How SD counties are spending $250 million in COVID relief money

The majority of $250 million in COVID relief money South Dakota counties received from the state and federal government during the pandemic has been spent or obligated to replace payroll for county employees or stashed into county general funds, according to tracking documents from the state and federal government.

Members of the South Dakota Legislature studying county funding models over the summer were presented that information at their first meeting Wednesday in Pierre.

The large injection of money has helped counties stay afloat as they struggle with increasing costs and unfunded mandates from the state government, said committee chairman Rep. Roger Chase, R-Huron, but those were only one-time funds.

“We realize those COVID funds absolutely helped counties sustain themselves over the last two to three years, but that money will run out,” Chase said.

The committee’s task is to find opportunities for cost relief, efficiency and revenue for county governments. The committee will meet at least three more times this year before presenting a report to the Legislature and Gov. Kristi Noem in November.

Counties received a total of $77.8 million in stimulus money from the state and another $171.8 million from the federal government between 2020 and 2022. The money came from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, of which the state allocated $77.8 million of its $1.25 billion in federal funds to counties, and from the American Rescue Plan Act (ARPA), which sent $171.8 million directly to counties. The CARES Act was a $2 trillion package of emergency assistance approved by Congress in 2020, and ARPA was a $1.9 trillion economic stimulus bill passed in 2021.

Over 96% of the $77.8 million in state-allocated funds were spent on payroll for county employees — the bulk of which covered payroll costs for public health and public safety employees responding to the pandemic, based on documents reviewed by the committee.

Pennington County received the most money from the state allocations at $15.62 million, followed by Minnehaha County at $13.56 million, Brown County at $4.36 million and Lincoln County at $3.32 million.

Joey Knofczynski, a fiscal analyst with the South Dakota Legislative Research Council, explained that population factored into the amounts allocated to and spent by counties. Pennington County, the second most populous county in the state, received more than Minnehaha County because Pennington chose to spend more money on COVID related expenses than Minnehaha, he explained.

Aside from payroll expenses, the second-highest category Pennington County spent money on was COVID equipment, such as air purifiers and incurred costs from public hospitals and clinics (including setting up temporary medical facilities). It also spent more money on COVID equipment than any other county. Minnehaha County spent the majority of its non-payroll expenses on preparation for county employees to return to work in the office, spending the most on the category out of all counties.

Rules prevented counties from spending the money to replace revenue lost due to the COVID-19 pandemic.

As for the ARPA dollars, counties and local governments had broad discretion for spending money, including revenue replacement, public health and economic aid, premium pay for essential workers, and investments in water, sewer and broadband infrastructure.

Most South Dakota counties chose to use the money to replace revenues, or put the allocated money into general funds, according to the April 2022 annual report to the U.S. Treasury. April 2022 is the most recent data available for the annual reports, though the next available data will be released by the federal government later this summer.

Local governments are required to commit to specific projects by the end of 2024 and spend the money by the end of 2026. If local governments miss either deadline, they have to return the money to the federal government.

Minnehaha County received $37.5 million from ARPA funds, followed by $22.1 million in funds to Pennington County. Lincoln County was awarded $11.87 million and Brown County was awarded $7.54 million.

Minnehaha County, as of the April 2022 report, listed expenditures including COVID sick leave, retention bonuses, COVID unit staffing costs, premium pay, upgrades for the county commission’s audio and visual equipment, and lost revenue replacement. Those costs accounted for $14.3 million of the $37.5 million Minnehaha County has to spend.