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PIERRE | A House committee on Wednesday approved a bill that would require public reporting of business conflicts by members of many state government boards, commissions and authorities, and by local education board members and officials across South Dakota.

The proposal from Rep. G. Mark Mickelson, R-Sioux Falls, comes in the wake of the Mid-Central Education Cooperative audits and apparently related killings that occurred last year and the EB-5 immigrant investor scandal and suicide that happened in 2013 and 2014.

Last year the Legislature approved Mickelson’s measure requiring state employees to report when they have business conflicts.

The concept now would expand to more broadly cover people involved in state contracts, including money passed from state government through the K-12 public education system.

The House State Affairs Committee voted 13-0 to endorse the measure, HB 1214, and send it to the full House of Representatives for consideration.

The House debate could come early next week.

“I think the sponsor of the bill explained his intent admirably," Rep. Roger Solum, R-Watertown, said to his committee colleagues. "Let’s move it down to the floor.”

Among the 19 co-sponsors are the Legislature’s two Democratic leaders, Rep. Spencer Hawley of Brookings and Sen. Billie Sutton of Burke.

“I think the disclosure adding more light to the contracts has to be helpful,” Hawley said. He added that he would be harsher but called it “a good step.”

The conflict reports would be collected for the Legislature’s Government Operations and Audit Committee. Those legislators would review the reports annually.

There are about 130 boards and commissions, Mickelson said. The legislation would apply to 23 specific ones. 

“This provides them clarity whether they have a conflict,” Mickelson said. “The public would be happy knowing we have a process in place.”

An amendment brought by Mickelson and approved by the committee would allow conflicts to be declared during public meetings. The conflict would be reported in the meeting minutes.

The proposed law is complicated. It proposes a ban on conflicts of interest unless the conflict is publicly declared.

Among the key provisions:

• It would prohibit people who are serving on certain state boards, commissions and authorities from having an interest in any contract or deriving a direct benefit from any contract within the jurisdiction or relating to the subject matter of the state authority, board or commission.

• The prohibition also would apply for any political subdivision of the state that administers or executes similar subject matter programs as the state authority, board or commission.

• The prohibition also would continue for one year after the member’s term.

• However, the prohibition wouldn’t apply if the person provides full written disclosure to the board, commission or authority for review and the members determine the business arrangement is “fair, reasonable and not contrary to the public interest.”

• The member couldn’t vote on matters involving the conflict. The authorization for the member must be in writing and must be filed with the state auditor general.

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• The same exemption process would apply to past members for one year.

• The auditor general would provide the authorization reports to the Government Operations and Audit Committee members.

• The prohibition and the waiver also would cover board members and officials for school districts, education cooperatives, local education service agencies, local service agencies, nonprofit education service agencies or jointly governed education service entities that receive state government funding.

• The penalties for violation would be removal from the appointment or employment, possible cancellation of the contract and possible criminal prosecution as a Class 1 misdemeanor punishable by up to one year in jail and a $2,000 fine.

The state boards, commissions and authorities that would be covered are the South Dakota Building Authority; Board of Economic Development; South Dakota Housing Development Authority; South Dakota Health and Education Facilities Authority; Science and Technology Authority Board of Directors; South Dakota Ellsworth Development Authority; South Dakota Commission on Gaming; South Dakota Lottery Commission; State Brand Board; Game, Fish & Parks Commission; Banking Commission; Board of Trustees of the South Dakota Retirement System; Aeronautics Commission; South Dakota State Railroad Board; Transportation Commission; South Dakota Board of Education; Board of Regents; Board of Pardons and Paroles; Board of Minerals and Environment; Board of Water and Natural Resources; State Investment Council; South Dakota Railroad Authority; and the Board of Water Management.

The House committee voted 11-2 to kill House Bill 1155, a proposal from Rep. Paula Hawks, D-Hartford, that sought to ban conflicts of interest altogether. However, the ban would have applied to board and commission members who served without pay or received only expenses.

Mickelson asked Hawks how many state board members are paid other than expenses. Hawks said she would have to ask someone. “Do you know the answer?” she asked Mickelson. “No,” he replied.

Grace Kessler, a governor’s aide who works on board and commission appointments, said to her knowledge none of the positions are paid.

Hawks’ legislation also would have repealed the law that Mickelson passed last year.

Solum said HB 1155 should be killed. “At this point I’m not sure what this bill does,” he said.

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