The fiscal year 2018 budget proposed Tuesday by Gov. Dennis Daugaard includes $2.5 million to create a state park in Spearfish Canyon.
Daugaard previously proposed a state-federal land exchange to help create the park. Legislation to authorize the exchange is pending in Congress.
Most of the land offered up by the state is controlled by the state’s Office of School and Public Lands. If the exchange is approved, state government would have to reimburse its own school and public lands trust fund for the appraised value of the exchanged land.
Daugaard has included $2.5 million in his proposed budget for that purpose, Chief of Staff Tony Venhuizen explained after the governor's budget address.
"The constitution requires that school and public lands be made whole, so even though it is already state land, the state basically has to buy it from itself," Venhuizen said.
The constitutional requirement dates to statehood in 1889, when plots totaling millions of acres across the state were reserved to help fund public education.
Roughly 760,000 acres — nearly 1,200 square miles — remain under the control of the Office of School and Public Lands, which leases the land to users including livestock grazers and oil producers. Proceeds from the leases are deposited in the school and public lands trust fund, as are proceeds of land sales. Interest from the trust fund is paid annually to local school districts, whose shares of the payout are based on their enrollment.
The total current-year payout to schools is $10.2 million, according to School and Public Lands Commissioner Ryan Brunner. The Rapid City School District’s share is about $1.1 million.
Brunner said the school and public lands parcels that were selected for inclusion in the land exchange are surrounded by federal grasslands and are therefore afflicted with access, water and fencing problems that diminish their value to the state and lessees. The parcels produce less than $6,000 in combined annual leasing revenue, Brunner said.
An appraisal of the parcels is yet to be conducted as part of the proposed land exchange. If the exchange is approved and the land appraises at $2.5 million, as Daugaard's budget anticipates, that amount would be paid by the state into the school and public lands trust fund.
"We'll be able to turn lands that are landlocked and difficult to lease, obtain the appraised value for those lands, put the money in investments, and generate 10 times more money for education," Brunner said.
An "extremely conservative" first-year return of 3 percent on a $2.5 million investment, Brunner noted, would be $75,000.
The plan has opponents, however. Officials with the U.S. Forest Service have said an exchange of state grasslands for forested federal land in the Black Hills could be an unfair deal for the federal government. Some critics of the park proposal have said it could lead to overdevelopment in Spearfish Canyon.
If Congress approves the exchange, the federal government will give the state 1,468 acres in Spearfish Canyon and 524 acres adjacent to Custer State Park. The state would give the federal government four parcels totaling 1,954 acres near the Fort Pierre and Buffalo Gap national grasslands.