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Public Investment in Homestake Science Good for South Dakota Economy

Governor Dennis Daugaard is building back his spending on state employees faster than he is repairing the fiscal damage he's done to our K-12 system (though his Administration will argue the growth of state government jobs isn't out of line). But not all of the payroll increases the Governor is proposing merely expand the bureaucracy and patronage at his disposal. Of the 107.7 full-time equivalents (FTEs) in the Governor's FY2014 budget proposal, 41 would go toward serious science, which in turn will generate some serious economic development.

Governor Daugaard wants to invest $2 million in 21 new FTEs for the Sanford/Homestake Lab in Lead. That would add to the 122 full-time jobs that make the Homestake lab one of the largest employers in the Northern Hills. Those workers pump $8.5 million in payroll into the economy, plus $14 million in local contract services. It may not be the same proportionate impact that Homestake brought to the Hills when it employed 2000 miners to dig gold, but it beats an empty hole in the ground.

Now we can talk about all the grand-scheme economic development that science generates through new technology. But South Dakota Science and Technology Authority exec Ron Wheeler puts the economic benefits of investing in the Homestake Lab in much more concrete local terms:

To date, the state of South Dakota has appropriated about $42 million for the lab. Of that, $10 million is in the S.D. Treasury, as it is for indemnification purposes. Because of the $30 million in state spending, Wheeler said, the lab has attracted more than $261 million in outside dollars, more than $115 million of which was spent in South Dakota [Wendy Pitlick, "Science Investments Pay off for State," Black Hills Pioneer, 2012.12.15].

Wheeler says investment in the Homestake Lab keeps more economic value in the state than other economic development projects:

Wheeler also explained that investing in the Sanford Lab would bring the exact kinds of returns necessary for economic development.

"For retailers, there you take local money and a lot of it goes out of state for the goods and services that are being sold by retailers," Wheeler said. "That’s why in economic development you don’t call those primary jobs. In our case, we are creating jobs where all of this money is coming from outside of South Dakota, and it goes into salaries and contractors and so forth. That turns in the community six times at least, and some would say seven times" [Pitlick, 2012.12.15].

Investing in the Homestake Lab also brings fewer externalities that the state must bear. The Homestake Lab imposes almost no environmental cost on the surrounding community. Projects like the state-subsidized Bel Brands cheese factory in Brookings depend on the expansion of our dairy herd, which means more smelly, polluting CAFOs across eastern South Dakota. Expanding CAFOs put more small dairies out of business; the Homestake Lab doesn't compete anyone in South Dakota out of a job.

Another 20 FTEs in the Governor's proposed budget would build a new physics Ph.D. program run jointly by the School of Mines and Technology in Rapid City and the University of South Dakota in Vermillion. The Homestake Lab would be integral to that Ph.D. program, providing research, internship, and employment opportunities for students. Homestake would also serve as a big recruiting tool for those programs: very few universities have access to a science facility like Homestake. There are some experiments that just can't be done anywhere but a mile underground. You can't go that deep at Harvard or Berkeley. You want to study neutrinos? You'll come to Mines or USD. That's a recruiting pitch that should grab some top physicists and students (as long as the South Dakota GOP can keep its mouth shut about its disdain for talent and intellect).

If any legislators balk at throwing two million dollars down a hole in the Black Hills, we should remind them of the return on investment those dollars will produce. We should also remind them that, true to the red-state moocher model, we bearing just a small fraction of the cost. While the Governor asks for $2 million more this year, the federal government is spending $15 million per year on Homestake. Expanding FTEs for Homestake and an in-state physics Ph.D. program is a small price to pay for the direct economic benefits that science jobs bring to our state.


  1. Bill Dithmer 2012.12.17

    If any legislators balk at throwing two million dollars down a hole in the Black Hills, we should remind them of the return on investment those dollars will produce.

    And yet we are still going to put 2 million down that hole. When will it start to go the other way?And if it has why are we putting 2 million down that hole if it is that profitable?

    The Blindman

  2. tonyamert 2012.12.17


    The basic premise here is that by investing this $2 million dollars, we are going to attract vastly more. As empirically shown, our $30 million spent has resulted in external investments of $261 million or an 8.7:1 return.

    We do very similar things with other industries, such as tourism. We recognize that by investing money on advertising South Dakota in general we see a vast economic return, but not specific to one business.

    I believe that you're looking at his as some type of traditional business entity. It's not. The return is not specific to a single business entity. Its impact is diversified across the state.

  3. caheidelberger Post author | 2012.12.17

    Tony's right, Bill: Ron Wheeler's point is that by investing the lab, we make possible more experiments that will draw more funding and more scientists that will put more money in the state's economy. Here's an example I learned from Mike Headley, the lab director: right now, we're spending money to fix the Ross shaft. The shaft infrastructure is old and worn out. The lab could hollow out more spaces down below to make room for more labs to do more experiments, but the elevator in the Ross shaft couldn't bear the weight of the rock they'd have to haul out. If I understand it right, a couple guys could haul rock out maybe a couple buckets at a time, which makes hauling out blasted rock too inefficient to be worth the time. But by refurbishing the Ross shaft (putting up new steel reinforcement, strengthening the infrastructure), we make it possible for construction crews to haul out more rock in a cost-effective manner. Once the Ross shaft is done, we can build more labs down below, which can host more experiments and more scientists... and that means more money flowing into the SD economy.

    And consider this angle: When I grumble about state investments in economic development in big corporate projects, I'm often bent out of shape because those projects (like the Keystone pipelines) are going to happen whether we give them handouts or not. The free market will make them happen. The free market doesn't do particle physics. Our investment in Homestake is an example of government following Adam Smith's proper roles of government and providing a public good that the free market either cannot or will not do on its own.

  4. Stan Gibilisco 2012.12.17

    As a resident of Lead for almost a decade, I have to say my views on this issue are biased.

    Invest in that hole, say I.

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