By David Lias
South Dakota’s economy is improving, meaning the state should end its fiscal year at the end of June with anywhere from $14 million to $20 million in unspent revenue.
Turns out there’s a need for those extra funds. Gov. Dennis Daugaard will call the South Dakota Legislature into a special session on June 22 to deal with cost overruns in the construction of a new State Veterans Home in Hot Springs.
“Some of that (revenue) I’m going to ask the Legislature to look at spending on the State Veterans Home, which came in over budget,” the governor told local reporters after addressing Friday’s session of Girls State on the University of South Dakota campus at Vermillion.
The Legislature earlier this year approved a bill authorizing the spending of $41.3 million in state and federal money to build the new home. But Daugaard says when bids from contractors were opened recently, the lowest bid was considerably above projections. He says that will lead to a total project cost of $51.3 million.
Daugaard says the state can’t wait until the next legislative session in January to deal with the issue.
The governor said he believes he and members of the Legislature share the same concerns regarding this issue: “ … frustration that our projections were so far off, and they (lawmakers) want to dive into the details of that, and understand what caused that. I think in some cases our architect and engineers just misjudged the competition for contractors and if we would have been able to bid this a year ago, we would have had better bids.
“I think the Legislature will, as I do, grouse about it, feel kind of irritated about it,” Daugaard said, but ultimately will approve appropriating the needed funds for the project.
An improving economy means the demand for contractors has grown, he said. That growing demand means construction firms are bidding projects hoping to make a profit instead of merely breaking even.
“I think also, in some areas, some of our engineers or our architects just forgot this or that,” Daugaard said. “One other benchmark against which I judge this is Nebraska just announced they will be seeking bids for an over 200-bed nursing home for veterans, same as us. Their costs per bed are projected to be higher than what our bids came in at.”
He said veterans’ nursing homes are more costly to build because they must meet higher standards than typical nursing homes.
The governor said he spent Thursday morning with the architect, the engineer, the state engineer, the lieutenant governor and other officials “working through every possible way we could drive the cost down, and so we are working toward that.”
A recent development that makes investing such a large appropriation for veterans’ care in one location is Medicaid certification for the Hot Springs facility.
“We had been operating, essentially, a nursing home without Medicaid eligibility in the past, and that was a mistake,” Daugaard said. “In the last two years now, we’ve been certified Medicaid-eligible, which allows us to cover our operating costs a lot better than we used to.
“When you combine that with the fact that this is a facility solely for veterans, then you get some veterans’ income from the federal VA (Veterans Administration) income stream, so operating a facility like this is very doable for the state,” he said. “In fact, it’s more doable in some ways than a private facility, even though we have a lot of capital costs into it. We have to remember, also, that of the $50 million that we’re going to spending on this if the Legislature agrees, $23 million of that is from the federal government in the form of a grant.”
The facility may be more expensive than a typical nursing home, but the federal government covering nearly half the costs means “it’s not so hard a pill to swallow,” the governor said.
After the Hot Springs facility is complete, Daugaard said there likely may be an attempt to explore the idea of building a similar veterans home in East River South Dakota. That project could be a challenge, however, because it is unclear whether federal funding would be available to help cover costs.
The governor noted that most veterans in South Dakota who need care don’t want to move to Hot Springs, and opt to seek care in the closest nursing home to them and their family.
“There are some veterans who are homeless, or who don’t have family who are looking for a kind of family, and the family that they’ve known the best is their military family,” Daugaard said. “If they can find a facility like our veterans home where they have the camaraderie and the common background of others who have served, that’s a family of sorts. We want to continue to offer that kind of family to the people who have sacrificed so much for our country.”
Daugaard said Friday he is confident that the recent sale of Smithfield Foods, Inc., to a China-based company will boost job numbers in South Dakota.
Smithfield, one of the biggest pork producers in the U.S., on Wednesday agreed to be bought by Shuanghui International Holdings Ltd., the majority shareholder in China’s largest meat processor, for about $4.72 billion.
Smithfield Foods owns John Morrell & Co., a major employer in Sioux Falls.
“I think the Smithfield sale offers a much better opportunity to export to Chinese consumers,” the governor said. “The buyer is a Hong Kong-based company, which I think is good because Hong Kong, unlike the rest of China, has freedom of speech, a more democratic-type of government, and they have some protections that we enjoy in America and want our businesses protected by.
“Hong Kong is still a gateway to China, and our meat exports will have a great opportunity here with this very good gateway into China,” Daugaard said.
He added that during his two trade missions to China, officials raised the topic of food safety.
“Chinese consumers want safe food … they want a food product from America, because they trust the American brands,” Daugaard said. “Having a consumer product that’s created by a company that’s as vertically integrated as Smithfield – they own their hogs, they raise their hogs, they slaughter and package and sell to a finished product – there is a confidence in that product because you see it from inception to the table.”
“I really think this is a good news situation (with this purchase),” the governor said. “Time will tell – maybe I’m wrong, but I’m hopeful.”