Press "Enter" to skip to content

HB 1230 Gives Excessive Authority to Governor… and Still Can’t Outbid Iowa

South Dakota Senate Majority Leader Russell Olson argued on SDPB Wednesday that HB 1230, the governor's new corporate welfare program, is essential to bringing new business to the state. On Dakota Midday, Senator Olson made two remarkable claims:

  1. Olson contends that HB 1230 gives the governor more flexibility to close deals.
  2. Olson claimed that we were in running for a multi-million-dollar renewable energy project, but we lost it when Iowa threw another $9 million on the table.

The first claim exposes how HB 1230 surrenders legislative appropriations authority to the governor. "Flexibility" means the ability to spend money without Legislative oversight. Do we really want to empower the governor to make a snap decision to spend the $16 million dollars HB 1230 would make available? I'm not picking on Dennis; I'm talking about whether that power is appropriate for any governor. Do a gut check: imagine I was governor. Would you want me to have that kind of discretion to throw millions of your tax dollars at companies I really like?

The second claim exposes the futility of HB 1230 and corporate handouts as an economic development strategy. Suppose we're in a bidding war with Iowa for another big renewable energy project (and if anyone can tell me exactly which big project picked Iowa over South Dakota, I'd love to know!). Suppose our governor can now swagger to the table with $16 million, the amount HB 1230 would put into the Large Project Fund based on current contractors excise tax figures. Ha! Beat that, Iowa!

The problem is, Iowa always can beat that. According to, $16 million would be 0.45% of South Dakota's total state spending for the fiscal year just completed. Suppose Iowa assigned the same importance to winning that renewable energy project. Iowa's total FY2011 spending is $13.68 billion. If they are willing to bid 0.45% of their state budget, they can drop almost $62 million on the table.

Senator Olson's arguments for HB 1230 give South Dakotans two good reasons to vote against it (if they get the chance—Secretary Gant, how's that signature count coming?). The bill gives the Governor's office far too much spending discretion, and it fights a bidding war that South Dakota can't win.


  1. Nick Nemec 2011.07.01

    Your first point is an important one. Lack of legislative oversight on this slush fund should be a big concern. Of course a Gov. Heidelberger would make that stalled out Kadoka to Rapid City bike trail a reality with enough $ left over for a Herman to Madison spur. Holy tourism increase Batman.

  2. Steve Sibson 2011.07.01

    Another important point is that this is "NOT" economic development. It is a contest on where the economic development happens, in this case South Dakota or Iowa. "AT BEST", this is a zero-sum game. So who is the real winner? The big corporations who receive taxpayers' money, whether it be Iowa's or South Dakota's. Are we not all Americans?

    If we take the economic argument further, we will understand that at the end of the day America's economy is less efficient. If it was more efficient for the business to run in South Dakota, then Iowa's taxpayers funded the inefficiency so that it can operate less efficiently in Iowa. That is why I say "AT BEST", this is a zero-sum game. That was the point I made in the Senate State Affairs committee hearin on HB 1230. I used Hayek's Road to Serfdom as my source.

    The last thing that is relevant is that the $16 million should be spent on education.

  3. caheidelberger Post author | 2011.07.01

    Steve, I appreciate your willingness to view the common good in the context of the entire nation. You sound almost... communitarian.

    And I definitely appreciate the economic point. Absent any incentives, the entrepreneur measures the advantages in the marketplace and goes where it will be most efficient to do business. If we throw cash at her, she moves to a state where it will be less efficient. That's a fascinating economic point!

    Nick, as Governor, I promise to expand the Rapid City–Kadoka trail to a statewide bicycle network, including a spur along Medicine Creek straight to Holabird so Woster and Dennis can bike to the next blog hunt. I will dedicate the entire Large Project Fun to recruiting Trek to build a racing bike factory in Sioux Falls and a mountain bike factory in Rapid City. Now if we could just get that pesky Legislature out of the way... ;-)

  4. Nick Nemec 2011.07.01

    I find myself fundamentally agreeing with Steve. The entire process of states outbidding each other for businesses is short sighted and a terrible waste of public funds. In the long run it does more harm than good for our country.

  5. Guy 2011.07.01

    Steve, Corey, et. all: Great Points! Corey please keep the pressure building because I believe a more educated citizenry will become more engaged as we all begin to feel the sting of the FY '12 buget cuts. It will take time to feel them, but, that is coming next fall into next spring.

Comments are closed.