South Dakota’s Budget Faces Cuts, But Unclaimed Property Revenue Soars
In the midst of proposed budget cuts by Republican Governor Kristi Noem, there’s one financial silver lining for South Dakota legislators: a record-breaking surge in unclaimed property revenue. In a year marked by economic challenges, the state received an astonishing $308 million in unclaimed assets, nearly double last year’s record of $175 million. This unexpected windfall could provide some much-needed relief as lawmakers face difficult decisions about how to allocate funds.
Unclaimed property refers to a wide array of assets that individuals or organizations have abandoned or forgotten, including money in bank accounts, PayPal balances, uncashed checks, stocks, unused refunds, life insurance payouts, and even the contents of safe deposit boxes. According to state Treasurer Josh Haeder, the state has seen everything from “false teeth to gold bars” turn up in its safes.
What Is Unclaimed Property and How Does It Work?
South Dakota’s unclaimed property program is designed to ensure that forgotten or abandoned assets are returned to their rightful owners. Financial institutions, insurance companies, and other holders of unclaimed property are legally required to attempt to contact the original owners. If the property remains unclaimed for three years, it reverts to the state.
The state Treasurer’s Office in Pierre handles these assets, storing physical items such as jewelry and cash in safes. While the office makes efforts to locate the owners, items that remain unclaimed for a year are typically sold at state auctions, with the proceeds going into the state budget. Despite these efforts, a significant portion of the property is never claimed, allowing the state to hold onto the revenue.
The Process of Claiming Unclaimed Property:
- Property holders (banks, insurance companies, etc.) attempt to find the owners.
- After three years, the unclaimed property is transferred to the state.
- The Treasurer’s Office stores physical items, such as gold or jewelry, in safes and auctions unclaimed items.
- Rightful owners can claim their assets at any time through a multi-step process.
However, claiming the property can be a hassle. The process involves filling out an online form, submitting a follow-up form via email, and providing supporting documentation like photo identification and a Social Security number. For many, the effort may seem unworthy of the potential reward, especially if it’s just a small amount of money.
The Surge in Unclaimed Property Revenue: Why Now?
The sharp increase in unclaimed property revenue over the past few years can be attributed to several factors, most notably the aftermath of the COVID-19 pandemic. During the pandemic, widespread relocations led to many people abandoning their assets, including bank accounts and investments. As the three-year dormancy period on many of these assets has now passed, they are being reported as unclaimed, contributing to the surge in revenue.
Haeder explains that the surge isn’t merely a quirk of bad luck or coincidence. “The pandemic prompted a lot of people to relocate, and many of them left assets behind,” he said. The combination of increased national mobility and the natural passage of time has led to a larger-than-usual influx of unclaimed property in South Dakota.
The state’s favorable laws have also played a role. South Dakota has become home to several national banks, which have chosen to place their charters in the state. This has boosted the flow of unclaimed property, particularly in the form of abandoned bank accounts and financial assets.
The Financial Impact on South Dakota
For a state that has faced significant budget cuts, the influx of unclaimed property revenue is a rare bright spot. Last year, South Dakota collected $175 million in unclaimed property, of which only $38 million was returned to the rightful owners. While the amount returned may seem small compared to the total revenue, the difference helps bolster the state’s budget and provides flexibility for lawmakers during lean times.
Despite the high volume of unclaimed property, the process remains underutilized by the public. Many residents are unaware that they may be entitled to unclaimed funds, and others find the claims process too burdensome to bother with. As a result, much of the revenue from unclaimed property remains in state coffers.
In fact, last year’s record-breaking total was only made possible by a continued effort to locate and claim unclaimed assets. While only a fraction of South Dakotans actively search for these forgotten assets, the state’s Treasurer’s Office works tirelessly to maintain a website where residents can check if they’re owed money. In doing so, the office ensures that as much of this unexpected revenue as possible is returned to the public.
Looking Ahead: What’s Next for South Dakota’s Budget?
As South Dakota lawmakers prepare for the upcoming legislative session, the revenue from unclaimed property will be a key point of discussion. With many proposed budget cuts on the table, the state’s windfall could help fill some of the gaps created by declining revenues in other areas. However, this source of revenue is not without its limitations. As Haeder pointed out, the surge in unclaimed property could very well be a temporary phenomenon, driven by the unique circumstances of the pandemic.
Still, as South Dakota continues to recover from the financial impacts of COVID-19, unclaimed property remains a significant financial resource for the state. For now, it’s one of the few sources of revenue that provides legislators with some breathing room to make spending decisions.
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