Venhuizen: Schopp didn’t fire SD GEAR UP staff (w/update)

Tony Venhuizen said moments ago that state Education Secretary Melody Schopp didn’t fire the employees at the South Dakota GEAR UP office in Rapid City, contrary to what was reported by KOTA TV. “She doesn’t have the authority to do that,” said Venhuizen, who is the governor’s chief of staff and who oversees Schopp’s department for his father-in-law. Venhuizen said it’s possible that some or all of the GEAR UP staff was let go, in the wake of Schopp’s decision last week Wednesday to pull the GEAR UP contract from Mid Central Education Cooperative at Platte. The federal GEAR UP funding flows to the state Education Department, then goes to Mid Central, and Mid Central sends much of it to various non-profits, businesses and consultants, either directly or through several of the non-profits. SD GEAR UP eventually receives some of the money. SD GEAR UP is run by Stacy Phelps, who is also CEO for one of those non-profits, and serves on the state Board of Education. Venhuizen’s point is that Schopp doesn’t have direct control of those non-profits or the GEAR UP office. The SD GEAR UP website no longer is available on the Internet. It was earlier this week.

UPDATE: The KOTA TV story was substantially correct but erred on Schopp’s role. A letter from Schopp about halting the GEAR UP grant to Mid Central was read by GEAR UP director Stacy Phelps to GEAR UP employees on Tuesday. Phelps reportedly told them they were terminated. As for Venhuizen’s statement about Schopp, he was technically correct. GEAR UP now will flow the state Board of Regents in the future.

Could the tragedy have been prevented?

We learn from KOTA TV that state Education Secretary Melody Schopp fired all involved with the GEAR UP program on Tuesday. (NOTE: Since the post was written this morning, there now is a claim from a top Daugaard administration official that the KOTA report wasn’t true. See above post.) That came just hours after we learned from state Attorney General Marty Jackley that circumstances indicate Scott Westerhuis killed his wife, Nicole, and their four children with a shotgun before lighting their house afire and killing himself with the shotgun last week Wednesday night or early Thursday. The Westerhuis deaths came less than one day — hours, actually — after Schopp had informed Mid Central Education Cooperative in Platte that the GEAR UP contract no longer would be administered by Mid Central. Scott Westerhuis was business manager at Mid Central; Nicole Westerhuis was the assistant business manager. We don’t know what suddenly triggered Schopp’s decision; she won’t talk to reporters this week. The governor’s chief of staff and son-in-law Tony Venhuizen is doing the talking and emphasizing it was her decision. Venhuizen’s portfolio includes Schopp’s department. All of this has its roots in the previous administration of Gov. Mike Rounds. He appointed Rick Melmer as state education secretary and they hired Keith Moore to be South Dakota’s first director of Indian education. Melmer later left to become dean of education for the University of South Dakota. Moore went to USD as well to be diversity director, then received an important appointment by the Obama administration to be director for the federal Bureau of Indian Education in Washington, D.C. He took Brian Drapeaux with him as chief of staff. Drapeaux worked at Personal Group in Pierre immediately prior to that move. Moore and Drapeaux ran afoul of federal contracting regulations when they tried to hire Personal Group for a federal review of the bureau. When that move was blocked, they did an end-around by finding another tribal contractor and arranged for Melmer and Personal Group to be subcontractors. The federal inspector general for the Department of Interior conducted an investigation into Moore, Drapeaux, Melmer and Personal Group. You can read that report here. Meanwhile Schopp, who had been with the state Department of Education since the late 1990s, was chosen by Gov. Dennis Daugaard in 2011 to replace Tom Oster as secretary heading the department. After Moore left, the Indian education director post in the state department became a revolving door. Schopp continued to allow the Indian education program to essentially be run out of Mid Central at Platte. That frustrated several people who served as Indian education director. The accountability was loose. Schopp appointed an oversight panel that included Moore and Melmer; essentially the director of Indian education needed their sign-off. Meanwhile the GEAR UP program, whose focus in South Dakota has been to get American Indian students to prepare for college, was run through several non-profits that received funding from Mid Central. The money flowed from the federal Department of Education to the state Department of Education to Mid Central to the non-profits to the SD GEAR UP program in Rapid City and to various other consultants and businesses along the way. The arrangement made it easy for a share of the money to be split off for administrative purposes at each level down the chain. Running SD GEAR UP in Rapid City was Stacy Phelps, an alumnus of the South Dakota School of Mines and Technology who held the summer GEAR UP camp at the School of Mines campus. Phelps, who seemed to have a sincere belief in trying to get other Indian students to follow the path he took into the world of science and math and engineering, was appointed to the state Board of Education in 2008 by Rounds. The state Department of Legislative Audit in the past year cracked the lid an inch off whatever was happening outside the lines with GEAR UP money, starting with the finding that Melmer and Moore were paid for months in 2013-2014 without requiring they file time sheets., and a long list of other questionable practices. The audit looked only at 2014 regarding Mid Central as the sub-recipient from the state Department of Education on GEAR UP funding. The overall conclusion was the state department wasn’t fulfilling its oversight responsibilities. Schopp installed her department’s finance director, Tamara Darnall, as the person now responsible for watching Mid Central on the GEAR UP grant, which was $4.3 million in the past year. Last month, the audit findings came before the Legislature’s Government Operations and Audit Committee. Darnall and Mid Central’s director, Dan Guericke, answered lawmakers’ questions. It became clear that several legislators, such as Sen. Phyllis Heineman, R-Sioux Falls, and Rep. Roger Hunt, R-Brandon, wanted to see proof of results from the millions of dollars that had been spent on GEAR UP for many years. What happened in the weeks after that meeting isn’t known yet, but Schopp’s notice to Mid Central last week became the flash point. What’s surfaced in the past few days is widespread talk among people in other education cooperatives in South Dakota that there had long been suspicions about the practices at Mid Central. We sense that Legislative Audit had found other problems in its followup work on the GEAR UP grant, but state Auditor General Marty Guindon said he can’t talk publicly about the findings at this time. Two years ago, South Dakota went through a similar wave of responses to corruption involving EB-5 and the shotgun death of Richard Benda, who had been Rounds’ secretary of tourism and development. In that instance, the Daugaard administration took steps behind the scenes to shut down the EB-5 program. We learned many months later from the attorney general that Benda died just weeks before a grand jury was to meet and the attorney general was prepared to arrest him. We’re seeing the broom again this time from the Daugaard administration regarding GEAR UP, right down to wiping the Internet clean of the GEAR UP web pages, just like the SDRC web site with EB-5. Now an entire family is dead rather than just one former state official. And there are other twists yet to be explained.


Emery, Sioux Falls projects needed bigger loans

The state Board of Water and Natural Resources stepped in Thursday and increased the loan amount for a Sioux Falls project and gave Emery a bigger loan that will be forgiven. Sioux Falls previously received a low-interest state loan of approximately $18,553,000 for a sewer replacement project. The board loan an additional $6.3 million on Thursday at the request of Mayor Mike Huether. Combined with some additional financing from the state board, the total amount loaned to Sioux Falls for the project climbed to nearly $26.1 million, at a 10-year rate of 1.25 percent interest. A sanitary sewer surcharge will be used to repay the loan.

Then there’s Emery. The community received a $2,890,000 loan from the state board earlier this year using the clean-water fund, with $1,677,000 of the loan amount to be forgiven. (Principal forgiveness is the board’s preferred method of avoiding additional EPA reporting requirements if the money was a pure grant.) Emery also received a second loan earlier this year of $1,585,000 from the drinking water fund. And the board also gave Emery a grant of $615,000 from a third program. Now Emery officials have learned from their engineering firm that won’t be enough money. Emery needs another $348,683. So the state board on Thursday loaned another $194,000 to Emery, with the amount to be forgiven. Emery in turn plans to apply for another $155,000 in the board’s March funding round. Mayor Joshua Kayser explained in a letter how utility rates have already increased from about $60 per month in 2005 to about $91 per month currently. “We are attempting to be proactive in replacing old lines prior to an emergency or crisis,” the mayor wrote.

Dimock meanwhile received a $50,000 grant and a $478,000 loan for improvement to its wastewater treatment system and Wakonda will see a grant of $7,773 to pay for a recycling collection trailer.

HAVA board OKs two grant requests w/updates 1 & 2

The Help America Vote Act grant board for South Dakota meets Thursday (Sept. 24) at the counties association building in Pierre. The board received two grant requests, each for $9,000. Sully County seeks help with voting machine maintenance. Dewey County wants to target its grant to help absentee voting in Oglala Lakota and Todd counties. The board is administered through the South Dakota Secretary of State Office.

UPDATE 1: The state board voted 6-0 to approve each of the funding requests this morning. Sully County will be reimbursed as receipts are presented. The Dewey County grant will be used for an absentee-voting site within the county; the application indicated the money would be used for Oglala Lakota and Todd counties. The application’s category for absentee-voting centers currently provides only for Oglala Lakota and Todd. Kea Warne, a deputy secretary of state for elections, suggested the HAVA board at its October meeting discuss adjusting that portion of the form for future funding rounds.

UPDATE 2: Brandon Johnson is stepping down as state HAVA coordinator and taking another position in the elections field with the technology company Everyone Counts. Today was his last as HAVA coordinator. Succeeding him will be Kristen Kellar, who has been elections coordinator in the Secretary of State office. Moving up to elections coordinator is Rachel Schmidt, who has been handling the busy front desk at the office. Secretary of State Shantel Krebs said she is in the process of hiring a new person to succeed Schmidt.

A public-record vacuum w/update

The legacy of Republican Jason Gant’s single term as South Dakota secretary of state includes the withdrawal of public records that had been available on the SDSOS website. He changed the system so that business records older than a few years aren’t available. The records remain listed as part of search results, but a “U/A” appears where there once was a hyper-link. Secretary of State Shantel Krebs hasn’t been able to correct the situation, yet, and perhaps never will be able to afford such a project without the Legislature approving extra funding for the project. People who want to search the history of a business, starting with its initial filing, can’t reach back for those older records unless they directly contact Krebs’ staff and request them. Not only is that the opposite of efficiency in government, her staff members already have plenty to do. Gant’s change of the system came in the wake of the EB-5 scandal. A coincidence, perhaps, but easy Internet access to those business records was important. Now that easy access to the histories of those companies — and all companies beyond a few years — is gone. Evidently that is what was wanted.

UPDATE: Secretary of State Shantel Krebs said Thursday morning she has two people working part-time on restoring access to the records. She said the records were hacked in 2012 and Gant didn’t heed directives from the state Bureau of Information and Telecommunications and from the office of state Attorney General Marty Jackley to repair the situation. She said the part-time work has been progressing from 2015 into previous years, with each document reviewed for possible personal information that should be redacted.

Platte deaths came after big contract wasn’t renewed

The deaths of Scott Westerhuis, his wife and their four children before an early-morning fire last week Thursday came within hours after the state Department of Education on Wednesday didn’t renew a large contract with Mid Central Education Cooperative, where he was the business manager and his wife, Nicole, also worked.

State Attorney General Marty Jackley announced last night that preliminary results of the investigation show all six died from shotgun wounds. He said it appeared Westerhuis killed his wife and their children before killing himself, but he emphasized the investigation is continuing.

Mid Central was the focus of a state audit in the past year that found a number of problems in its administration of GEAR UP, a program designed to encourage American Indian students to attend higher education after high school graduation.

The investigation into the Westerhuis house fire determined all six members of the family were shot.

More details will be posted as they become available today.

The latest version of the GEAR UP contract was for nearly $4.3 million. The federal government provides the funding to the state Department of Education. The state department in turn contracted with Mid Central as its sub-recipient. Mid Central, based in Platte, manages most of the state department’s Indian education efforts.

Mid Central in turn contracted with various consultants, personnel and businesses to provide services for GEAR UP.

Tony Venhuizen, the chief of staff for Gov. Dennis Daugaard, reported this morning that the state department’s top official, Secretary Melody Schopp, informed Mid Central officials of the non-renewal decision last week.

Venhuizen, who oversees the department, said he was aware of her action

“She let us know she was going to do it but it was her decision,” he said.

The state Board of Regents might be chosen to take over the responsibility for the GEAR UP contract, according to Venhuizen. “That remains to be seen,” he said.

The state audit found that former state Education Secretary Rick Melmer and former state Indian education director Keith Moore received payments from the state department, but initially hadn’t filed work reports, to serve on a panel to oversee Mid Central’s conduct of American Indian education programs. Their responsibilities included GEAR UP.

Mid Central’s board of directors accepted Melmer’s resignation at the board’s July meeting.

State Board of Education member Stacy Phelps of Rapid City operated a business that received a large piece of the GEAR UP funding to host an annual summer event at South Dakota School of Mines and Technology.

The audit noted a number of discrepancies and weak financial controls over the federal money by the state department and Mid Central.

State records show Scott Westerhuis was registered agent for a variety of business enterprises involved in Indian education in recent years. Nicole Westerhuis and Phelps were listed on various of the documents as well.


Highway funding increases aren’t firm quite yet

State Revenue Secretary Andy Gerlach and state Transportation Secretary Darin Bergquist are appearing before the Legislature’s Government Operations and Audit Committee this morning (Tuesday) regarding the revenue produced so far from the passage of Senate Bill 1 for highway funding in South Dakota.

Gerlach said he’ll report in greater detail to the committee in the months ahead because there were some fluctuations that resulted from existing flexibility in state laws. For example, motor-fuel businesses pay their taxes up front before selling the gas, diesel and ethanol at the pumps. So their numbers for March, April and May weren’t at full speed. The 6-cent tax increase per gallon for gas, diesel and alcohol fuels took effect April 1. Gerlach said $11.9 million more came in so far. He said June, July and August numbers are the first months that appear to be fully under the new tax rates.

Another example is the excise tax on purchases of new and used vehicles. It increased to 4 percent from 3 percent on April 1. Gerlach said about $7.9 million more has been collected since the increase took effect. He said there are three factors: Vehicle price; vehicle sales; and the additional 1 percent of tax. Gerlach said he plans to dig deeper into the numbers and report back to the committee.

License plate fees went up 20 percent for passenger vehicles and also rose for vehicles over 20,000 pounds. State law allows people to re-register their vehicles up to 90 days ahead of the expiration of their current registrations. What happened after SB 1 passed is vehicles owners headed to the courthouses to renew registrations early before the increases took effect on April 1. The numbers show March revenue was up noticeably while April and May were down, Gerlach said. June and July results produced “a truer picture” and August reports aren’t in yet from county courthouses, he said. “Right now I just don’t have a good number for that particular area,” he said.

County commissions are still working on their wheel taxes. SB 1 raised the maximum amounts to $5 per wheel from $4 and set a new $60 maximum to cover vehicles including trailers with more than four wheels. Nineteen counties added wheel taxes for the first time, because under the new law a wheel tax is a requirement to qualify for a $15 million state bridge-improvement grant (yes BIG) program that will be controlled by the state Transportation Commission. Gerlach said 53 counties now have a wheel tax while 13 don’t. He said some county commissions implemented a wheel tax but reduced property taxes by a comparable amount.

Two big questions about current ballot measures (revised)

None has made the November 2016 ballot yet, but one proposed amendment to the South Dakota Constitution and two proposed initiated laws raise questions about what happens if voters approve two or three measures that conflict, and the approval occurs in the same election. That could be the case on the payday lending issue. The trump card might be one measure that is about to circulate from labor union IUOE Local 49 that would allow any organization to charge a fee for its services, all other state restrictions notwithstanding.

On the surface, the union’s fee proposal would allow a union to collect fees from non-members in a workplace where the union is present. I tried calling Scott Niles, who runs the Local 49 office in Rapid City, but he hasn’t returned messages left more than a week ago on his office number and his cell number. The proposed initiated law wouldn’t apply solely to union fees, however. It would apply to any business or non-profit organization. It makes no mention of union fees.

Then there are the two measures that are directly about payday lending. One is a proposed initiative that would set a 36 percent cap on annual interest and fees. The other is a proposed constitutional amendment that appears to set an 18 percent cap but also would allow a lender to reach any other agreement with a borrower, essentially making the 18 percent cap irrelevant. In this instance, voters could approve one or both of the payday ballot measures. The payday constitutional amendment likely would nullify the payday initiated law if both pass, and that would void the 36 percent cap because it would only be a law. The constitution overrides laws.

The union’s measure wouldn’t take effect until July 1, 2017, if it passes. It’s one of the questions I want to ask Scott Niles. The union is pushing ahead, it appears; the ballot-measure committee’s organizational paperwork was signed Wednesday by Niles and a Sioux Falls labor leader, Will Thomssen. To this point, backers of the 36 percent cap have focused their counter-arguments on the 18 percent non-cap.

NOTE: The union-fees proposal was initially listed as a proposed constitutional amendment, but now is listed as a proposed initiated law. The original post on this topic treated it as a constitutional amendment. Those portions of the post have been revised.


Andy G: State revenue stronger in August

State Revenue Secretary Andy Gerlach said this morning that South Dakota sales and use tax collections in August were up 6.78 percent from the similar month one year ago. “I would say the ag economy is the driver of our (state) economy in South Dakota and the sales and use tax is part of that,” he said.

Gerlach also reported that state collections of contractor’s excise tax were up 8.68 percent from last August, and sales of items subject to the tourism tax were up 14 percent. “We’ve had a good tourism year,” he said.

His remarks came during a presentation to the South Dakota Lottery Commission. Lottery officials reported that video lottery terminals have been producing well since the July 1 start of the fiscal year. Through Sept. 5, net machine income — the money left behind by players through losses and unplayed credits in the privately owned machines — was $36.52 million, more than 5 percent above the similar point a year ago. That projects forward to $103.35 million as state government’s 50 percent share for the 2016 fiscal year that runs through June 30, 2016. State share of video lottery in fiscal 2015 was $98.3 million.

Meanwhile the lottery’s sales of instant scratch-off tickets ran 3.9 percent ahead of last year through the first 10 weeks of the fiscal year, while the jackpot lotto sales remained off-key at 11.6 percent below one year ago through 10 weeks. If those rates hold true for the remaining 42 weeks, instant tickets would generate revenue of about $5,670,000, which is about $200,000 more than the past year, and lotto sales would come in at about $6,280,000, some $2.1 million less than last year.

Honor for Tom Roby

Tom Roby of Watertown passed away March 19. The 90-year-old was a local-government leader and state senator in younger days. Now he will get a lasting honor as the newest member of the Watertown Community Hall of Fame. He will be the only member of the Class of 2015 to be inducted Oct. 30, according to the Watertown Public Opinion newspaper. He helped lay the foundation for Watertown’s economic growth during the past 50 years, as one of the leaders who recruited Minnesota companies to cross the border into South Dakota, and as one of the leaders who pushed for formation and funding of Watertown’s development corporation. Tom Roby was a city alderman for one two-year term starting in 1961 and won election as mayor for eight years starting in 1963. He was locally active in Republican politics and in 1982, at the age of 58, stepped forward again, winning election to a Codington County seat in the state Senate by about 300 votes. He was elected to a second two-year term in 1984 and served through 1986. In the 1984 race, he defeated Democratic Rep. Dorothy Kellogg, 5,068 to 4,762. He lost his attempt at a third term in 1986 — in a rematch with Kellogg. Her vote count stayed nearly identical, but more than 800 voters didn’t back Roby against her the second time. The tally was Kellogg 4,787 and Roby 4,237. The two squared off a third time in 1988, and Kellogg prevailed, 5,162 to 4,632. Kellogg went on to serve three terms in the Senate, defeating Republican Rep. Doris Kumm in 1990. Kellogg was put into a new legislative district for the 1992 elections, and Republican Rep. Randy Frederick of Hayti — her  junior by 36 years — defeated her. The Roby-Kellogg elections were one of the great rivalries of that era’s politics in South Dakota. Frederick meanwhile cemented his role as a force in the Legislature, served through 2000 when term limits approved by voters in 1992 made their effect felt for the first time, and helped former Sen. Mike Rounds of Pierre win election as governor in 2002. After Rounds’ victory, Frederick was tapped to be chairman of the South Dakota Republican Party. For Roby, the selection to the Watertown hall of fame means his name will be on a permanent plaque at the Redlin Art Center, recognition of what he meant to a city that remains vigorously on the rise more than a half-century after he began as mayor.