Future Fund Tax: A Good Idea?

Do we need it and is it good for the people of South Dakota?

The Future Fund was established by the South Dakota Legislature in 1987 after a challenging recession. The goal was to diversify the economy, so future recessions were less challenging. It is funded with an "investment fee" that is collected from employers as part of their unemployment taxes. According to the law, “Moneys in the fund must be used for purposes related to research and economic development for the state.” The moneys are completely controlled by the Governor, without any citizen or legislative oversight.

While employer taxes sound like they only impact companies, they increase a company’s cost and the company turns around and passes that cost on to consumers — meaning everything from food to gas to housing is more expensive. So in reality this is a tax on the citizens of the state.

It is also interesting that the fund is still active even though the state is at/above full employment (normally about 4-6%). As we have discussed in prior posts, undertaking economic development when an economy is at full employment creates labor shortages and all kinds of problems including wage depression. Wage depression is particularly challenging since real inflation is running between 9 and 14% and has been running at this level since the late 1990s ($50,000 in 1997 is the equivalent of about $233,000 now). As a result, these programs are actually pushing our citizens into poverty and radically increasing the tax load for those that are not.

Here are a few years of Future Fund projects (you can find a complete list here). There is great disagreement about whether this “tax” is necessary or helpful to the average citizen. What are your thoughts?

2024 (Gov Noem)
$15,000,000 - Sioux Falls Development Foundation (Sioux Falls) - Why so much to Sioux Falls?
$13,500,000 - Department of Game, Fish and Parks (Statewide) - Shooting range (Legislators declined funding and Governor moved forward through Future Fund)
$40,000 - South Dakota Chamber of Commerce & Industry (Statewide)
$50,000 - South Dakota Chamber of Commerce & Industry (Statewide)

2023 (Gov Noem)
$7,940,211 Department of Labor and Regulation (Statewide)
$5,000,000 Strategic Media Placement, Inc. (Statewide) - Delaware, Ohio Company
$4,777,314 Lake Area Technical Institute (Watertown)
$3,000,000 North Sioux City Economic Development Corporation (North Sioux City)
$2,500,000 Dean Entertainment Group, LLC (Sioux Falls) - Denver, CO Company for advertising a rodeo
$2,345,000 Mitchell Technical Institute (Mitchell)
$1,600,000 South Dakota Trade Association (Statewide)
$1,574,749 Southeast Technical Institute (Sioux Falls)
$1,561,435 Western Dakota Tech (Rapid City)
$40,000 South Dakota Chamber of Commerce & Industry (Statewide)