Corporate welfare rolls on in South Dakota. Less than a month after announcing a $50-million partnership with billionaire T. Denny Sanford to fund vo-tech scholarships, Governor Dennis Daugaard is kicking some more state money back toward the Sanford professional family. The Sioux Falls Development Foundation announced Tuesday that the Governor will grant $3 million from the Future Fund to SAB Biotherapeutics. The company genetically engineers cattle to produce vaccines and treatments for various diseases. SAB Biotherapeutics will use this money to expand, possibly creating 200 new jobs paying in the $50K–$70K range in Sioux Falls.

Expanding jobs and curing Ebola is great. But note that this isn't the company's first swig at the public trough. SAB Biotherapeutics started as Hematech in Massachusetts back in 1998. Governor Mike Rounds bribed them into moving to South Dakota in 2003 with a $7.5-million economic development package. Then they became a Japanese company, then a Sanford company at the end of 2012 ("SAB" stood for "Sanford Applied Biosciences").

If the free market doesn't value life-saving vaccines enough to allow biotech firms to pay their own way, well, then I guess spending state money to promote public health is necessary. But perhaps this expansion will allow SAB Biotherapeutics to come up with a cure for addiction to government handouts.

6 comments

Rep. Kristi Noem retools Mike Rounds's "South Dakota common sense" mantra to say the the economy would be fine if the feds just did things the way South Dakota does. Her weekly column cites the new French cheese plant as affirmation of South Dakota's tax policies and work ethic:

...Our state tax policy makes it cheaper to run a business. The workforce is one of the most dedicated and talented in the country. We put our hearts into everything we produce. And we are surrounded by communities that generously support each other during the good times and pull together like a family would during the hard times.

It’s probably no wonder, then, that I joined Gov. Dennis Daugaard to welcome a new manufacturer to Brookings. In addition to 3M and Daktronics, Brookings is now home to a new Babybel cheese manufacturing facility. It was an honor to welcome them to our state [Rep. Kristi Noem, "SD's Economic Policies Worth Copying," Mitchell Daily Republic, 2014.10.07].

First, let's be clear: most people everywhere work hard and help their neighbors. South Dakota workers are not uniquely virtuous. Working folks in New York or Texas or California are not uniquely lazy or anti-social.

As for the Bel Brands cheese plant, let's review the main reasons the French decided to build in Brookings:

  1. South Dakota saved its dwindling dairy herd by luring foreign investment through a government program to sell green cards.
  2. South Dakota handed Bel Brands $5 million in corporate welfare.
  3. Brookings offers Bel Brands access to skilled graduates of one of only two university programs in the country offering degrees in dairy production and manufacturing. That program is at South Dakota State University. State University, as in, made possible by good big government.

So really, Republican Kristi Noem is telling the country to be more like South Dakota: use big government to benefit big business.

35 comments

Madville Times readers share my concern about the need for more funding for education. There are numerous ways to increase that funding, such as the current HB 1003, which sets the minimum annual K-12 funding increase at 2%, and HB 1004, which timidly restores the per-student K-12 funding allocation to what it was in 2010.

Given the current scrutiny of the state's economic development programs, how about a small gesture to recognize that investment in education is essential to growing our economy? Based on your suggestions, for your consideration, I offer a plan to require the state to invest one dollar in K-12 education and one dollar in higher education for every dollar it hands out in corporate welfare.

Madville Times Bill 104

FOR AN ACT ENTITLED, An Act to couple economic development with investment in education.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:

Section 1: For every dollar disbursed by the Governor's Office of Economic Development as a grant to any business, economic development corporation, local government, or other entity, the Governor's Office of Economic Development shall disburse one dollar in economic development match funds to the Department of Education. The Department of Education shall disburse any GOED moneys received under this statute to all K-12 school districts in South Dakota, in amounts proportionate to each school district's monthly state aid payment.

Section 2: K-12 school districts may use economic development match funds for salary bonuses for certified teaching staff, professional development activities, and/or purchase of instructional materials and/or classroom supplies.

Section 3: For every dollar disbursed by the Governor's Office of Economic Development as a grant to any business, economic development corporation, local government, or other entity, the Governor's Office of Economic Development shall disburse one dollar in economic development match funds to the Board of Regents. The Board of Regents shall disburse any GOED moneys received under this statute to each Regental institution each month, in amounts proportionate to each school's operating budget for that fiscal year.

Section 4: Regental institutions may use economic development match funds for salary bonuses for teaching and research staff, professional development activities, and/or tuition relief for the upcoming semester.

7 comments

Rep. Peggy Gibson published a list of the state's handouts to now-bankrupt Northern Beef Packers in the Huron Plainsman last week. Her numbers match Scott Waltman's July report in the Aberdeen American News on that state aid.

Here are the approval letters for five state grants to various entities in support of the Northern Beef Packers project. Check out who signed each one... and when:

  1. Grant 1430: $67,600 to Mentor Group, November 24, 2010, for plant appraisal.
  2. Grant 1433 (page 1, page 2): $150,000 to Aberdeen Development Corp., December 8, 2010, to pay for economic impact study and marketing services.
  3. Grant 1434: $1,000,000 to Northern Beef Packers, December 8, 2010, to subsidize construction costs.
  4. Grant 1439: $300,000, South Dakota Department of Agriculture, January 1, 2011, to promote South Dakota Certified Beef Program.
  5. Grant 3478: $843,000, Northern Beef Packers, January 1, 2011, to train packing plant employees.

The signatures? All from outgoing Governor Marion Michael Rounds:

Rounds Signature Grant 1434 - 1M to NBP

Northern Beef Packers was already at least two and a half years behind schedule. It had already burned through millions of dollars of EB-5 investment and a desperate offshore bailout. Yet in his last days in office, while the state budget spiraled into a $127 million shortfall that incoming Governor Dennis Daugaard used to justify 10% budget cuts, lame-duck Governor Rounds raided the state treasury for more corporate welfare for a doomed project.

Rounds thought this final blast of cash for Northern Beef Packers would help establish his legacy. It did establish the Rounds legacy: a legacy of drift, poor vision, and bad stewardship of the people's money.

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We still don't have a Farm Bill because Rep. Kristi Noem thinks we have to cut the Supplemental Nutrition Assistance Program (SNAP, or food stamps) by $40 billion over the next ten years. Six years of those cuts will equal the damage she and her Republican colleagues did to our economy with just two weeks of a government shutdown. Disgusting.

Also disgusting: the cuts she and her Republican colleagues have already forced on food stamp recipients will cost the South Dakota economy $11 million in this fiscal year:

In South Dakota, about 104,000 people, or about 12 percent of the population, are projected to be on the SNAP program during the 2014 fiscal year that ends next Sept. 30. That means the cuts put in place Friday would reduce benefits by $11 million, according to the Pew Charitable Trusts.

...Food aid groups and economists said a drop in food stamp benefits would force some families to miss meals or redirect money intended for other services such as a car repair or rent. Iowa State’s Hart said the decline in food stamp spending could be felt in the economy.

“Its primary benefit is to provide nutritional support to that individual but it also can have an indirect impact” on the local economy, Hart said. “You pull a dollar away from an individual as far as food assistance, well, they are going to replace it and not spend that dollar somewhere else” [Christopher Doering, "Cuts in Food Aid Likely to Ripple," that Sioux Falls paper, 2013.11.02].

Oh yeah, and more kids, and moms, and veterans will be hungry. But the average family will continue to pay $6,000 a year in direct and indirect subsidies for large corporations. That number will increase if the Farm Bill Rep. Noem wants ever passes, as it will hand her husband more federal subsidies to sell crop insurance to make sure her children don't go hungry.

Thanks, Kristi, for having your priorities straight.

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Here's a tricky question for Hanson County's Rep. Stace Nelson (R-19/Fulton). Last March he voted against Senate Bill 235, the omnibus legislation that retooled the state's economic development program. This month, under that enacted legislation, Rep. Nelson's county seat, Alexandria, received $50,300 to build new water and sewer out to a new factory.

Alexandria city councilor Owen Reitzel sends me a clip from the Internet-resistant Alexandria Herald explaining that the immediate beneficiary of this state-funded infrastructure will be a new South Dakota company, Sharp Industries, founded by South Dakotans. One Sharp manager, Melvin Waldner, already runs South Dakota Industries, which builds things like steel hog troughs and school lockers at a facility ten miles north of Alexandria. Waldner and Canton partner Leonard Decker of Dakota Steel and Trim started building an 18,000-foot plant in Alexandria where they will make stainless steel doors for agricultural and medical uses. Sharp Industries will put five to eight people to work when it starts production, perhaps as soon as the beginning of 2014. Waldner and Decker tell the Herald they hope to expand to a workforce of as many as 40.

In August, Hanson County had 1,900 workers and 1,820 jobs. If Sharp Industries lives up to its owners' hopes, it would cut local unemployment in half.

Now I have my own qualms about Senate Bill 235 and the state's addiction to corporate welfare. But Rep. Nelson and I will face a challenging question when we look at those new workers in Alexandria, folks bringing home good manufacturing checks (because Waldner and Decker will pay much better than minimum wage for quality work, right?), building houses, paying taxes, and keeping their kids in the local school: is this corporate welfare a net plus for a community like Alexandria?

2 comments

Michael Larson finds an embarrassing indication of the quality of oversight in South Dakota's corporate welfare program. Adams Thermal Systems of Canton received two $50,000 economic development grants from the Governor's Future Fund in September and November, 2011. Governor Dennis Daugaard gave Adams Thermal these funds for creating and retaining jobs in Canton. Adams Thermal received similar Future Fund grants in 2004 as part of state assistance that made Mike Adams purchase of the company possible, plus another $5,516 in 2008.

Apparently the Future Fund doesn't ask for refunds when job creation results in worker elimination. An Adams Thermal machine killed worker Larry Michael Kinzer on November 7, 2011. To avoid federal criminal prosecution for Kinzer's death, Adams Thermal agreed last week to pay Kinzer's widow $450,000, to pay the Occupational Safety and Health Administration a $435,000 fine, and an additional $450,000 fine.

Adams Thermal issues corporate propaganda (posted, gallingly, on Thursday, September 5, the day of their settlement with OSHA and the Department of Justice) that "Safety has always been a top priority in our organization." Ha!, says OSHA and anyone else able to read:

An OSHA investigation following the incident revealed that managers at Adams Thermal had “instructed and authorized” employees to bypass the safety guards installed on machines, prompting a criminal complaint with the U.S. Attorney’s Office in South Dakota. Scott Allen, a spokesman for the U.S. Department of Labor, said criminal complaints are “very uncommon.”

“This is quite significant because it had to do with a fatality,” Allen said. “I would put this in the significant category for sure.”

Thursday’s agreement defers prosecution on the criminal complaints.

Less than five months before Kinzer was crushed to death, OSHA fined Adams Thermal $4,500 after an inspection found problems that portended his death. According to the citation OSHA issued on June 17, 2011: “The employer did not furnish employment and a place of employment which were free from recognized hazards that were causing or likely to cause death or serious physical harm to employees exposed to a potential crushing and/or amputation hazard.”

The fine was reduced to $3,150 on July 14.

OSHA returned with a partial inspection the day after Kinzer died. A complete investigation opened on Feb. 6, 2012, found 47 violations — 44 of them classified as “serious” [Jonathan Ellis, "Adams Thermal Fined $1.3 Million for Lax Safety, Worker's Death in 2011," that Sioux Falls paper, 2013.09.06].

If making safety your top priority gets you 44 serious OSHA violations, I'd hate to see how many guys die on the job when safety is only a secondary priority.

And as citizens whose tax dollars funded a company with such callous disregard for safety and human life, we should all feel a little guilty.

p.s.: In December 2011, the Governor's Future Fund gave $2 million to the ever-beleaguered Northern Beef Packers. We have a tough time picking winners, don't we?

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Governor Dennis Daugaard says South Dakota doesn't have the money to expand Medicaid. Besides, if anyone should get welfare, it's children and the disabled, not able-bodied adults.

3M must be run by kids in wheelchairs:

3M announced Wednesday it will be expanding manufacturing capabilities in its Brookings facility later this fall thanks to the newly established Reinvestment Payment Program. 3M was the first company to receive approval under the program.

“I am pleased with 3M’s decision to expand within South Dakota,” said Gov. Dennis Daugaard. “The Reinvestment Payment Program and Workforce Development Program are two critical programs for the creation of permanent, full-time jobs and both play a valuable role in the continued growth of South Dakota’s economy.”

The Board of Economic Development approved a reinvestment payment of up to $234,000 to offset the sales and use tax paid on eligible equipment costs incurred during the project. In addition, the GOED will supply up to $17,000 in Workforce Development Program funds to assist with new employee training. The expansion is slated to create a total of 29 jobs [Governor's Office of Economic Development, press release, 2013.08.28].

There must not be any able-bodied adults at Marmen Energy, either: the state has approved handing them $600K out of the Senate Bill 235 slush fund to expand their wind tower plant in Brandon.

11 comments

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