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Some legislators question $30M deal they made with governor in 2014

PIERRE -- Two sets of legislators lost Tuesday in their attempts to expand the purposes for some of the $73 million of cash accumulated in South Dakota's business loan fund.

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South Dakota State Capitol

PIERRE - Two sets of legislators lost Tuesday in their attempts to expand the purposes for some of the $73 million of cash accumulated in South Dakota's business loan fund.

Sen. Stace Nelson, R-Fulton, wanted $40 million to help pay for the animal disease laboratory at South Dakota State University.

The Legislature's Joint Committee on Appropriations rejected the Nelson plan. He had 19 Republicans and 11 Democrats as co-sponsors.

They offered it as an alternate to the governor's stalled proposal to raise fees on agricultural producers to help pay for the lab.

Meanwhile, the House appropriations members blocked legislation that would have allowed the loan fund to be tapped for the Building South Dakota program if necessary.

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House Democratic leader Spencer Hawley, of Brookings, sponsored the legislation. The cosponsors numbered four Democrats and five Republicans.

Hawley said the Legislature created the Building South Dakota program in 2013 to help with job creation, employee training, worker housing and tax relief for qualified business projects.

The main source of funding originally was a portion of the unclaimed money and other property that is remitted to the state treasury by banks and other businesses.

Gov. Dennis Daugaard in 2014 brought legislation offering $30 million to Building South Dakota as a replacement for the unclaimed property revenue. The $30 million was to be split evenly across three years.

Hawley said Tuesday there isn't a major funding stream for Building South Dakota beyond the 2018 budget year that starts July 1, 2017.

His legislation sought to transfer money from the business loan fund, known as the Revolving Economic Development Initiative, if there wasn't sufficient money from other sources.

He would take $8 million from the REDI funding in 2019 but said he doesn't want to do it. He warned the governor will set the tone with the December 2017 budget speech and legislators will be cornered on where to get the $8 million.

"We don't have the ability here in 38 days to find $8 million," Hawley said. "We as a Legislature need to decide, do we want Building South Dakota," he added.

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In 2018 the last of the $30 million will be used, according to Hawley. He is a non-voting legislative representative to the state Board of Economic Development that oversees the REDI fund and many pieces of the Building South Dakota program.

Hawley said there would be zero funding in Building South Dakota in 2019. Hawley said he's asked the board what is planned. "There is no plan, from what I've been told, go forward," Hawley said.

The only opponent to testify against the Hawley bill was Liza Clark, the governor's commissioner for finance and management.

Clark said there is money remaining in the Building South Dakota Fund and it continues to receive some new revenue from a portion of the state's contractor excise tax.

Hawley's legislation didn't identify where $8 million of cuts could be made in the state budget, according to Clark.

"The bill doesn't direct anything else but taking money from the REDI fund," she said.

The House committee endorsed the passage of a second bill brought by Hawley and the same bipartisan coalition that would change the percentages of funding designated for two of the Building South Dakota pieces.

The housing component would get 35 percent rather than the current 25 percent. The economic development partnership piece would get 5 percent rather than the current 15 percent.

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Rep. Jason Kettwig, R-Milbank, testified about the demand for housing assistance. He is city administrator. "The number one thing that has come back, every time, is housing," he said.

Hawley wanted the committee to combine the two bills. But Rep. Dan Ahlers, D-Dell Rapids, couldn't get a second for the amendment and his motion died.

Speaking against that approach was Rep. Jean Hunhoff, R-Yankton. "There's two different thought processes here," Hunhoff said. "You know the budget process we're facing right now... I really think we need to hold off on taking any action at this time."

Hunhoff said her perception was the $30 million over three years was intended to sunset or end Building South Dakota. She didn't disagree with shifting money within the Building South Dakota components for "better utilization of those dollars."

Hawley seemed stung by the committee's refusal to look ahead to 2019. "I know after 2018 nothing will ever happen again," he told the committee as he presented the housing legislation. "I hope to have this discussion next year and see where you're going to find the $8 million."

The South Dakota Housing Development Authority receives applications that are two to three times the funds available in Building South Dakota's housing opportunity fund, according to Mark Lauseng, the authority's executive director.

"We just think it's doing really good things," Lauseng said. "Any additional percentage in the housing opportunity fund, we think the need is there," he added.

No one testified against the housing bill. The committee endorsed it 7-0.

The REDI fund was created in 1987 by Gov. George S. Mickelson and the Legislature through a temporary 1-cent sales tax increase that raised $40 million. Its purpose was to help businesses such as manufacturers to open or expand in South Dakota.

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