Lawmakers face a giant split on costs for legalizing low-THC hemp in South Dakota

Capitol News Bureau
KELO Gear Up Pierre Capitol Building

PIERRE, S.D. (KELO) — Disagreement intensified Tuesday at the Capitol between Republican Governor Kristi Noem and leaders of the Legislature over how much state government will have to pay if low-THC hemp is legalized in South Dakota.

The 18 members of the Joint Committee on Appropriations received a presentation and a series of explanations from three of the governor’s department heads that the start-up cost will be nearly $1.9 million, mostly for new equipment, while the ongoing annual expense would approach $1.6 million, largely to cover 15 new positions.

But the lawmakers also received a Legislative Research Council estimate that put the amounts much, much lower, at about $80,000 for start-up and about $165,000 per year after that. Its bottom line was that most of the cost could be absorbed within the existing state Department of Agriculture budget.

The differences were largely over the number of people to be hired and whether the potency testing should be done in South Dakota by the state Department of Health or shipped out of state at approximately the same cost per sample. Federal law requires that hemp have no more than three-tenths of one percent of THC to be legal.

HB 1008 is scheduled for possibly final legislative approval Thursday afternoon in the Senate. The House approved the bill 54-12 on February 11. The governor vetoed a somewhat similar bill last year, but she later said she would sign legislation this year if it met her four requirements.

Senator John Wiik, a Big Stone City Republican who is co-chair of the committee, asked whether the LRC estimate would meet Noem’s fourth criterion that the program be adequately funded. Several people in the audience shouted back “No!” “No!”

House Republican leader Lee Qualm of Platte, the bill’s prime sponsor, said farmers probably aren’t going to plant much industrial hemp this year, because the state’s rules probably won’t be in place until June and that would leave a short window of July for planting.

“I understand it’s a shot in the dark,” Qualm said about neither side having a good idea of the numbers of growers and acres.

State Agriculture Secretary Kim Vanneman said her department didn’t conduct a survey of producers.

Qualm cautioned the committee that South Dakota voters will decide two ballot measures in the November election on legalizing medical marijuana and recreational marijuana.

He said the success of one or both would “totally change” what South Dakota would or wouldn’t need.

“I would hate to see us do something that is totally unnecessary,” Qualm said.

Vanneman’s estimate was based on 65 growers and two processors the first year, using North Dakota’s program as the model.

The LRC estimate used 10 growers and two processors the first year, with licenses eventually climbing to 50 growers.

Representative Chris Karr, a Sioux Falls Republican and the panel’s other co-chairman, agreed there wasn’t solid information about what might happen. “It all boils down to what assumptions are being made,” Karr said.

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