State budget: Legislature snubs Gov. Kristi Noem, bridles power to spend federal stimulus

Joe Sneve
Sioux Falls Argus Leader
Chris Karr and Kristi Noem

PIERRE — A deal struck this week to give lawmakers more control over how federal money gets spent in South Dakota brought unity to the state Legislature that 48 hours earlier was bitterly divided.

South Dakota's 97th Legislative Session came to a close Thursday after hours of deliberations — both behind the scenes and throughout a series of highly contentious committee meetings — as the House and Senate found compromise for nearly $7 billion of budget bills.

And that's got state employees, teachers and community support providers set to get 6% wage increases, millions of dollars in one-time construction projects and major initiatives to fund water and housing infrastructure.

More:Gov. Kristi Noem not pleased with workforce housing initiative that finally earned lawmaker approval

"There's a lot of things in that bill, but I don't know if anything is more important to me than the fact that we were able to work together for several weeks," said Rep. Chris Karr, the Sioux Falls Republican who co-chairs the legislature's powerful budget-setting committee. "We began this even before session and we ended together."

But not everyone at the Capitol is pleased with a series of budget bills awaiting Gov. Kristi Noem's signature.

Karr and other lawmakers, who as recently as last week, were divided on the topic of the budget with talks between appropriators from each Legislative chamber breaking down for a time. At the center of the disagreement was the question of federal spending authority, which came to light earlier this year when the Noem administration began disbursing federal stimulus dollars to South Dakota daycare providers.

Led by Karr, House appropriators contended the executive branch did not have authority to spend what will amount to $100 million of American Rescue Plan Act funds designated for childcare assistance without formal authorization from this year's Legislature.

Siding with Noem, the Senate took the position that even though those dollars had come in since the current year's budget was set, because the dollars were being used for an assistance program that the Department of Social Services already had set up, new authorization was not necessary.

And with each camp dug in, and hundreds of millions of new federal stimulus still filing in after passage of the Bipartisan Infrastructure Law, the dispute lingered into the final days of session and threatened to keep the House and Senate from reaching agreement on a new budget.

House appropriators had been resistant to many of the governor's spending ambitions, but were willing to concede much of them if the spending authority question could be resolved.

Enter House Bill 1281.

The measure, which cleared both chambers with overwhelming majorities, will require state agencies get formal authorization from the Legislature before federal funds can be spent on new programming or initiatives that do not already exist. It would apply only to dollars that come in during the next fiscal year.

Noem and her administration, though, fervently argued this week that HB1281 would require all federal dollars get new authorization from legislature before being spent, which they contend would essentially create a full-time Legislature and require the state's financial accounting system be overhauled.

And with some agencies of the state receiving federal funds on a regular basis, even when there aren't stimulus packages being passed in Washington, D.C., that could slow down the state's abilities to disburse funds.

"It's not good, and we need to make sure this Appropriations Committee doesn't break state government," Noem said in a social media post before both HB1281 and the budget bills were adopted by a defiant Legislature.

Noem in recent days watched as her influence on the budget process with legislators diminished, as many lawmakers often in lockstep voiced indifference to her desires Wednesday and Thursday.

"We would have some pretty big discussions and I'm not sure we'd get out of here very early today," Karr said about the possible of HB1281 not passing. "It's what brought us all together."

While the governor could veto HB1281 or any of three budget bills — the general bill, the supplemental appropriations bill to adjust this year's budget and a mil levy-setting measure — all four measures earned approval with more than two-thirds of Senate and House members in support.

The governor's office did not immediately respond to a request for comment Thursday evening.