Most out-of-state worker recruitment cash goes unspent

A few years ago, an economic development office in Yankton asked for and received access to $100,000 from the state to train local employees and recruit out-of-state workers.

The funding helped pull in a manufacturing quality manager, two professors, a vice president of enrollment, an accountant and a fire chief from states including Illinois, Nebraska, North Carolina, Washington and Nevada.

But the city only spent $40,000. The rest went unspent, in part due to restrictions placed on how and where the money could go.

Yankton’s story is unique to Yankton, but it’s similar to other cities who signed on for the program in one key way: Local officials asked for more money than they were able to use. 

This week, lawmakers learned that just a fraction of the $1 million they sent to the Governor’s Office of Economic Development (GOED) two years ago to draw skilled workers to the state was spent before the hiring bonus program was shuttered.

The idea was for local economic development leaders to partner with GOED to identify the needs of individual employers and help connect recruits to a subsidized hiring bonus. Out-of-state residents who moved to South Dakota would be paid for doing so, and the employer or community foundation would match the state funding and double the payout. 

The money was also meant to help “upskill” South Dakota workers into higher-paid positions — again with locals matching the state’s contributions — and to fund a cooperative marketing campaign designed to pique the interest of out-of-state talent.

In the end, GOED spent about a third of the $1 million it received — $318,412. Of that amount, about $161,000 — 16% of the total — was spent on skills training for South Dakotans and hiring incentives for out-of-staters. The rest of the $318,412 went to the marketing campaign.

The leftover money, lawmakers learned on Wednesday, will be folded back into ongoing marketing efforts.

Joe Fiala, GOED’s director of partner relations, told the Legislature’s Interim Appropriations Committee that the program did return results. As an example, a nurse from California was paid $2,500 by the state and another $2,500 from her South Dakota employer to relocate, he said. All told, 66 people from 25 states and two foreign countries moved to the state to take advantage of the recruitment cash. 

On the upskilling side, Fiala pointed to a worker who earned a commercial driver’s license with the help of $633 in state funding, which bumped his hourly pay as a driver by $2.50 an hour. Thirty-five people got a hand from the state through the upskilling portion of the program.

On the marketing side, social and traditional media ads were sent to residents of Wyoming, North Dakota, Nebraska, Montana, Minnesota, Iowa, Colorado, and California.

“Going forward, we will continue to market out-of-state for our workforce and try to let people know that yes, we do have jobs here, it’s a great state and we want people to come,” Fiala told the Interim Appropriations Committee.

Return on investment, marketing questioned

Rep. Linda Duba, D-Sioux Falls, is a member of the committee. Duba asked Fiala about the return on investment.

“What was the spend to get those 66 people here?” she asked.

The incentives piece of the program cost around $161,000, Fiala said, spread across the 101 people it helped. New resident recruitment cost an average of $1,989 per person; the upskilling portion spent an average of $872 per person. 

The remaining money — around $700,000 — will be used to continue marketing the state as a solid choice for skilled workers. 

Rep. Chris Karr, R-Sioux Falls, questioned why the money wasn’t returned, or at least used to reduce the agency’s overall marketing budget for this fiscal year. It appears that GOED is building “a slushy fund,” he said.

The money was meant to carry over, according to GOED Chief Fiscal Officer Travis Dovre, and the leftover funds will allow the agency to “really drive the needle home” and “make a big splash” with its marketing push.

The community partnerships ended last September, Fiala added, but the marketing campaign — spearheaded by the South Dakota firm Lawrence and Schiller and Tennessee’s Designsensory — never slowed down.

“The marketing effort has continued on throughout this entire time frame,” Fiala said. 

Karr wasn’t satisfied with that answer. He asked GOED to come back to the committee to explain why the dollars weren’t returned. 

Appropriations Committee Chair Sen. Jean Hunhoff, R-Yankton, said that GOED’s answers did not fully explain why the dollars were folded into the following year’s budget.

“I guess that’s an internal decision within the agency,” Hunhoff said.

It’s unclear whether the incentives program that ended last September could have been restarted with new rules or extended. Fiala and Dovre had not responded to questions on those topics from South Dakota Searchlight as of Friday afternoon.

More asks than offers

The state’s local partners asked for more incentive money than they were able to spend. 

Yankton Thrive had $100,000 worth of commitments from local businesses for upskilling and recruitment, and the state was prepared to match those dollars.

The city was only able to use $40,000 of it, according to Nancy Wenande, Thrive’s executive director. That was in part because of program rules written by GOED. New recruits needed to be paid at least $20 an hour — more than some manufacturing firms might offer. On the upskilling side, a raise had to follow for any employee who received training or skills-building through the program.

Some employers wanted to use the funds for leadership training, Wenande said, which tends to function more as a proving ground to vet future managers than a path to an immediate pay bump.

Wenande said Yankton was grateful for the partnership and did benefit, just not quite as much as it could have.

“It was just difficult to execute, based upon some of the guidelines,” Wenande said. “It was a win. We didn’t get to use all $100,000 of that funding, but the $40,000 was helpful.”

Yankton was not alone in asking for more money than it used. Requests from 17 communities or community organizations totaled more than $1 million, including economic development groups in Watertown, Brookings, Sioux Falls, Pierre, Sturgis and Huron.

Sturgis was approved for $40,000 in workforce incentives, but spent just $2,500 of that GOED funding. That money was matched by a local employer to pay a former Arizona resident $5,000 for a South Dakota relocation, according to Sturgis Economic Development Corporation Executive Director Amanda Anglin.

The remaining $37,500 went unspent.

“From my perspective, we just didn’t have the inquiries we were anticipating from the marketing campaign,” said Anglin, who nonetheless said the community was grateful for the recruitment efforts.

In Brookings, all $90,000 went unspent. That’s in part because Tim Reed, a GOP senator from Brookings, took over the city’s economic development office shortly after the funding was approved. Other reorganization efforts took precedence, Reed said.

The marketing side led to a few inquiries from potential residents, he said, but little else came of the program for Brookings.

“We got calls on that, but we didn’t know of anybody who specifically moved to Brookings because of it,” Reed said. “The rest of the money we left because we just didn’t have the organizational capacity to administer the program.”

The city of Huron had more success pushing its $25,000 allocation for incentives out the door, according to Ted Haeder of the Greater Huron Economic Development Corporation. A half dozen out-of-state recruits landed in the Fair City with the help of the funding, Haeder said, filling automotive, health care, banking and other positions.

The city left around $5,000 unspent, said Haeder, who said his organization would be happy to partner on a similar program again.

“It wasn’t a whole lot of extra work for us,” he said.

Pierre had success, as well, though it spent less than it could have. It used $28,000 of its $80,000 allotment and drew 10 workers from out of state to fill jobs in health care and corrections, according to Pierre Economic Development Corporation CEO Jim Protexter.

“The sheriff told us it was a blessing,” Protexter said.

Money as a springboard in Sioux Falls

Sioux Falls didn’t spend all $50,000 of its incentive money, but it did build a longer-term training program at Southeast Technical College.

The funding focus in the state’s largest city was for commercial driver’s license training, according to Bob Mundt of the Greater Sioux Falls Development Foundation. The city used GOED dollars to help fund CDL training at the technical college for 15 people in hopes of filling open trucking positions. The expanded CDL coursework has since helped more than 100 others, Mundt said.

The outreach, targeted marketing, recruitment and training opportunity connections will carry on, Mundt said, with or without state aid.

“We’re going to continue that program here at the local level,” Mundt said. “We leveraged some of the state dollars to make that happen last year.” 

The city’s ongoing project aims to connect potential recruits in Omaha and Council Bluffs, the Twin Cities and Sioux City areas to Sioux Falls job opportunities, as well as help connect current residents to training programs at universities and technical colleges.

“Anything we can do to spread the good word about Sioux Falls, that’s what we’re trying to do,” Mundt said.