2018 SD Legislative Sessions – Tom Pischke Week 1 Update

Pischke_2017On Tuesday, Governor Dennis Daugaard gave his final state of the state address as Governor of the great State of South Dakota. State government faces several challenges as we prepare to budget for the coming year, but there are many bright spots on the horizon.

– Sales tax revenues continue to lag behind projections and revenues are tight. We will need to continue to watch revenues over the next two months to ensure we adopt a structurally balanced budget in March. Part of that is due to weak sales tax collections from a strained farm economy, and part is due to on-line and out-of-state retailers.

– The state has taken several steps over the years to try to collect more online retailers to encourage them to remit taxes. The state has reached an agreement with Amazon to collect and remit state and local sales taxes in South Dakota. Amazon began to voluntarily to collect sales tax on February 1st and began remitting in late March.

– Over the past six years, the legislature has passed a repeal over 4,000 sections of obsolete or unnecessary laws and rules, accounting for nearly 470,000 words. We will be proposing more of these bills this year.

– Two years ago, we started to create new conflict of interest standards for state employees. After one year’s experience, there will be legislation this year to clarify and streamline that law so that boards, commissions and school boards can achieve our objective of bringing transparency to these situations.

– South Dakota has now obtained AAA ratings – the highest possible – from all three major credit agencies. The AAA rating saves money when our tech schools, universities, and hospitals issue bonds – we get a lower interest rate because of our bond rating. We have balanced our budget for 128 years and recently placed an explicit requirement for a balanced budget in the constitution.

– Regular maintenance of state-owned facilities prevents larger problems in the future. But we also need to constantly reevaluate our need for the facilities that he have. The Governor is proposing to sell and repurpose unneeded and obsolete State-owned buildings across the state. We owe it to taxpayers to keep the state’s footprint to a minimum, to avoid spending tax dollars on maintenance of unneeded facilities and to return these properties to the tax rolls when possible.

– The total prison population today is lower that it would have been without reforms, but it is higher than we predicted it would be when we passed the Public Safety Improvement Act. We believe it’s due to the increase in methamphetamine trafficking. The Governor is proposing a joint drug interdiction task force, comprised of four new Highway Patrol officers, joined by designated agents of the Division of Criminal Investigation. There is a very close correlation between the increase in drug trafficking and the increase in meth arrests and convictions in South Dakota. We need to stop meth from coming into South Dakota.

– The Governor stressed that we need to find a way to stop out-of-state organizations from experimenting with South Dakota’s constitution and laws. These groups have no ties to our state and often don’t even disclose the source of their funds. They are using our state’s low signature requirement and cheap media markets to attempt to pass 15 constitutional amendments and initiated measures that advance their national agenda but don’t address problems seen in South Dakota. This session, we need to work together to find a way to protect our state from interference by out-of-state groups, while preserving our citizens’ access to direct democracy, so issues that do concern our grassroots can be raised, but not by people who don’t even live here.

If you have concerns about upcoming legislation or ideas to make our state better, please contact me at Tom.Pischke@sdlegislature.gov.

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2018 SD Legislative Sessions – Dan Ahlers Week 1 Update

dan_ahlersDear Constituents,

Thank you for choosing me to represent you in Pierre. Each week during session, I will give updates on issues in Pierre. This week I will cover the impact of Federal Tax Reform, Medicaid, and the state budget.

The passage of the federal tax reform will impact several aspects of state government. Fortunately, the version that passed preserves the tax credit for bonding. Had this provision been removed, the cost for publicly bonded facilities, like schools, would have increased significantly. There is a 15% reduction in the Federal Low Income Housing Tax Program. This program provides tax credits for low income and affordable housing. These tax credits are tied to the corporate tax rate. The corporate tax rate was cut from 35% to 21%. This cut certainly benefits South Dakota corporations, but will compound the affordable housing shortage and the recruitment of much need workers in South Dakota.

The State will be proposing changes to the Medicaid program. The Governor is working with IHS (Indian Health Services) to get full federal reimbursement for tribal members even if the services are provided by a non-IHS facility. Currently, state Medicaid pays more than 96 million dollars for native health care services. The state has also filed an 1115 Medicaid waiver. A section 1115 waiver provides states an opportunity to test existing or pilot new ways to deliver and pay for health care. The State is proposing a two year pilot program in Minnehaha and Pennington counties that would impact approximately 1,300 Medicaid recipients. Participants would be automatically enrolled in an intensive employment and training services within the Department of Labor.

In Appropriations, we began state agency budget hearings. Thus far, we have reviewed the budget and funding requests for thirteen agencies. These budgets include the Governor’s Office, Legislature, Secretary of State and the Governor’s Office of Economic Development. The Governor has recommended no inflationary increase to education, most Medicaid providers and state employees. We continue to struggle recruiting teachers, health care professionals in Medicaid supported facilities (like nursing homes) and in state government. Many of our surrounding states pay more and offer better benefits. We have a workforce shortage in South Dakota. Comparable pay is a real workforce development challenge. I am concerned that if we do not find money to provide some increase to these areas, it will further compound our existing problems. One of the more interesting items from our budget hearings came from the Public Utilities Commission (PUC). Due to the corporate tax cuts at the federal level, the PUC is requiring the utility providers to return these savings to rate payers. This may take two years to fully realize results, but South Dakota taxpayers should see some kind of rate reduction or rebate from their utility providers.

It will be important to hear from you during session. I would appreciate your input on any issue or concerns. You may email me at dan.ahlers@sdlegislature.gov.

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2017 SD Legislative Sessions – Dan Ahlers Week 9 Update

dan_ahlersGreetings from Pierre. The legislature has wrapped up the 2017 session. While there have been some disappointments, I would like to focus on the accomplishments.

The repeal of IM-22 was a controversial issue in Pierre this session. However, with help from the voters, we passed HB1076. This bill creates the Government Accountability Board. The legislature will also study campaign finance reform over the summer.

This session, the legislature increased funding for the Intensive Meth Treatment Program. Across the board cuts in 2011 have had a devastating impact on our fight against meth addiction. Instead of a reduction in meth use, we have seen an increase in cases. This money will enable our providers increase the number of people receiving treatment for meth addiction.

The legislature also appropriated money for the Animal Disease Research and Diagnostic Lab addition and renovation at SDSU. This facility is our line of defense against animal disease and protecting our food supply. This lab also handles the quarantine process when an outbreak occurs. This lab serves our farmers as well as food processors like the turkey plant in Huron and Morrells in Sioux Falls.

During the governor’s budget address, he advocated for a 1% increase for education, Medicaid providers and state employees. When revenues came in lower than expected, these recommendations were eliminated by the governor. By statute, the legislature was still obligated to give education a three-tenths of a percent increase. Republican leadership advocated not giving an increase to education and voted to eliminate language that dedicated the ½ percent sales tax to education.

Through a bi-partisan effort with the Senate, we were able to get a .3% increase for education, .3% for most Medicaid providers and reduce insurance costs for state employees. Many in Republicans in the House were unhappy with this plan. Ultimately, most voted for the increases. We were able to get the increase without increasing the budget or making cuts that would hurt ongoing programs.

We did not attempt to put language back into statute that dedicated the ½ percent sales tax to education. The way the previous language was written, the legislature would have cut $5.9 million from education. Even with the .3% increase in the funding formula, education would have taken a $3 million cut. The ½ percent sales tax will most likely be an issue in the 2018 session.

Thank you to everyone that called, emailed or stopped by to talk about issues and share concerns. Please continue to contact me with issues or concerns at 940-3071 or dan.ahlers@sdlegislature.gov.

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2017 SD Legislative Sessions – Dan Ahlers Week 8 Update

dan_ahlersGreetings from Pierre. We are entering the final week of the legislative session. So far, government accountability has dominated this session. This November, the voters of South Dakota voiced their distrust of government with the passage of IM-22. But are we really listening?   Last week’s activities suggest we still have a lot of work to do.

On Wednesday, Senate State Affairs heard testimony on SCR 15. This resolution addressed our country’s policy on refugees. The sponsors of this resolution criticizes the refugee program and declared that our refugees in the United States and their children have links to ISIS and other terrorist organizations. If the sponsors had spent a little time researching the refugee process, they would know that this is a grueling 18 month process resulting in very few applicants being accepted. Less than 23% of all applicants are accepted into the refugee program. Many of these refugees applied multiple times and wait years to be accepted. The committee heard testimony for more than 2 hours, then recessed for legislators to vote on bills in their respective chambers. After session, State Affairs reconvened and continued action on SCR 15. The resolution was then gutted and new language inserted to thank President Donald Trump for keeping us safe from radical Islamic terrorism. The resolution was passed out of committee. It was a slap in the face of every refugee that came to Pierre that day.

HB 1150 was heard in Senate Appropriations on Thursday. This bill would allow non-resident military veterans get hunting licenses at the resident rate. The premise of service members getting a preferable hunting rate could be applied to numerous categories. Keeping non-resident at one rate and resident at another is the simplest and most appropriate way for Game Fish and Parks to offer licenses. The proponents submitted a lot of testimony. A military veteran of the Korean War even testified. The insult came when the chair deferred action on the bill. All the proponents left the room and the committee moved on to other bills. At the end of the committee hearing, the chair brought the bill back and the committee tabled the bill. They didn’t have the courage to vote on this bill while the proponents were in the room.

HB 1149 is a tax reduction to the TRS fee on your telephone bill. It has passed both houses and is on the governor’s desk. This tax provides telecommunication services for people with disabilities. For the past decade, the revenues from this tax have exceeded the expenses by 40%. The reduction will align the revenues with the actual need. Because the fund balances in this account continue to grow, it has become fund that is routinely swept and the money used for other purposes. The governor and legislature have used this money to balance the budget and fund projects like the Sanford Underground Research Facility at the Old Homestake Mine. Good tax policy dictates that revenues should reflect expenses. When I heard that the legislature planned to sweep this fund again, I wrote this bill to highlight this practice and promote fiscal transparency. Currently, the legislature still plans to sweep $800,000 to balance the state’s budget. We have a reserve fund for this purpose. If the legislature sweeps this fund, they are basically stealing from people with disabilities.

Finally, the legislature does not intend to honor its commitment to education with half cent sales tax increase from last year. By statute, we are obligated to increase funding to education by 3 tenths of a percent for FY 2018. This equates to $2.4 million dollars to be used primarily for teacher salaries. The real rub came when we had a bill to extend the date for schools to spend down their reserves. This bill would have extended the date to 2020. The issue of large reserves was, in part, created by the legislature. For more than a decade, the legislature has given additional dollars to education as one-time funding. Each time the legislature told schools that this was one-time funding and not to expect it next year. This creates a budgeting problem for schools, because it limits the way money can be spent. For example, you cannot fund salary increases on one-time monies. Legislators stated we had a deal with the passage of the half cent sales tax increase that schools would spend down reserves. The legislature expects the schools to keep their end of the bargain, but they don’t intend meet their obligations.

The legislature needs to conduct itself in a more respectful manner. In the shadow of IM-22, the legislature has learned very little about showing more respect or listening to voters. Legislators continue to think people are not watching their actions. Please don’t let them dismiss you as a constituent. Contact your local legislators and tell them to honor their commitment to education and conduct themselves in a more professional manner.

Thank you for your continued support and thoughtful comments. If you have any questions, please email me at dan.ahlers@sdlegislature.gov or call 940-3071.

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2017 SD Legislative Sessions – Dan Ahlers Week 7 Update

dan_ahlersGreetings from Pierre. Its crunch time at the capitol. We had cross-over, Appropriations sub-committees reviewed department budgets and I will give an update on some of the more interesting bills.

Cross-over was Thursday. This day is when all bills must be out of the house of origin. House bills out of the House and vice versa. Legislators are like high school students that wait until Sunday to finish homework due on Monday. Consequently, the House worked until 9:20 p.m. and the Senate until 6:30 p.m. on Thursday to get its work done.

Appropriations sub-committees started meeting this past week with departments to evaluate budgets. So far, we have adopted sub-committee recommendations for the governor’s office, lieutenant governor, office of economic development, state auditor, state treasurer and the PUC. Many of these departments have small budgets, so the reviews do not take much time. Appropriations must find $25 million in the 2017 and nearly $30 million in the 2018 in order to balance the budget. Most of 2017 will be accomplished with one time savings like the closure of STAR Academy. The savings from the closure will be approximately $2 million. Some of the savings will come from department suggestions and a reduction in current spending for the remainder of the fiscal year. Any deficit left will most likely come from reserves. For 2018, Appropriations and its sub-committees are eliminating most of the department’s program expansions. Education will get its mandatory increase of .3%. Our service providers will receive no increase. This approach will eliminate most of the deficit. Any remaining deficit will most likely mean program cuts.

Here is an update on some bills of interest. HB 1076, the government accountability board, passed the House by a vote of 64 to 3. Email your Senators and ask for their support. This is an excellent bill and has the support of the Attorney General and Secretary of State. SB 54 from the Secretary of State’s office addresses campaign finance was amended and passed the Senate by a vote of 19 to 16. Unfortunately, this bill does very little to limit campaign donations like IM-22. Attempts to amend the bill failed. We will try to amend again in the House. It is important that the limits in this bill reflect those in IM-22. Legislators should respect the will of the voters. Finally, SB 55 known as the “Science Bill” would have allowed teachers to teach non-scientific theory in place of actual science. This bill failed in House Education and was deferred to the 41st legislative day 11 to 4.

Thank you for the email and calls this past week. Your input is important and appreciated. If you have questions or concerns, please email dan.ahlers@sdlegislature.gov or call 940-3071.

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2017 SD Legislative Session – Dan Ahlers Week 6 Update

dan_ahlersGreetings from Pierre. This week I would like to explain the revenue process as it relates to the budget. I will also give an update on bills concerning ethics and campaign finance reform.

Appropriations, as part of the budget process, adopts revenue estimates for each fiscal year. As a member of the revenues sub-committee, my job is to analyze revenue estimates from our legislative and the governor’s financial staff. First, we review the revenues for fiscal year 2017 which began on July 1st, 2016. Based on revenues for the previous 6 months, we determined that this year’s revenues will come in $25 million below the adopted budget.

Three main factors contribute to the down turn in revenues. The Ag economy is down and commodity prices are low. Farmers purchase less equipment and sales and use tax revenues goes down. There is a price deflation in consumer goods that also impacts revenues. When you go to McDonalds and purchase a McPick 2, the cost is $2. Normally, the cost is $5. Currently, the sales tax collected is 15 cents instead of the 33 cents at regular price. If you compound this price deflation over thousands of transactions every day, there is a significant decrease in sales tax revenue. Finally, the uncollected sales tax from internet sales continues to have a negative impact on revenues.

The second part of revenue projections is estimating the revenues for fiscal year 2018. Essentially, we are making an educated guess on a year’s worth of revenues 6 months before that fiscal year begins. We make those estimates based on current fiscal year data as well as economic forecasting on the state and national level. Both the governor’s financial and the legislature’s financial staff present statistical and economic trend data. We also consider outside forecasts from economists. Using all this data, the revenue projections sub-committee adopts a revenue estimate. The revenue estimates for fiscal year 2018 are $38 million less than the governor projected in his December budget address.

While this information sounds bad, I suggest now is the time to take a breath and gain perspective. This week, the governor’s departments we come to appropriations with areas where money can be saved. Our sub-committees will look at department expansions and determine if it is necessary. We can make many changes without cuts to programs. We also have $136 million in reserve funds. If we need $10 to $15 million to balance the state budget, it would be an appropriate use of funds. The worse thing we can do in a single down year is make unnecessary cuts. In 2011, we had a significant structural deficit. The knee jerk reaction was a 10% across the board cut. Those cuts had a negative impact on many state programs, schools and service providers across the state. Later, we learned that the deficit was not as bad as anticipated. The depth of the cut was unnecessary, but many of those dollars were not restored. It took our service providers and schools four years to get back to the funding levels pre 2011. It would be fiscally prudent to take a year and ride out the economic rollercoaster.

Here is an update on current ethics and campaign finance reform bills. HB 1073 which establishes limits on gifts from lobbyists passed the House this week by a vote of 66 to 0. It will be heard next in Senate State Affairs. HB 1076, the government accountability board will be heard in House State Affairs on Wednesday. Email your legislators and ask for their support. This is an excellent bill and has the support of the Attorney General and Secretary of State. Finally, SB 54 from the Secretary of State’s office has been amended and action was deferred until this week. This bill contains a lot of language updates and definitions of what constitutes a donor, entity and political organization. Unfortunately, the bill does very little to limit campaign donations like IM-22. I’m sure there will be further attempts to amend. I will keep you updated.

Thank you for the email and calls this past week. Your input is important and appreciated. If you have questions or concerns, please email dan.ahlers@sdlegislature.gov or call 940-3071.

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2017 SD Legislative Session – Midpoint Update from Dan Ahlers

dan_ahlersGreetings from Pierre. We are at the midpoint of session. I will highlight some of the bills of interest and status. I will also share some information about the Democratic goals in “Opportunity Agenda for Working Families.”

As many of you are aware, HB 1069 passed and was signed by the Governor. This bill repeals IM-22. Currently, there are 25 other bills that deal with campaign finance, government accountability and ethics. There are 3 bills to focus your attention. HB 1073 will revise provisions to limit gifts from registered lobbyists. This bill limits gifts to a cumulative of $100 in any calendar year. This bill may be amended to include a provision for limits on meals. SB 54 is submitted on behalf of the Secretary of State for campaign finance reform. This bill is currently being rewritten and will be amended in committee on Monday. I will keep the readers updated on the campaign limits set in this bill. Finally HB 1076 establishes the government accountability board. This bill has bipartisan support and is supported by the Secretary of State and the Attorney General’s office.

A bill getting a lot of attention is SB 61. This bill will take licensure control for nurse practitioners away from doctors. Currently, a NP works under a collaborative agreement with a doctor. The cost of these licenses is extremely cost prohibitive to NPs that wish to work in rural areas.   The opposition will argue these agreements are essential for oversight. However, none of the states surrounding South Dakota require NPs to get their license from a doctor.   Nurse practitioners are individuals with Masters or Doctorate degrees and have many hours of experience. This bill will not prohibit collaboration between an NP and a doctor. In fact, our surrounding states have demonstrated, in many cases, collaboration improves. This bill will help our rural areas recruit more NPs and will work in conjunction with our tuition reimbursement program for rural medical professionals.

Democrats recently introduced the “Opportunity Agenda for Working Families.” This initiative consists of five goals to make South Dakota’s economy work for working families. These goals are guaranteed sick and family leave, a pre-K pilot program, restoring childcare assistance, a comprehensive affordable housing program and a fully funded needs-based scholarship program.

Unfortunately, this year, the sick leave and pre-K bills have failed in committee on party line votes. I don’t believe these are party issues and we can find common ground over the summer months. Efforts continue to enhance affordable housing and fund the needs based scholarship. Regardless of this year’s outcomes, we will continue to work on common-sense legislation to help working families.

Again, thank you for the calls and emails. Please stay involved in the legislative process. Your voice matters. You many call me at 940-3071 or email at danahlers1973@gmail.com

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2017 SD Legislative Session – Dan Ahlers Week 4 Update

dan_ahlersGreetings from Pierre. IM-22 was officially repealed last week. Although the measure is repealed, the fight for ethics reform continues. Appropriations held hearings with the Board of Regents. With revenues lower than expected, we are working to decide the best way to invest in our universities and keep student tuition low.

On Thursday, Governor Daugaard signed HB 1069 and officially repealed IM-22. The governor said during his press conference that the process is not important, only the end result. I disagree. In order to have government work for the people, we must respect the rules and process. When we think we are above the process and rules don’t apply, that is when we have corruption. It has become a political culture in Pierre. We have EB-5 and Gear UP scandals that cost taxpayers millions. We have a group of legislators that think they can make and bend rules to suit their agenda. Whether we are talking about video lottery, the cigarette tax, minimum wage or IM-22, we have a legislature that continues to ignore the people’s vote.

There is still an opportunity to get the reform voters wanted with IM-22. HB 1076 will create a government accountability board. This board will monitor all of state government. HB 1073 will limit gifts from lobbyists. Secretary of State Shantel Krebs has introduced SB 53 & 54 to reform campaign finance. If we can pass all four bills, we could end up with reform that’s better than what IM-22 offered. As voters, it is important that you read these bills, contact legislators and ask for their support. You may read these bills on sdlegislature.gov.

Appropriations met with the Board of Regents this week to discuss their 2018 budget. Over the past five years, tuition increases have remained low. In order for this trend to continue, the legislature will need to invest more in higher education. Achieving more funding is complicated by several outside factors. While graduation rates are at record levels, the number of new students is down. Tuition revenues are down due to duel credits in high school as well as an increase in online courses. The only institution with a real increase of on campus students is the School of Mines.

This reality is forcing the universities to reexamine their missions. DSU has done an excellent job of evolving with technology. DSU is retooling to become a leader in cyber security. Currently, the university is looking to contract with online retail giants and government contractors. The university will also tackle the next wave in communication, 5G technology security. USD has our states only law school. In recent years, the number of law school students failing the Bar Exam has increased to the point that the program is at risk for academic probation. USD President Jim Abbott would like to raise the test scores for admittance as well as limit the number of students accepted. This approach would require a 1.2 million dollar appropriation over a three-year period to sustain the law school.

With challenges and financial needs increasing for the Board of Regents, the Appropriations Committee is considering focusing our summer meetings on a review of our university missions, facilities, administrations and educational programs.

Remember, we need your involvement in the process. Please email at dan.ahlers@sdlegislature.gov or call 940-3071 with any questions. I appreciate all your comments. Thank you for allowing me to serve as your state representative.

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2017 SD Legislative Session – Dan Ahlers Week 3 Update

dan_ahlersGreetings from Pierre. As many predicted, IM-22 (the ethics reform measure) has dominated debate in the legislature. Three bills were introduced this week to change the initiated measure, referred law and amendment process as well as repeal IM-22.

SB 59 is a measure that would delay the effective date for initiated measures and referred laws. This bill is reasonable and worthy of consideration. This bill would change the effective date to July 1st of the following year. It is the same effective date for laws passed during legislative session without an emergency clause. This bill would allow time for the legislature to review a law that may need corrections or address sections that may have constitutional issues.

SB 67 is aimed at changing the number of signatures required for initiated measures. This bill will increase the number of signatures required to get a measure on the ballot. The proponents of this bill say it will make it more difficult for out-of-state interests to get initiated measures on the ballot. In reality, it will make it more difficult for South Dakotans to get measures on the ballot. Outside groups have the money and organization to meet the required number of signatures on a petition. Many of our ballot measures are introduced by local individuals and groups with limited resources. South Dakota was the first state to adopt the ballot initiative back in 1908. It is part our independent spirit and rich South Dakota history. To diminish our ability to exercise this right is a mistake.

Finally, HB 1069 has been introduced to repeal IM-22. Although this argument has broken down mainly along party lines, it is not a partisan issue. Most Republican and Democratic legislators recognize IM-22 has flaws. The distinction between parties comes with how these changes are addressed. Republicans are set on a full repeal without consideration of amending IM-22 to make it work or receiving input from the public. Leadership has tried to fast-track this bill through the process with changes in procedure. On Monday, it was announced on the House floor there would be a Joint State Affairs Committee to hear arguments on HB 1069. First, by rules, no such committee exists and would require a rules change to conduct business. When the committee chair was questioned on procedure, he cited other joint committees. All of these committees are defined in rules.

When the Senate State Affairs Chairman was asked how the Senate committee vote would proceed, he did not have an answer. As legislators, we have the ability to change rules and there is a process for that, but we cannot make it up as we go. The purpose of the joint hearing was to limit the amount of testimony for the opposition. The minimum amount of notification, 2 days, was given prior to the committee hearing. The limited number of days makes it difficult for the average citizen to take time from work to testify. Typically, legislation with this level of significance would receive more consideration for people wanting to testify, as well as the amount time given for committee hearings in both House and Senate. This bill also includes an emergency clause which does not allow the public to refer this bill to a vote.

Legislators should recognize that IM-22 is a reflection of how the voters feel about their government. The efforts of legislators to repeal IM-22 only perpetuates the distrust of government. The real issue in this debate is not about the ballot measure process or IM-22. The issue is whether the legislature respects the voters of South Dakota. SB 67 seeks to limit your voice and HB 1069 ignores it. The emergency clause attached to HB 1069 seeks to silence it.

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2017 SD Legislative Session – Dan Ahlers Week 2 Update

dan_ahlersGreetings from Pierre. Because this program affects so many South Dakotans, I would like to focus on the proposed changes to the South Dakota Retirement System. Due to economic factors, SDRS is recommending changes to protect the longevity of the fund as well as member benefits.

The South Dakota Retirement System was created to provide members and their families the opportunity to achieve financial security due to retirement, disability or death. The goal of the plan is to implement, manage and efficiently administer a sustainable retirement program.

The South Dakota Retirement System has a membership of more than 84,000 people. SDRS pays benefits in excess of $500 million each year. The majority of money paid each year goes to individuals that still live in South Dakota.

In the last 26 years, SDRS has been over 100% in actuarial valuations 21 times. SDRS’s fund ratio remains nearly 30% greater than the national average. Most states would love to have a retirement system funded as well as ours. However, due to lower than assumed investment performance the fund is 97% of its Fair Value Fund Ratio. In order to avoid the catastrophic situations of other state retirement funds, the Board of Trustees has a 100% funded objective. To maintain this objective SDRS is introducing 3 bills to ensure its longevity and commitment to its members.

HB 1016 will revise the methodology for calculating the annual cost of living adjustment or (COLA). If the fair value funded ratio is 100% or greater the COLA payable is equal to the Consumer Price Index for Urban Wage earners or (CPI-W). It will have a maximum increase of 3.5% and a minimum increase of .5%. If the fair value funded ratio is less than 100%, a maximum COLA is calculated that results in SDRS being fully funded and a minimum of .5%. It is important to note that this change will not cut benefits. The change only impacts the amount of increased benefits.

HB 1017 revises the definition of compensation of SDRS and establishes a penalty for false reporting. Compensation is defined as wages earned for services rendered during a specific time frame. Employer funded benefits, allowances or reimbursements for expenses are excluded. Payments in lieu of insurance, temporary pay for additional duties or incentivize retirements are also excluded. An example would be a teacher that would take an additional $1000 cash instead of opting into a group insurance plan. The $1000 payout would not be considered compensation.

HB 1018 revises the computation for benefit compensation. The reason for this change pertains to large, late-career increases in compensation. These incidents create inequities that result in a significantly higher benefit and liability. These benefits and liabilities exceed the amount the contribution and investment income can fund. This bill will phase in a longer averaging period of 5 years for people hired on or after July 1, 2021. Compensation for each year considered is limited to 105% of the highest compensation in any of the final 10 years of employment. This bill will prevent losses from large increases just prior to retirement and keep ongoing cost benefits in balance with contributions.

All 3 bills passed the House Retirement Laws Committee and are headed to the House floor. If you missed last week’s article, it should still be available on Big Sioux Media. If you would like to contact me, you may email me at dan.ahlers@sdlegislature.gov or call 940-3071. I would be happy to answer any questions.

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