$30.7 Million More To Support Education
A column by Gov. Dennis Daugaard:
If you’ve ever taken a course on psychology, you have probably heard of the marshmallow test. The social experiment was first initiated at Stanford in the 1960s and it involves sitting a child in a room by themselves with a marshmallow. If the child can refrain from eating the marshmallow for 15 minutes, they are then rewarded with a second marshmallow. The study found that, for the most part, the kids who were willing to wait for the second marshmallow went on to achieve better outcomes in life.
I can’t speak to whether the science behind the study is sound – or claim that I would have held off for that second marshmallow as a child – but there is no doubting the power of delayed gratification and the rewards it can bring. That’s true for us as a state as well, and the reason why we recently received payments totaling $30.7 million that will go toward education.
The majority of the funds came from previously disputed tobacco payments that have been held in an escrow account since 2004 regarding the enforcement of the tobacco Master Settlement Agreement. The Master Settlement Agreement (MSA) was an accord between 46 states and the major cigarette manufacturers in 1998, which provides yearly payments to participating states. Some states securitized their MSA payments through issuing bonds to receive large upfront sums of cash and forgo their future payments. In many cases, states spent this one-time cash many years ago, on budget deficits or capital projects, and it is gone.
In South Dakota, we took a different approach. In 2001, the citizens passed an amendment to the South Dakota Constitution with a 72 percent “yes” vote to create the Education Enhancement Trust Fund. This constitutional amendment directed any proceeds from the MSA to the Education Enhancement Trust Fund.
The South Dakota Investment Council invests the assets of the trust. State law allows a 4 percent distribution from the trust fund to the general fund each year, without invading principal, to support education in South Dakota.
Since 2003, more than $220 million has been distributed from the trust fund to support education. During the Great Recession, the market value of the trust fund dropped below $270 million. Today, the Education Enhancement Trust Fund has more than $595 million in assets. Plus, this July 1, an additional $20.4 million will be distributed from the trust fund.
Thanks to the Investment Council and the fiscally responsible decisions of our citizens and state leaders, the annual distribution from the trust has grown every year since 2011 and is expected to continue for future generations. Meanwhile, other states have spent their tobacco funds or are receiving MSA payments that are declining. When this $30.7 million is fully realized in the trust distribution formula, it will provide more than $1 million in additional ongoing support for education in future years.
I am grateful for all of the Investment Council’s hard work and that South Dakota is comprised of individuals willing to forgo an immediate benefit to gain even more later. In this case, the second marshmallow was really worth the wait.
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