South Dakota lawmakers must list all conflicts of interest ahead of Supreme Court opinion

South Dakota lawmakers will receive a letter this week, asking them to list all possible conflicts of interest when it comes to their jobs outside of being legislators.

Those responses will then be used in a brief that the South Dakota Supreme Court will examine while they make a decision regarding the broad nature of a constitutional provision banning lawmakers from having a either a direct or indirect conflict of interest in state contracts during their terms and up to a year after they exit office.

Gov. Kristi Noem asked the Supreme Court to issue an advisory opinion in late October, with the support of Attorney General Marty Jackley and Senate Pro Temp Lee Schoenbeck, R-Watertown, and House Speaker Hugh Bartels, R-Watertown.

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The provision in question reads: "Any member of the Legislature during the term for which he shall have been elected, or within one year thereafter, be interested, directly or indirectly, in any contract with the state or any county thereof, authorized by any law passed during the term for which he shall have been elected.”

Noem asked the court to provide guidance on what an indirect benefit contract means, according to the letter. She raised the question of if lawmakers and their spouses be employed by a school district or a county, if a lawmaker’s business could subcontract with the state for goods and services and if lawmakers and their spouses could receive foster care reimbursements.

So, why now?

In August, Rapid City Senator Jessica Castleberry resigned from her position after it came to light that her daycare had accepted federal COVID-19 funds. That decision was in direct violation of the constitutional provision and an advisory opinion by the court regarding sitting lawmakers accepting COVID-19 emergency funds for their businesses.

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Noem had asked Jackley's office to investigate Castleberry in late July after Department of Social Services fiscal staff recognized Castleberry’s name on a recent grant application and flagged it as a possible constitutional violation.

Aside from resigning, Castleberry also has to pay back the $499,129 in emergency funds that she accepted between 2020 and 2023. The payment plan is scheduled to take between 20 to 30 years.

What is the state going to do in the future to crack down on conflict of interest disclosures?

During a meeting Tuesday of the Executive Board, State Auditor Richard Sattgast explained his office would be bringing in a new accounting system that would track conflict of interest disclosures for grants.

The new system will request employers applying for state department and agency-specific grants disclose if a sitting lawmaker could benefit from the contract. State lawmakers would also have a chance to self-disclose as well if they're a partner in the business.

Sattgast added conflict of interest statements need to include specific language about direct and indirect interests.

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Schoenbeck questioned if the Auditor's Office and the South Dakota Treasurer's Office had created procedures for when the offices learn about a conflict of interest.

"I really want to wait and see what the Supreme Court says," Sattgast replied. "I think it would be remiss of me before the Supreme Court gives their explanation, or a discussion with the Legislature, on how we move forward with this."

He added up to 25 lawmakers could be impacted by the Supreme Court opinion. Many lawmakers, outside of the legislative session that lasts nine weeks, either own businesses or work for counties, cities or municipalities, meaning they could be impacted by the constitutional provision.

Committee members regularly mentioned Castleberry's daycare as well as Rep. Kevin Jensen, R-Tea, whose wife owns an drug and alcohol addiction program in Sioux Falls that regularly receives funds from the Department of Social Services. Jensen is listed as the fiscal officer for the business and has disclosed his connection to the business on legislator conflict of interest forms.

When's the deadline for the Supreme Court advisory opinion?

It's unknown when the Supreme Court will issue the opinion or if it'll decide that oral arguments are necessary.

The Legislature, Governor's Office and Attorney General's Office must submit briefs by Dec. 15, weeks before the 99th Legislative Session is scheduled to start.

Noem has yet to appoint a replacement for Castleberry and explained in the letter requesting the opinion that she wants to justices to issue guidance before she appoints a new senator.

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The Legislature has also hired its own lawyer, Ron Parsons, the former U.S. Attorney for the District of South Dakota, to help compile a brief order by the court about the topic. The letters going out to the lawmakers asking them to list potential conflicts of interest will be included in the brief.

Schoenbeck added Parsons won't use the name of lawmakers in his brief, but will instead use specific scenarios that have been asked about in the last few months and if those violate the state Constitution.

"We have a coffee shop impression of what that says unless you go read all the cases and I'm not sure those shed a lot of light," he said. "Most people don't even go read that constitutional provision."

House Majority Leader Rep. Will Mortenson, R-Pierre, said he was proud lawmakers have wanted to be open and transparent about possible conflicts of interest.

"There's a lot of grey and hopefully, we get a little more black and white," he said. "I would say that our citizen legislature depends on it."

This article originally appeared on Sioux Falls Argus Leader: Lawmakers must list conflicts of interest for SD Supreme Court