Gov. Dennis Daugaard wishes his new grant program for financially assisting large business projects could have become law July 1, rather than wait 16 more months for a statewide vote.
In an interview, the Republican governor said he had no plans to bring a legal challenge against the referendum that was led by South Dakota Democratic Party chairman Ben Nesselhuf.
But Daugaard said the uncertainty about the grant program’s future is causing second thoughts within businesses that his administration is trying to recruit to South Dakota now.
“It’s really a great disservice, and it’s very clearly a political motivation. It bothers me,” Daugaard said.
Nesselhuf said the governor isn’t used to being told no.
“So when 23,000 South Dakotans exercise their right to vote on this issue, Governor Daugaard can only say it’s political. Voters want a say on how their tax dollars are spent. Daugaard should slow down and listen to them.”
South Dakota currently has a tax-refund program for large business projects that applies regardless of whether the financial assistance is necessary.
The Legislature decided in 2009, however, that those laws should expire after Dec. 31, 2012.
Daugaard, after taking office in January, proposed a replacement. He received approval from the Legislature’s Republican majorities to allow the state Board of Economic Development to make discretionary grants to large business projects.
Every Democrat and one Republican in the Legislature voted against the grant program. Nesselhuf then spearheaded the petition drive to refer the program to a statewide vote in the November 2012 election.
The new law is on hold until after the election. If voters uphold it, 22 percent of the revenue from the state’s contractor excise tax would fund the grants, starting in 2013. Based on recent tax receipts the annual amount would be about $13 million or more.
Daugaard said recruitment of business projects has become more difficult since the determination last week there were sufficient signatures on the referral petitions. He said more and more businesses will be “held hostage” during the run-up to the vote.
Daugaard said a business choosing between South Dakota and Nebraska raised the question last week of how equipment purchases and related costs will be treated if the installation isn’t completed by the end of 2012.
The governor said the uncertainty must be overcome too on another project with a likely payroll of 400 jobs where the choice is between South Dakota and Iowa.
“The same issue has come up,” Daugaard said. “It’s hurting us already.”
The contractor excise tax revenue traditionally has been used for the general purposes of state government, such as the two largest recipients, state aid to public schools and Medicaid.
Daugaard’s program would cause a major change in public policy regarding the tax’s purpose. Nesselhuf disagreed with the governor’s position.
“This bill forces small businesses across South Dakota to pay a tax, which Governor Daugaard will then give away for multi-million dollar corporate projects. Our taxpaying job creators shouldn’t subsidize their competition every time they want to expand,” Nesselhuf said.