PIERRE, S.D. (KELO) — The governor on Friday morning filed her brief with the South Dakota Supreme Court regarding her request for an advisory opinion on legislative conflicts of interest.
The Supreme Court set a deadline of Friday, December 15, for briefs from the governor, the Legislature and the state attorney general. The Legislature filed its brief earlier this week (see related story.) The attorney general’s brief is expected later today.
Here’s how Governor Kristi Noem’s legal counsel, Katie Hruska, summarized the purpose of the request:
“As analyzed in this Brief, the extent of what constitutes an indirect interest as contemplated by Article III, § 12 is impacting the Governor’s ability to appoint eligible Legislators to vacant seats who have no potential conflict of interest and are willing to serve without fear of inadvertently violating the interested contract clause. The lack of clear guidance for our state employees is troublesome for their duty to expend funds in accordance with the interested contract clause. Uncertainty is having an impact on all three branches of our state government.”
Hruska continued, “Each of the nine questions posed in the Request involves an inquiry either made by Legislators or state employees to the Governor’s Office on the propriety of making payments in compliance with Article III, § 12. These questions are the ones most often asked or ones in which the Court’s interpretation of Article III, § 12 may impact current Legislators. Additional inquiries could be sought but clarity on these nine questions will provide guardrails for understanding the extent to which Article III, § 12 applies to other situations.”
Hruska argues in the governor’s brief that the Supreme Court should provide its advisory opinion soon so that the two current vacancies can be filled. The Legislature opens the 2024 session on January 9.
“Necessary to the Governor’s consideration of any candidate must be an inquiry
into whether the candidate is qualified and eligible for the appointment, possesses the
skills to accomplish the job for their constituents, and whether a direct or indirect conflict
of interest exists,” Hruska wrote.
She continued, “If these vacancies are maintained after legislative session begins on January 9, 2024, further impact to the Legislature will be felt as committee assignments are made, votes are taken, and policies are shaped, having an immediate impact on the legislative branch of state government. Answering the Request will provide necessary timely direction for the Governor to make appointments to vacant legislative seats.”
What the Supreme Court says will provide direction for the governor’s future actions , according to Hruska.
“Prudent use of state resources would not permit investigations into every single allegation or inquiry of remote indirect interest scenarios. Before the Governor orders and directs the Attorney General to investigate any particular transaction, clear guidance is needed to determine whether a transaction constitutes a prohibited direct or indirect interest in any state or county contract,” she wrote.
“Should the Court answer the proposed questions in the Request, the Governor could reasonably understand when an allegation requires an investigation of an alleged Article III, § 12
violation. Then, it would be in that venue where the private rights of the impacted Legislator can be fairly considered in the usual adversary proceeding. For now, these are strictly legal questions,” Hruska continued.
The nine questions posed by the governor to the Supreme Court were:
May a vendor of the state receive a state payment if that vendor employs a
legislator, and such legislator is not an owner of the vendor?
Hruska notes that the Supreme Court in two previous decisions found that “no company with ownership interest held by a Legislator may lawfully contract with the state. Does the same prohibition apply to a company that employs a Legislator? This is the situation which the Request wishes to be answered.”
May a vendor of the state receive a state payment if that vendor is a publicly traded company, and a legislator owns any shares or stock in such vendor?
Wrote Hruska, “A contract with a Legislator-owned closely held business confers a clear pecuniary benefit to that Legislator. But contracts with a publicly traded company may be so far removed from benefiting a Legislator who owns shares or stock in that company, that it is not so clear Article III, § 12 prohibits it.”
May a Legislator be a state, county, city, or school district employee, either full time, part time, or seasonal, or an elected or appointed official?
With this question, the governor wants to know whether the Supreme Court’s Pitts decision that led to a legislator’s resignation extends to county employees and officials. Hruska noted there is no South Dakota case analyzing the interested-contract clause for elected or appointed officials but there was an official opinion from the South Dakota attorney general in that said “a conflict of interest exists for a Legislator to be a county commissioner because, ‘a county commissioner elected to the Legislature would, perhaps, have the opportunity to vote on matters affecting his commission tenure and compensation while serving in the Legislature.’”
(A current senator, Randy Deibert, recently resigned from a seat on the Lawrence County Commission.)
May a Legislator receive retirement compensation from the South Dakota Retirement System for services rendered other than acting as a Legislator?
Hruska wrote, “Retirement policy changes are recommended by the SDRS Board of Trustees to
the Legislature, and such changes impact the membership as a whole, not an individual member. There are also intricate administrative rules promulgated by the Board of Trustees. There can be no change made to affect only a member-legislator’s interest in their retirement.”
She noted, “South Dakota does not have a pension plan for Legislators for legislative service.”
May a Legislator or a business owned by a Legislator subcontract for payment, goods, or services provided to or from the state?
The governor’s brief says this question asks whether the Supreme Court’s rationale in Norbeck II and Asphalt Surfacing extends to subcontracts. The brief notes that each contract contains a template regarding subcontractors. Wrote Hruska, “Without the primary contract for services with the state, there can be no subcontract to which the State must consent or require indemnification.”
May a Legislator or a business owned by a Legislator receive Medicaid reimbursements administered by a state agency?
The governor’s brief says this question presents a solemn occasion in three ways. Wrote Hruska:
“First, while it may impact private rights of a Legislator or their business to be a Medicaid provider, it also raises the broader conflict of interest question involving a Legislator’s ability to
receive state and federal funds for services rendered, not to the state, but to eligible individuals through this program. As such, whether a Legislator may be a Medicaid provider receiving rate reimbursements from the State Medicaid program for services provided to Medicaid eligible recipients is a question that impacts the institutions of state government.
“Second, this issue also impacts eligible individuals’ access to the medical providers from whom they choose to seek services. Third, some Legislators—former, current, and prospective—are Medicaid providers and have an ownership interest in the company for which they work. To require a case in controversy for each would expend more judicial resources than necessary, whereas an advisory opinion could establish consistent parameters for each affected Legislator, including prospective candidates for the Legislature, to identify whether a conflict exists. As such, whether a Legislator may be a Medicaid provider receiving reimbursements from the State Medicaid program for services provided to Medicaid-eligible recipients also is a question not easily answered through the usual adversarial proceeding.”
The governor’s brief goes on to explain how South Dakota’s Medicaid system works. Hruska points out, “A Legislator has minimal authority to affect any increased pecuniary benefit to themselves as a provider in their role as a Legislator. The funds that provider-legislator receives from the state are payments for services provided to an eligible individual, analogous to an insurance payment. The state receives no direct services or benefits from the provider, other than seeing that eligible individuals can receive the healthcare they need from the provider they choose.”
May a Legislator receive an expense reimbursement for foster children in their care administered by a state agency?
Wrote Hruska, “These reimbursements are approved at the discretion of DSS (the South Dakota Department of Social Services) to encourage as much normalcy as possible. The Legislature does not determine what expense is reimbursable.”
May a Legislator or a business owned by a Legislator purchase or receive goods or services, including state park passes, lodging, and licenses, from the state when such goods or services are offered to the general public on the same terms?y
“The goods or services contemplated by this question are not new goods or services that the Legislature would authorize by the passage of a law,” Hruska wrote. “Contemplated are ongoing programs and services.”
She points out, “A state park pass must be purchased to enter a state park and use those resources. The fee amount is set by the GFP (South Dakota Game, Fish and Parks) Commission in administrative rule, not by the Legislature. The funds to operate the parks, including its facilities, are received into the GFP fund. That fund is continuously appropriated to GFP, meaning that the funds are not within the general appropriations act and not annually appropriated by the Legislature. The funds are set forth in an informational budget only subject to review by the Legislature.”
Hruska notes “there are professional and occupational licensures where a legislator-professional receives services from the state that are offered to all other professionals on the same terms. For example, a nurse pays a license fee and enjoys the services the Board of Nursing provides to all nurses on no terms different than any other nurse licensee. A legislator-nurse has a direct interest in their implied contract with the Board but it is not pecuniary.”
(Several legislators hold state nursing licenses.)
How do the instances detailed above apply to a Legislator’s spouse, dependent, or family member?
The governor’s brief says, “There is conflicting authority in other states which have considered their similar interested contract clauses.” Hruska goes on to point out that the Oklahoma attorney general has “opined that a spouse’s direct or indirect interest in a contract would also be a violation of the interested contract clause.” But she next turns to the Michigan attorney general who has found “that because married women are entitled to own, retain, and dispose of their earnings, a husband could be a county commissioner and his spouse could be the social
services director in the same county.”
As for South Dakota, she notes that the state Constitution has the same provision for property of married women: “The real and personal property of any woman in this state, acquired before marriage, and all property to which she may after marriage become in any manner rightfully entitled, shall be her separate property, and shall not be liable for the debts of her husband.”
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