It’s pretty hard to write so much about the Legislature without thinking up ideas for good legislation of my own. I’ve offered blog bills in past years; out of the blue, an eager reader discussing an entirely different issue gets me thinking toward my first Legislative proposal of 2018: Let’s require the state to spend 80% of its economic development funds (Future Fund, REDI loans, Dakota Seeds, you name it) in the counties that need economic development assistance the most.
Now there are many ways we can measure need for economic development. For now, let’s keep it simple: the counties in greatest need of help jumpstarting their economies are those with the most residents out of work. So let’s find the ten counties that, over the last ten years, have had the highest average rates of unemployment (we’ll drop low and high years and count just eight out of ten, to keep singular events from skewing the results).
Looking at SD Department of Labor data from 2007 to 2016, we find the highest “Olympic average” unemployment rates in Dewey, Oglala Lakota, Buffalo, Todd, Corson, Ziebach, Jackson, Mellette, Bennett, and Day counties. (Check my data on this spreadsheet.) The Olympic average rates range from 12.8% in Dewey to 5.5% in Bennett and Day. Over the same period, the statewide Olympic average annual unemployment rate was 3.8%; in the worst recent year, 2010, the statewide unemployment reached 5.0%.
Say, nine of those ten counties with the highest chronic unemployment (Day is the odd one out) all happen to be majority Native American. Imagine that.
Now suppose, for example that the Future Fund has $10,000,000 at the start of the fiscal year (the Governor actually spent $11.8 million out of the Future Fund in 2016). Under my plan, $8,000,000 is dedicated to projects in those ten highest-need counties. The other $2,000,000 could go for projects anywhere, but half of that “anywhere” money stays put until the state has spent at least of the “highest-need counties” money.
This plan not only requires the state to focus most of its economic development dollars on the counties in the worst shape but also gives the state an incentive to spend those high-need dollars first in order to free up as much money as possible for projects statewide.
Here’s the formal bill text for your eager dissection and amendment:
Dakota Free Press Bill 2018-1
FOR AN ACT ENTITLED, An Act to earmark economic development funds for projects in counties with chronic high unemployment.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1: That Chapter 4-8 be amended by adding a NEW SECTION to read:
Each statewide economic development fund controlled by the Governor, the Governor’s Office of Economic Development, the Board of Economic Development, and/or any other state economic development authority shall be divided into two separate subfunds: 20% of the balance available at the beginning of each fiscal year shall be designated a “general investment fund” (GIF) and 80% of the balance available at the beginning of each fiscal year shall be designated a “urgent need investment fund” (UNIF).
Section 2: That Chapter 4-8 be amended by adding a NEW SECTION to read:
The state may grant, loan, or otherwise invest GIF dollars in economic development projects anywhere in South Dakota. The state may grant, loan, or otherwise invest UNIF dollars in economic development projects only in one or more of the ten counties that have the highest Olympic average of annual unemployment rates in the ten calendar years preceding the beginning of the current fiscal year.
Section 3: That Chapter 4-8 be amended by adding a NEW SECTION to read:
Half of any GIF must be held in reserve during the fiscal year until at least half of its corresponding UNIF has been disbursed to qualifying projects.
As I often say, if government has any role in economic development (and some of my conservative friends will tell you the government’s only proper role is to get out of the way, not hand out money), that role should be focused on places where the market isn’t creating jobs and wealth on its own. Where better, then, to focus our state’s market-spurring efforts than the counties in South Dakota with the highest chronic unemployment rates?
Pass a copy of DFP Bill 2018-1 to your local legislators before they head to Pierre, and see what they say about some rational targeting of our economic development dollars!
I think that is a well written bill. One thing is for certain, it seems that most of the areas of these 10 counties have high speed internet services. That part of the infrastructure was done under the previous administrations idea of putting rural America on the information highway. So we do have that going for us to help with any economic development. No CAFO’s but instead meaningful development that tends to keep up with the way the world turns and allows our children and theirs a fair shake for a job that is close to home. What legislator in their right mind could not see the implications of adding more tax dollars to the state along with putting more jobs on the main streets that would be in those counties or close to them.
Plenty of native Americans in Day County. Ever hear of the Lake Traverse Reservation? Part of it is in Day County. Or, do you think that our native brothers and sisters can only live inside the confines of a reservation?
Thomas,
That is a reckless statement about Native Americans living “in the confines of a reservation.
Native Americans make up a significant part of the population of Rapid City and Sioux Falls as well as small towns across the state.
There is a recent pattern of Natives Americans that lived off the reservations returning to offer their knowledge and expertise in a multitude of areas.
I live in Rapid City and have a sister and other relatives that ‘choose’ to live on the reservation not because they can’t function off the reservation, but have something to contribute to the tribe.
You may want to name the specific funds using their legal titles, Mr. H, as opposed to saying “any fund controlled by these guys”, to avoid other law bills passed that could do things to jimmy up your proposal. Is “Olympic Average” defined somewhere in the statutes? You may need to add a section defining a few terms. Is the Ellsworth Development Authority a state economic development authority? Is the Science Authority at Homestake one? I don’t know, but I imagine a backlash of gordantic proportions if you try and divert Sanford money from Lawrence to Todd county, or Ellsworth money from Pennington to Ziebach. I’m just sayin…
Let’s just say that I find it improbable that the SoDak Totalitarian Legislature will find little room in its discussion chambers for your suggestion.
There are reservation lands in Huges, Hyde, Charles Mix, Lyman, Gregory, Tripp, and Yankton, but none of these are in the 10 most economically distressed counties in South Dakota.
It is good to see a homecoming as such Roger. We all sometimes need and welcome new ideas that can come from those that may have seen a better way to do something that makes sense. Economic development would make an even higher demand for skilled and knowledgeable members and their spouses to make it all happen. In each of these counties, there are people ready to have the chance and opportunity to make things happen. Good ideas help to make the Lakota Fund a viable and very important part of small business loans on the reservation. Couple that with loan guarantees for small business opportunities and there you go. The ideas of putting a project together that would employ 400 to 500 people in one location do not make sense in these areas as the population would not allow it. Small business, the backbone of the country, would work very well though. With the state as an interested and viable source, many things could happen. Have the wages necessary to make it all feasible, not minimum, but living wages, and you can see it all come together.
Bob, you and I both know that Mr. H would need to go to Pierre and work the discussion chambers in the evenings, plying the legislatures with his arguments about voting for his idea. Or even introducing it. He needs some friendly fellow to introduce it first and have the Research Council doctor it up rightly.
I like the plan and find it very sensible. These reservation counties need all the help they can get. However, the plan is not politically doable as the major population centers in South Dakota are the regular recipient of those funds.
Mr. Sol, I had thought a similar thought. Often, I suspect, economic development is targeted at areas where the return is the biggest. I bet you if Mr. H analyzed where all those grant money honey pots go, most go to Sioux Falls.
Thomas, yes, I would expect to find lots of Dakota people in Day County, but I was surprised to find that the Census Bureau says Day County’s indigenous population is only 9.7%, not much more than the statewide 9.0%.
Mr. Sol, yes, it would be a hard political sell, asking the reps from major population centers to vote for conscience over self-interest.
But as Jerry noted elsewhere, boosting economic development in the ten highest-unemployment counties would raise the tide for all of South Dakota. Or, to quote Paul Wellstone, we all do better when we all do better.
Grudz, GOED’s 2016 report on Future Fund awards shows most of the $11.8M disbursed going to projects marked as “statewide.” Only $429K went to projects marked for Mitchell, Vermillion, Sioux Falls, and, the biggest winner at $300K, Rapid City.
Interestingly, $7M out of that $11.8M was a grant to “Enterprise 605 Inc., a non-profit incorporated in Sioux Falls in 2016 to promote economic development. Its directors are Dana Dykhouse and David Link of Sioux Falls, David Emery of Rapid City, Robert Fouberg of Aberdeen, Venky Venkatachalam of Vermillion, and David Chicoine of Brookings.
Grudz, “Olympic average” is used for ag land assessment. If the term is not clear, I welcome amendment to clarify. Likewise with the specific economic development funds… although I would suggest that catch-all phrase is useful to make sure the Legislature and GOED don’t create new funds that are exempt from this 80/20 dedication of funds.
I do agree that if there are economic development authorities specific to certain localities, we’ll want to make some adjustments. However, maybe such locality-specific funds should be calculated in an overall split: maybe the money targeted to Homestake and Ellsworth should count toward an overall GIF in years when unemployment in Pennington and Lawrence doesn’t make the top ten and toward an overall UNIF if those counties ever make the top ten for joblessness.
What an amazing find! http://sdlegislature.gov/docs/budget/BoardPapers/2017/10%20-%20Follow-up%20Questions%20about%20GOED%20-%20January%2012%202017.pdf Thanks Cory!
Here is the answer to your Bill too formalize it. Indeed, this is exactly the kind of partnerships and loan guarantees that could make these distressed areas vibrant with small business opportunities. As I mentioned, the Lakota Fund, located in Kyle, South Dakota, has done a great job in that area to promote and to fund small business. The listings on the Pine Ridge Area Chamber of Commerce show that there are a good number listed there. This Enterprise 605 is just the incubator that can lift rural counties and help take the shutters off of businesses on small town main streets.
DFP Bill #1 is a winner! That will take the dependence off of the lower agriculture inputs of sales tax and disperse those incomes to small business to play it back to the states coffers. What a winning way to start 2018!
Here’s where I get nervous, Jerry: Is Enterprise 605 Inc. subject to any existing laws and rules controlling GOED activities? If we passed DFP Bill #1, and if GOED gave Enterprise 506 Inc. a big chunk of UNIF money based on a promise from E605 to direct that UNIF money to UNIF counties, is there any law or rule that would hold E605 to that promise? Does E605 have to publicly report any of its activities?
“Here’s where I get nervous, Jerry: Is Enterprise 605 Inc. subject to any existing laws and rules controlling GOED activities?”
According to the questionnaire link, Enterprise 605 declares that is was created for the purpose of promoting economic interests in the State of South Dakota “and providing financial support to South Dakota businesses or business that plan to do business in South Dakota”. Economic 605 is a South Dakota no-profit corporation created for the purpose of promoting economic interests and economic development in the State of South Dakota by fostering entrepreneurship opportunities and more according to the link I provided.
” If we passed DFP Bill #1, and if GOED gave Enterprise 506 Inc. a big chunk of UNIF money based on a promise from E605 to direct that UNIF money to UNIF counties, is there any law or rule that would hold E605 to that promise?”
E605 reviews and does the due diligence on requests for for investment. So there really is no guarantee that monies will be dispersed simply upon request. It would appear though that once entered into an agreement or contract after due diligence, that should be rock solid for the utilization of the funds requested.
“Does E605 have to publicly report any of its activities?”
All non profits in the State of South Dakota have filings that must be done. http://www.nonprofitlegalcenter.com/south-dakota/
If we want economic stability and growth – establish a state bank with a branch office in each rural county. Across the US about 1/3 of rural counties have no bank presence. This is up from about 15% in the mid-1990s. This absence of banking reduces rural loans, and hence business activity and opportunity.
ND has an extremely successful state bank. So effective that ND was virtually immune from the nation’s mortgage/housing/banking crisis.
The state bank! Senator Sutton works in finance. Perhaps as Governor he could draft and push some legislation to that effect, for exactly the purpose John cites: rural economic development!
Better yet, put the Post Offices back to one of their duties, providing banking services. No, I do not wear a tin hat and remember when banking was offered (not that old or crazy) http://www.latimes.com/business/la-fi-post-office-banking-20160102-story.html
What that would do is put banking into close proximity to areas that are miles and miles from the nearest bank and their services. This would certainly help small town main street.