Lawmakers aim to stabilize ‘volatile' unclaimed property revenue with trust fund
South Dakota lawmakers, the Governor's Office and the state Treasurer's Office hope to bring more predictability to a volatile revenue source and protect the state from a large liability by creating a trust fund for unclaimed property.
Senate Bill 155, advanced by the Senate Appropriations Committee on Tuesday at the Capitol in Pierre, would limit the amount of unclaimed property funds that could be used in the state's general fund budget. The bill would also create an interest-bearing trust fund to pay claims and accrue interest on the rest of the money. That interest could then be used as a revenue stream.
Unclaimed property consists of an array of abandoned or forgotten private assets, including money from bank accounts, PayPal accounts, stocks, life insurance payouts, uncashed checks, unused refunds, and even the contents of safe deposit boxes. Holders of the money or items, such as banks, try to find the owners. The property reverts to the state after three years.
Huge surge in 'unclaimed property' is sole revenue bright spot for SD legislators
Unclaimed property revenue surged to record levels during the past few years as people left assets behind during pandemic-motivated relocations, and because of Bancorp's relocation of its national headquarters to Sioux Falls.
The state typically spends much of the revenue, while setting aside only a portion of it for people who come forward to claim their property. Yet rightful owners can claim their assets from the state at any time, which has so far created a $1.2 billion perpetual and unfunded liability for the state, said Sen. Taffy Howard, R-Rapid City, who introduced the bill.
Much of the money is never claimed. Last year, as the state took in about $175 million of unclaimed property, it paid out $38 million in claims to 6,768 claimants. South Dakota has received $310 million worth of unclaimed property so far this year.
'It's been a benefit for our citizens, but I hope you'll agree that the time is now to create this trust fund and alleviate the burden that has also been placed on our citizens because of this,' Howard said.
Unclaimed property 'is fine in some ways,' Lt. Gov. Tony Venhuizen told lawmakers, but it's problematic, volatile and unpredictable as well, he said.
'Even though we know that a lot of these unclaimed property items will never be claimed, they could be and they stay on our books as a claim against the state,' Venhuizen said.
Under SB 155, lawmakers would only be able to use $61.4 million of unclaimed property money for the general fund in fiscal year 2026. The rest of the funds would be placed into a trust fund used to pay out claims and accrue interest.
The amount of unclaimed property that could be used for general fund expenses would gradually decrease to $25 million in fiscal year 2035 and would remain there. The state would begin drawing 4% of the market value of the trust fund to use as general fund revenue by 2031, while still retaining the rest of the trust fund to pay potential claims.
'There's concern that we may not have some one-time money or we're going to slowly reduce our ongoing revenue,' said state Treasurer Josh Haeder, 'but you're going to make it up from that interest earned at the end of the day.'
The Senate Appropriations Committee unanimously approved the bill, sending it to the Senate.
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Jim Mehlhaff, R-Pierre, expressed similar concerns. Based on a question from Mehlhaff, Corrections Secretary Kellie Wasko told the group that after closing up the penitentiary, she could likely fill 1,500 beds with the state's current prison population. 'We might build a facility that is overcrowded the day we move in,' Mehlhaff said, adding that spending $600 million of saved-up money without solving the problem would be 'a poor stewardship of taxpayer money.' Even so, Mehlhaff said, he recognizes that his fellow lawmakers need to be willing to move forward. Mehlhaff moved that the task force recommend the Legislature to direct the Department of Corrections to 'come up with a plan' to build 1,500 beds 'in the most efficient way possible,' with 300 beds for lower-security inmates. Attorney General and task force member Marty Jackley suggested a $650 million price cap as an amendment. Prison work group peppered with public testimony in first Sioux Falls meeting That addition was 'not necessarily friendly,' the Mehlhaff said, 'but if we could move the ball forward, I could accept that.' Before the final vote, both Venhuizen and Hansen, a 2026 gubernatorial candidate, lauded the result as a win. Venhuizen said the task force had produced a workable compromise. Hansen said the group was able to find a location that, unlike the original Lincoln County proposal, is palatable to neighbors. When asked if the lower price might force the Legislature to build a facility meant to last less than 100 years, Venhuizen said 'I would rather build it smaller' than cheaper. Compromises will need to be made, he said, but those decisions will need to come from the Legislature. Hansen said he also wants to see a durable facility. He couldn't speculate on what kinds of compromises might be necessary, but said there's no question that a higher price tag is off the table. 'We'll have to see what these guys bring to the Legislature,' Hansen said of the design team. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
