Governor Lets Feud with Schoenbeck Stall $200M Investment in Affordable Housing

Governor Kristi Noem’s inability to govern continues to hamstring practical efforts to improve the state’s stagnant economy. Faced with criticism for her poor performance, Noem continues to throw blame at members of her own party.

2022 House Bill 1033 makes $200 million ($50 million of that from Uncle Sam) available for the South Dakota Housing Development Authority to make loans and grants to build housing infrastructure. However, when Governor Noem signed the bill, she warned that the state money allocated might be limited by other state law to projects targeting low- to moderate-income families and that the federal money would be subject to “evolving federal guidance.” She said she hoped that the Legislature “will be able to deliver the needed statutory clarification before grants and loans will be made.”

The Legislature made no such clarification, and the South Dakota Housing Development Authority decided at its June 28 meeting it doesn’t dare spend the money:

Throughout the legislative process, supporters of the program did not want to restrict the program funding for low- to moderate-income housing only.

Backers argued that workforce housing is not necessarily income-targeted housing and that the fund should not be limited to providing infrastructure for housing only income-qualified residents. The funding mechanism for the program was contained in House Bill 1033 during the 2022 legislative session.

As a result of the confusion around the intent of the legislation, the authority board voted this summer to delay implementation of the entire funding program until it received further clarification on intent from the Legislature, [SDHDA director Lorraine] Polak wrote.

“The SDHDA Board of Commissioners determined that SDHDA could not appropriately administer the transferred funds without further clarification by the South Dakota Legislature,” Polak wrote to News Watch in an email [Bart Pfankuch, “Tension Between Governor and GOP-Led Legislature Stalls $200 Million Workforce Housing Program,” South Dakota News Watch, 2022.11.02].

HB 1033 actually reads pretty clearly. It allocates 30% of the money to Rapid City and Sioux Falls. It caps payouts at one third of project costs. It enumerates ten kinds of public expenditures (rights of way, water distribution systems, sanitary and storm sewers, streets and roads and bridges, curbs and gutters and sidewalks…) that qualify as housing infrastructure and allows the SDHDA to determine other kinds of infrastructure projects that would be “consistent with the purposes of this Act.” HB 1033 does not say anything about targeting certain income groups, but it doesn’t repeal the “affordable housing” provisions of Chapter 11-13; therefore, SDHDA could pretty easily say, “We’re spending HB 1033’s money in accordance with all other standing law” and start handing out grants and loans this year to approved affordable housing projects.

But no, Governor Noem would rather hold up economic progress to throw mud at bad old Senate boss Lee Schoenbeck:

In an email to News Watch, Gov. Noem’s office blamed the GOP leadership in the state Senate for refusing to work with her on the bill that authorized the spending, for changing her initial plan and instead concocting a “scheme” that put the program’s goals in jeopardy.

“We are disappointed but not surprised” the program has stalled, the governor’s email stated. “Rather than work with Governor Noem on this plan, Senate leadership preferred to draft their own scheme. Many legislators assured the Governor that this scheme would work, and she took them at their word and signed their bill. Unfortunately, we have now seen that this scheme did not work as Senate leadership stated it would, and the $200 million is lying dormant” [Pfankuch, 2022.11.02].

Schoenbeck, whom Noem throws under every approaching bus, says the delay is entirely Noem’s fault:

“There’s nothing wrong with the law,” Schoenbeck wrote. “To accommodate the Governor’s complaints and so she will drop both of her threats to sue [the South Dakota Housing Development Authority], we have drafted a bill. If [the governor] dropped her threats, money could go out now” [Pfankuch, 2022.11.02].

I win no points by saying any Republican is right, but Schoenbeck is right. The SDHDA is part of Noem’s executive branch. The SDHDA could read HB 1033 and Chapter 11-13 to do exactly what Governor Noem wants, and nobody in the Senate could do anything to stop them.

Governor Noem is letting a senseless feud with her own party leaders stand in the way of pouring $200 million of useful and stimulatory spending into South Dakota’s economy.