Fund controlled by governor may soon require legislative oversight

Responding to recent controversy about a fund controlled exclusively by the Governor’s Office, a committee of lawmakers endorsed a bill Tuesday that would require greater oversight of the spending. 

“I think this is a good attempt to respond to a concern that’s out there,” said Sen. Lee Schoenbeck, R-Watertown.

The South Dakota Senate Commerce and Energy Committee endorsed the bill 7-1. It now heads to the full Senate. 

The bill is an amended version of earlier, failed legislation that would have reduced the amount of money flowing to the Future Fund. The fund gets its money from a tax on employers, and the governor has exclusive authority in state law to spend Future Fund dollars on research and economic development. Unlike other funds administered by the Governor’s Office of Economic Development, Future Fund expenses don’t go through a board of citizen appointees for vetting or approval. 

The new version of the bill would require the Governor’s Office of Economic Development to provide quarterly reports to legislative committees, detailing each award or grant from the fund. The reports would include the recipient’s name, amount, location, the research or economic development purpose, the economic impact measures, and the number of jobs created or retained.

Noem’s uses of the Future Fund last year included $2.5 million for a Governor’s Cup rodeo in Sioux Falls and $5 million for Noem’s “Freedom Works Here” workforce recruitment campaign, which stars her in a series of advertisements. The latter also came under scrutiny for allegations that the politically connected Ohio firm chosen to conduct the campaign stole the idea for it from a South Dakota firm. 

The commissioner of the Governor’s Office of Economic Development, Chris Schilken, defended the governor’s use of the fund during a hearing on the prior version of the bill earlier this month. On Friday, he stepped down from his leadership position to take a subordinate role in the office, citing a desire to spend more time with his family.

According to the state Department of Labor and Regulation, 28,261 employers paid $23 million into the Future Fund in 2022, which equated to an average of $814 per employer. Governors can spend as much or as little from the fund as they want, and legislators have altered the contribution rates over the years, so the balance fluctuates. Noem distributed $30.34 million from the fund last year.