CIO.

Maher said the testimony was "a perfect example" of what happens when someone tries to scale back a government program.

"It's just absolutely phenomenal," he said.

The program is predicted to get $14.1 million in the current year. The amount will increase with or without the amendment in 2015, according to Maher.

He said $15.8 million is projected in 2015. "My amendment would scale it back to $15.2 million," he said.

Costello said South Dakota has more people working than before the recession. He said employers can't find workers with the necessary skill sets, which is why Gov. Dennis Daugaard is putting more money into training.

The Future Fund tax is $4.50 per employee at the $15,000 wage base that takes effect for the taxable amount in 2015, according to Costello.

Sen. Dan Lederman, R-Dakota Dunes, asked for the amendment to be tabled. No one opposed killing it.

Maher's amendment on Tuesday caught the Daugaard administration by surprise. He tried to attach it to a Labor Department plan to reduce unemployment taxes.

The Labor Department collects the Future Fund money from employers and transfers it to the Governor's Office of Economic Development, but Labor officials at the Tuesday meeting couldn't answer questions about what happens with the money once it goes to GOED.

Maher said the problem with the Future Fund is that neither the Legislature nor businesses have any say on the money's use.

The Future Fund was created in 1987 by the Legislature at the request of Gov. George S. Mickelson as part of his broad economic-development initiative.

Essentially, a small piece of the unemployment tax was given a different purpose as a fee flowing into the newly created employer's investment in South Dakota's future fund.

"I really hope this conversation doesn't stop here today," Sen. Angie Buhl, D-Sioux Falls, said.