- Associated Press - Thursday, March 13, 2014

PIERRE, S.D. (AP) - South Dakota legislators were split along party lines Thursday in a debate on how to fund a bipartisan economic development initiative created last year.

“All of us, as the stakeholders in Building South Dakota that were here last year to work through that ordeal, we have ownership in this,” said Senate Minority Leader Jason Frerichs, D-Wilmot.

A special committee with leaders from both chambers of the Legislature passed changes to Building South Dakota’s funding formula Thursday with Republican support only. The House and Senate granted final approval to the measure Thursday, with votes dividing mostly along party lines.

“There’s equal passion for Building South Dakota on both sides of the aisle,” House Majority Leader David Lust said.

The parties, however, disagreed on how to set up the funding.

Opponents of the bill, most of whom were Democrats, doubted that the funding formula would draw in enough money to sustain the economic development initiative. But supporters argued the formula was sufficient and would protect the state’s coffers during times of economic hardship.

Building South Dakota was established last year to boost the economy with grants to education, infrastructure and housing projects. It will receive a $30 million windfall from the governor this year through a related piece of legislation.

The $30 million will cover Building South Dakota for the next three years. After that, the program will have to draw from the fund, according to the formula.

Every year the state will first protect a reserve coffer equal to 10 percent of the prior year’s expenditures. Surplus money from the budget and cash from the property tax reduction fund go to pad the state’s rainy day fund.

If the reserve falls below 10 percent, as it did in 2008 through 2011, then no money could be put aside for Building South Dakota. But if the reserve funds exceed 10 percent, as they did in 2012, then some of that money flows to the initiative.

Lawmakers estimate that one-half of a percent of the general fund expenditure would go to Building South Dakota in good years, about $7 million or $8 million.

Rep. Scott Parsley, D-Madison, said he doubted the formula would provide even half of what legislators expect.

Democrats in both chambers said they preferred more straightforward funding, such as setting aside 1 percent of the annual budget for the program.

“I just think we’re establishing a really complicated formula that will leave us crumbs at best for Building South Dakota,” House Minority Leader Bernie Hunhoff said.

Hunhoff, a Yankton Democrat, tried to have the House appoint a new committee to renegotiate the bill, but the majority in the House did not agree. Representatives voted 52-18 to support the measure. Rep. Lance Russell of Hot Springs was the only Republican to oppose the bill in either chamber.

Senators voted 31-4 for the measure.

Senate Majority Leader Tim Rave said the funding formula drafted by Corey Brown, president pro tempore, was ingenious.

“It helps us manage our budget reserves while still funneling dollars to Building South Dakota when we have those dollars,” said Rave, R-Baltic.

Lust, the House majority leader, pressed representatives to support the measure even if they objected to Building South Dakota or the recent tweak to the formula, because much of the funding is already being accounted for.

“Be mindful of what a vote against this bill does,” said Lust, R-Rapid City. “If this fails, this bill goes down, you’ll have to answer to the Medicaid providers, the educators, the state employees.”



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