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Daugaard Donors Receive Future Fund Grants; First Amendment Prevents Fix?

South Dakota's governor has exclusive control over the Future Fund, a pool of economic development cash funded by a portion of every South Dakota business's unemployment taxes. Sometimes Governor Dennis Daugaard uses the Future Fund for good (if you think focusing on job skills over Shakespeare is good). Sometimes he uses it for pure corporate welfare.

Now Pierre reporter Joel Ebert suggests that Governor Daugaard may use the Future Fund to reward his campaign donors:

Gov. Dennis Daugaard has received thousands of dollars in campaign contributions from affiliates of companies that have been recipients of grants overseen by the governor’s office, an investigation by the Capital Journal has found [Joel Ebert, "Daugaard Receives Donations from Future Fund Recipients," Pierre Capital Journal, 2014.03.13].

Ebert points to three companies—Dakota Resources, Pergroup, and Lawrence and Schiller—that have received Future Fund grants and whose owners or officers have contributed to Daugaard's campaign fund.

See who's gotten Future Fund grants from Governor Daugaard (PDFs):

Sensing Illinois-style politics (you know, Daugaard did go to law school at Northwestern and work in Chicago for three years), Rep. Bernie Hunhoff proposed legislation this session that would have prohibited Future Fund grant recipients or other state contractholders (from contributing to their Pierre patrons' campaign funds. House Bill 1189, Rep. Hunhoff's no-pay-to-play bill, was defeated last month, predictably, along party lines.

Banning political contributions from folks with whom the state does business (in Hunhoff's case, big business: his bill blocked contributions only from folks who got grants or contracts worth more than $25,000 in one year) seems sensible... but it also poses a First Amendment problem. It is arguably unfair to make sacrifice of certain free speech rights (and yes, money is speech) a condition of doing business with the state. I can even imagine a Machiavellian twist to the pay-to-play ban: pass Hunhoff's bill, and a Republican governor could direct some contracts and grants to companies run by key Democratic donors, thus denying Democratic opponents access to those campaign dollars.

The potential for corruption is obvious. Can we find a constitutional way to prevent this corruption... and can we get a Republican Legislature to pass such a measure?

p.s.: In December 2011, Governor Daugaard ladled out two million dollars from the Future Fund to Northern Beef Packers.


  1. John Tsitrian 2014.03.15

    After these firms get the money is there any accountability in terms of how it was used?

  2. Nick Nemec 2014.03.15

    The infatuation with Northern Beef Packers by both the Rounds and Daugaard administrations is head shakingly stupid. The business plan for NBP was to produce a commodity product in a mature industry dominated by four players who controlled 80% of the market and have a history of playing hardball and a willingness to take deep losses in order to force upstarts out of the business. They don't play well with others. NBP was doomed to failure before a shovelful of dirt was ever turned.

    The business geniuses in the Rounds and Daugaard administrations were unable or unwilling to see this. Instead they choose to pursue hairbrained finance schemes (EB-5) and dump millions of dollars of taxpayer money down a rathole meddling with the free market system because they knew better.

  3. Paul Seamans 2014.03.15

    Nick Nemec makes some very good points. The Marquis de Mores suffered a fate similar to Northern Beef Packers in the 1880's when he started a beef packing plant in Medora, Dakota Territory. He hadn't done his due diligence and soon found out he couldn't break into established markets and that there weren't enough cattle in the area to sustain the plant. The plant quickly closed it's doors and the Marquis and his beautiful wife, Medora, moved back to France. Too bad there weren't some history buffs on the board of Northern Beef or on Governor Round's staff.

  4. John Tsitrian 2014.03.15

    My sense was that investors were led to believe that enough slaughter-ready cattle were available within a 200-mile radius of Aberdeen to support the plant's projections of 1500-1800 kills a day. A substantial number of those were to come through the South Dakota Certified Beef program, begun by then-Governor Rounds a few years before the NBP plant was in the development stages. Out here in west river I saw no indication that SDCB was gaining any footing, and doubt that any serious numbers were coming out of the program. NBP had to depend on the hope that the general supply of slaughter-ready cattle would support the plant, and it didn't. Cattle numbers across the country were shrinking dramatically and feedlots in NE and other nearby states with sizable feedlots were killing far more cattle than could be raised in their respective states, meaning the scramble was on for supplies. I have no doubt that order buyers were scouring every auction barn in SD for calves to take to southern feedlots, drawing down supplies in the northern Plains that might otherwise have been available to finish and slaughter up here. At its best, and with some fresh financing to help purchase supplies, NBP killed 200 head/day. Throwing good money after bad is a natural reaction that comes from denial that one's investment decisions are no good. Cutting losses is bad for the ego, and, on a political level, bad for public relations.

  5. John Tsitrian 2014.03.15

    Change above to read "meatpackers in NE"

  6. Wayne Pauli 2014.03.15

    You know, I like the "Illinois-style politics" phrase. Governments anywhere and at any level that are one party systems are going to have these issues. Until a majority of every day folks decide that business as usual is not the business they want...well we have what we have and will continue to have. The majority party of South Dakota points it's finger at Illinois and says, "See, this could be you." Never fully recognizing that it already is.

    It is easy being a member of the minority party in these situations. What is hard is being a card carrying member of the party of power and having to climb out of bed every day and support what the ruling class is telling you to eat, drink, and say.

    It is that hope that some day they can be in the clique, and be able to eat lunch with the cool kids that drives them. Their pay day will come by being a good solider.

    Do they really believe that our teachers should be the lowest paid in the nation? Do they really believe that we should throw out our frail elderly and our poor when they cannot provide basic services for themselves? Do they really believe that financial situations like the NBP are OK?

    If so, then they must realize that someday most of them will have grandchildren in our decaying public school systems, that they will need more medical services, that they may wonder why Rome fell.

    I just returned from a short respite in Phoenix. My Arizonian son (yes, he left SD after getting his education) was commenting on the number of #2 license plates he sees in the valley. I told him that I assume many of them are DINO's, Dakotans In Name Only. They come from parts unknown, looking for a tax haven that has great mail forwarding services. They summer in the Black Hills, winter in AZ, really want nothing in terms of services, pay sales tax for a few summer months, vote GOP, and are gone.

    In some respects it reminds me of the Tea school dist trying to get a bond issue passed and a faction of voters from Sioux Falls who happen to grudgingly be in the Tea district voting No as a group to block expansion because they do not want to be part of the district to start with, do not want increased taxes because of someone else's kids, and want to secede from the district (gerrymandering perhaps).

    Yes, it is easy to be a member of the minority party and watch our neighbors and associates labor under this pressure knowing that someday we will be able to say, "I tried to tell you..."

  7. Donald Pay 2014.03.15

    What Wayne Pauli says is what drove us out. We could deal with the corruption (in SD it's just "the way we do business") at the top. It was actually kind of fun kicking them from time to time.

    It still is. Watching (from afar) Daugaard lie about his desperation to site a nuclear waste dump while scheming to keep it under the radar is exactly like Janklow. "Nuke Dump Denny" is just a recycled Janklow, except Janklow wanted low-level waste and Nuke Dump Denny wants high-level radioactive waste.

    So, no, the corruption at the top is fine if it didn't have such awful consequences for the folks down below. And what finally got to us is that the folks down below who fall in line and excuse it, in Wayne's words: "It is that hope that some day they can be in the clique, and be able to eat lunch with the cool kids that drives them. Their pay day will come by being a good solider." But who wants to be a soldier for corrupt leaders? No one with any morals.

  8. Disgusted Dakotan 2014.03.15

    Follow the money trail people.. these people are happy to sell us all out to funnel that Chinese & tax payer money to their friends and family at the trough. Lose a lot of it? Just cut education and funnel more tax payer dollars under the guise of "Build SD."

  9. Monty 2014.03.15

    Pay to play, the gag law, and non-partisan legislative redistricting measures would be a great trio of ballot issues. Circulators could carry the three petitions at the same time for the 2016 general election.

  10. Roger Cornelius 2014.03.15

    Now I got this figured out, Future Fund uses unemployment taxes and other tax sources for funding.
    The governor, at his discretion, hands outs grants to the private sector, most likely cronys, to operate their businesses
    Now comes election time or in Daugaard's case re-election,
    campaign funds are needed so he turns to his cronys that he gave grants to. They respond generously.
    So, in effect unwitting taxpayers and those that pay unemployment insurance are actually making campaign contributions to candidate that may not be of their choice.

  11. caheidelberger Post author | 2014.03.15

    Dang, Monty— that would be quite a package. Who would lead that drive? Can we get the Dems to use that for organizing and driving voter tuurnout, or do we need a separate grassroots movement? Or should we just hire Emmett Reistroffer's circulators?

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