South Dakota Lawmakers Reject Reform for Economic Board, Advance Change for Governor-Controlled Fund

Proposed legislation aims to address conflicts of interest and transparency in state economic development programs

Published on Mar. 1, 2026

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South Dakota lawmakers took divergent paths on two bills aimed at reforming the state's economic development practices. A bill to tighten conflict-of-interest restrictions on the state Board of Economic Development was rejected, while a separate proposal to make the governor-controlled Future Fund voluntary for employers advanced.

Why it matters

The votes highlight ongoing debates over transparency and oversight in how South Dakota allocates public funds for economic development. Critics argue that conflicts of interest and lack of disclosure undermine public trust, while supporters say the current system enables quick responses to economic opportunities.

The details

The rejected bill from Rep. Karla Lems would have barred Board of Economic Development members from holding direct ownership or board positions in entities receiving state funds. This came after scrutiny of the board's longtime chairman also serving on the corporate board of a company that has received millions in state aid. The approved bill would shift the 'employer's investment in South Dakota's future fee' that funds the governor-controlled Future Fund from automatic collection to a voluntary opt-in system for employers.

  • The House vote on the Board of Economic Development bill was on February 20, 2026.
  • The bill to change the Future Fund fee was approved by a committee on February 20, 2026 and now heads to the full House.

The players

Karla Lems

A Republican state representative from Canton who introduced the two bills.

Jeff Erickson

The longtime chairman of the state Board of Economic Development who also serves on the corporate board of a company that has received millions in state aid.

Eric Muckey

A Democratic state representative from Sioux Falls who opposed Lems' bill on the Board of Economic Development.

Kristi Noem

The former Republican governor of South Dakota who drew bipartisan criticism for her uses of the Future Fund.

Marcia Hultman

The secretary of the South Dakota Department of Labor and Regulation, which collects the Future Fund fee.

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What they’re saying

“We cannot make informed decisions with public funds if it is clouded by undisclosed conflicts after decisions are made. Legislative reform is necessary now.”

— Karla Lems, State Representative (South Dakota Searchlight)

“Having my quote used on the House floor 'in the name of a bill I wasn't asked to support is frankly unprofessional.'”

— Eric Muckey, State Representative (South Dakota Searchlight)

“Employers should knowingly choose where their dollars will go. If a program is valuable, employers will support it voluntarily, and if participation must be compelled to sustain it, that is something we should all examine honestly.”

— Karla Lems, State Representative (siouxfallslive.com)

What’s next

The bill to change the Future Fund fee now heads to the full South Dakota House for consideration.

The takeaway

The split votes highlight the ongoing tensions in South Dakota over balancing economic development priorities, transparency, and oversight of how public funds are used. While the legislature rejected tighter conflict-of-interest rules, the push for more employer choice and scrutiny of the governor-controlled Future Fund suggests continued debate over these issues.