Lawmakers advance stricter controls on state economic development board and fund

Rep. Karla Lems, R-Canton, listens to a committee hearing on Jan. 23, 2026, at the South Dakota Capitol in Pierre. Her bill to impose tighter conflict-of-interest controls on the state Board of Economic Development is advancing in the Legislature. (Photo by Makenzie Huber/South Dakota Searchlight)

The state’s economic development board could be subjected to tighter conflict-of-interest requirements if a bill responding to South Dakota Searchlight reporting becomes law, and an economic development fund controlled by the governor could also be brought under stricter control by a bill advancing in the Legislature. 

Board of Economic Development ethics

The bill dealing with board members cleared the House State Affairs Committee on a 7-4 vote on Wednesday, as lawmakers debated whether current disclosure and recusal laws go far enough to protect public trust.

Rep. Karla Lems, R-Canton, introduced the bill. It says a member of the state Board of Economic Development can’t serve on the board of a company or have an ownership interest in a company that receives an award, disbursement, expenditure or grant approved by the board. 

“This is not an accusation from me of wrongdoing,” she said. “This is about shoring up public trust. We have seen in recent years how the absence of guardrails leads to controversy.” 

Lems cited South Dakota Searchlight reporting that the Board of Economic Development’s longtime chairman, Jeff Erickson, also serves on the corporate board of CJ Schwan’s and is part of a corporation that rents office space to the company. The company has benefited from $69 million in state tax rebates, grants and loans in the past several years for the construction of a food production plant in Sioux Falls, though Erickson abstained from related discussions and votes.

Company that hired state’s former head of economic development benefits from $69 million in aid

Several committee members questioned whether a recusal eliminates a board member’s influence. Lems said the bill draws a line that prevents self-dealing and the appearance of self-dealing.

Opponents, including Governor’s Office of Economic Development Commissioner Bill Even, said the bill could backfire by making it “nearly impossible” to recruit qualified volunteer board members with the financial and industry expertise needed. He said the bill’s “ownership interest” language could be interpreted broadly, discouraging participation by individuals with common investments, such as stock holdings or mutual funds.

Ryan Budmayr is the president and CEO of the South Dakota Chamber of Commerce and Industry. He said the bill “replaces accountability with a purity test.”

“This is an extreme step that will harm our state’s business climate,” he said. 

The bill now heads to the full House for consideration.

Another bill inspired by the same Searchlight reporting would make state officials involved in a big contract with a company wait longer before accepting a job with that company.

The bill comes in response to the situation of former state economic development commissioner Steve Westra. As reported by Searchlight, Westra took a job with CJ Schwan’s a year after he left state government. While working for the state, Westra had signed the first pledge of state aid benefiting construction of the company’s $550 million, 650-employee food production plant in northern Sioux Falls.

That bill has passed the Senate and awaits action by a House committee.

Future Fund bill

Rep. Marty Overweg, R-New Holland, introduced a bipartisan bill to put more guardrails on how the governor can award Future Fund economic development dollars. It passed 63-4 on Wednesday and goes to a Senate committee next. 

The fund was created in 1987 at the request of then-Gov. George Mickelson. It was placed under the governor’s exclusive control, enabling quick responses when economic opportunities arise. South Dakota employers contribute fees to the Future Fund when they remit payroll taxes for unemployment benefits. 

Last week, Even testified in favor of the bill to the House State Affairs Committee, which approved it 12-0. 

“We had the opportunity to sit down and really be palms up around what the governor’s office was looking for, and the governor, and GOED, as well as what the legislature was looking for,” Even said. “And through that process, we were able to work on this draft.” 

The bill would clarify the definition of “purposes related to research and economic development,” the only current limitation on Future Fund awards under state law. The new definition would include grants for industry research and equipment; scholarships, apprenticeships and career training; recruitment of out-of-state companies and workers; and development of infrastructure and projects aimed at business retention and expansion. 

Rep. Eric Muckey, D-Sioux Falls, said clarifying what qualifies for funding makes it “a very effective bill” that addresses past controversies with the fund. Those controversies included Republican former Gov. Kristi Noem using it to pay for a fireworks show at Mount Rushmore, a Rapid City-area shooting range that legislators refused to fund, a Sioux Falls rodeo, and a workforce recruitment campaign that Noem starred in. 

The bill would also require business applicants to submit a business plan, limit awards to reimbursement of actual project costs and, for awards over $1 million, require itemized project invoices and proof of payment before reimbursement.