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Legislative committee endorses proposal for more control over state treasurer’s budget

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Legislative committee endorses proposal for more control over state treasurer’s budget

Feb 20, 2024 | 2:36 pm ET
By Joshua Haiar
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Legislative committee endorses proposal for more control over state treasurer’s budget
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South Dakota State Treasurer Josh Haeder testifies before a committee of lawmakers in Pierre on Jan. 12, 2024. (Joshua Haiar/South Dakota Searchlight)

The state Treasurer’s Office may have to seek permission from the Legislature to increase the office’s budget for finding unclaimed property owners.

The House Appropriations Committee voted 5-3 on Tuesday in Pierre to endorse legislation containing that requirement.

“This bill is an important way of improving the legislative oversight in this area,” said the bill’s prime sponsor, Rep. Tony Venhuizen, R-Sioux Falls. 

He said the office’s current ability to set its own budget is “highly unusual within state government.”  

Unclaimed property consists of an array of abandoned or forgotten private assets, including money from bank accounts, stocks, life insurance payouts, uncashed checks, and even the contents of safe deposit boxes. 

Staking claims on unclaimed property: $175 million haul sparks budget battle

The holder of the money or items, such as a bank, tries to find the owners. After three years of dormancy, the property reverts to the state and most of the money goes into the state budget. Yet the owners of the unclaimed property can still claim it, and the state Treasurer’s Office maintains an online database and makes other efforts to connect people with that property.

To get more property back to its rightful owners, Governor Kristi Noem and the Treasurer’s Office plan to spend more of the value of unclaimed property on advertising and other efforts to find those owners. Current state law does not require the office to request approval from state lawmakers for that.

Treasurer Josh Haeder is already appearing in commercials encouraging people to visit the state’s unclaimed property website.

Budget plan, reaction

Haeder told lawmakers in a previous budget committee hearing that the plan is to adjust his office’s annual advertising and outreach budget from a flat $125,000 to 1% of the value of unclaimed property remitted to the state each year. Based on the current record amounts, that 1% would be more than $1 million.

Following that committee hearing, Venhuizen said the Legislature, which sets annual state budgets, should have oversight of increased spending.

“This is really a process bill,” Venhuizen told South Dakota Searchlight. “This bill just makes sure that the budget for this office is handled like any other state agency.”

Haeder told South Dakota Searchlight the bill would impede the office’s “ability to make good faith efforts to return people their property.” Returning more unclaimed property could require more time and staff, Haeder said, so the office should have discretion to adjust its spending. 

The bill has since been amended to ensure the treasurer retains discretion over the payment of unclaimed property claims and audits. But the bill would require the treasurer to get legislative approval of the office’s administrative budget, including marketing expenses.

During Tuesday’s House Appropriations Committee, Venhuizen said the bill as amended “addresses those major objections” that Haeder brought up. 

However, Haeder said the bill, “even with the amendment, is still not practical.” He said that because the office uses unclaimed properties to create its annual budget – which is an amount based on a projection of properties coming into the state each year – his office should not have to go through appropriators, who oversee the spending of tax revenue.

“We will need to put together an entirely new budget,” he said. 

Additionally, Haeder said Venhuizen ignored the office’s suggested changes to the bill, which Haeder called “incredibly disrespectful.”

“Our input was not accepted,” Haeder said, adding that because of the lack of communication, the bill could have “unintended consequences.” He said the bill disrupts a system that “works perfectly fine at this point in time.”

Venhuizen said he’s available to talk. 

“I spend my time here in the appropriations room,” Venhuizen said. “He’s a two-minute walk away. It’s easy to talk at any point.” 

Impact on banks debated

Haeder said banks expect the state to work hard to return unclaimed properties, and any efforts to hinder that would give them a reason to leave the state.

“If we don’t do more, we’re going to lose a large holder,” he said. “On that note, unfortunately, one of our major holders has indicated they plan to leave South Dakota — one of our major remitters of unclaimed property.” 

Haeder said the office learned that information on Friday and is working with the Governor’s Office to learn more. He told South Dakota Searchlight that no further details are publicly available yet.

Venhuizen rejected Haeder’s suggestion that banks are going to pack up and leave if the office has to go through the budget committee.

“These banks are not interested in the technical way the state budgets for unclaimed property administration,” said Venhuizen, who added he has been involved in recruiting banks to the state. “That is not a factor in where they site their charters.”

Venhuizen said that while unclaimed property is not tax revenue, whatever is not paid back to rightful owners ultimately ends up in the state’s budget. Therefore, it’s “six of one, half a dozen of the other” whether people say the office’s administrative budget comes from the state budget or unclaimed property. 

“The difference is,” he said, “the administration costs would go through the general appropriations process,” where lawmakers approve departments’ budgets.  

Since 1954 when the federal Unclaimed Property Act was passed, the state has taken in about 2.5 million pieces of unclaimed property worth about $1.1 billion. The vast majority of that — about 2.2 million properties — has yet to be claimed.