Prudence, thy name is Governor Dennis Daugaard. As I admire prudence, by extension I admire Governor Daugaard. It was certainly hard to find fault with the Governor's op-ed piece in this morning's Rapid City Journal touting his reasoning for committing much of the unclaimed property windfall that just descended on South Dakota (to the tune of around $70 million) to paying down some of the state's long term debt. Strengthening a balance sheet is always a worthy endeavor, one that every prudent money manager should rank as among the highest of priorities.
However, in a state like South Dakota, where scrambling for opportunities is a way of political and economic existence, I'm wondering if Governor Daugaard's single-minded devotion to paying down debt isn't overplaying the prudence hand. Certainly the governor is no slacker when it comes to plunking down some money on growth-oriented ventures like the one he just derailed by pulling out of a $5 million deal with a headhunting agency to find qualified professionals and skilled workers for a state that lately has had a chronic shortage of them. A million bucks into a decision that produced something like 80 jobs, the Governor called the whole thing off the other day, in my view prudently so. Four million of good money after one million of bad called for a bail. Others may have found fault, either at the time or now in retrospect, with Daugaard's decision in the first place, but I was okay with it and would still support it given what we all knew at the time. Nothing ventured, nothing gained.
My point is, the economic gains that the State of South Dakota seeks to achieve come with investment, which by definition means some risk-taking. Perhaps it's the failure of the Governor's job-seeking deal that is making him risk-averse just now, perhaps it's the cumulative effect of the Northern Beef fiasco with its ties to the Governor's Office of Economic Development. My take is, paying down debt, even if much of it is to take out obligations incurred by Building South Dakota, this year's variation on the age old theme of economic development initiatives, is probably the least dynamic use of the windfall money that's out there.
For one thing, I note that South Dakota's balance sheet is already in pristine condition, with the state's bonds getting very high marks from the various ratings agencies. South Dakota's debt has been managed well and there's every reason to expect our state to maintain its unblemished payment history. For another, I think the State of South Dakota will get a much bigger bang for those bucks if they're put into circulation in any of several categories, including helping school districts with capital outlays, setting up a reserve to make up for shortfalls that might occur if ACA's Medicaid expansion gets a nod from the Governor, giving employers a break on state payroll taxes when it comes to new hires--too many to list here, but the opportunities abound.
My hope is that the Governor will at least temper his categorical commitment to paying off bonds with this windfall cash and consider the many productive ways that this money could be put into use by circulating throughout our state. Getting an economist or two on board to help out with the decision wouldn't be a bad idea. A guy who was much wiser and richer than I am once put it quite well: Money is like manure. It doesn't do any good unless you spread it around.
So pray tell dear Prudence, aka Governor Daugaard, won't you come out and play?