Notes from the Senate

By Tom Hansen, Senator Dist. 22

Governor Norbeck introduced the idea of a “state owned” cement plant in 1919.  That idea took root and put the state in the business of manufacturing cement for the next 80 years.  We had a dependable supply of product for many building and highway construction projects. The Legislature in special session in Dec. 2000 adopted a resolution approving the sale of that state owned asset.

Eight years have passed, but we still hear comments critical of that sale.  We now find ourselves faced with some budgetary challenges. That leads some to “second-guess” the wisdom of that decision. 

I was first elected to the Legislature in the 2000 election. A special legislative session was held between Christmas and New Years.   There were several of us freshmen Legislators that had just been elected. The constitution didn’t allow our terms to begin until the start of the new session in January. Therefore those who had served in the 1999 and 2000 Legislative sessions were the ones called upon to make the decision to approve or disprove the transaction.

Although I was not part of the decision to sell the plant, I have heard about the issues surrounding the debate several times.  I had a friend who was a member of the State Cement Commission at the time.  The issue is still being debated in some conversations. Therefore it is well to spend some time addressing it once again. 

One of the best sources of the facts can be found in the Legislative Research Council website.  In the “past legislative sessions” option one can go to the 2000 Special Session and read the text of the Governors speech to the Legislature. 

One argument was the total capacity for manufacturing cement was 109 million tons nationally.  However expansion was under way to increase that by about 25% to 136 million tons.  In 2000 the economy was strong.  However slowing was a possibility. That could come at the same time as total cement production capacity was taking the significant increase. 

Our plant was producing about 900,000 ton annually. That represented less than 1% of the total national production. Increased production capacity was even more pronounced in the region considered our marketing area.  Here production capacity was going up about 62%.

In 2000 we sold about 50% of the cement out of state.  Cement is a commodity sold in a very competitive market.  We used about 100,000 ton in our highway construction.  That is only about 1/9 of the plants production. 

Twelve Million dollars had been transferred annually from profits of the plant to the State’s general fund.  The Environmental “clean air act” permit was up for renewal.  There was a cost estimated of $12 million to put the facility into compliance with that act.  Also there was also only about 15 years of known limestone reserves.

There is no agreement on the wisdom of selling the plant.  But here are some facts.  The original “Cement Plant Trust Fund” investment was $238 million 2001.  Since then earnings of $125 million have been distributed. The inflation adjusted principal should now be $286.1 million. Due to the stock market downturn it is now $206.1 million. That is unfortunate, but who knows what the plant would be worth today had it not been turned into cash in 2001.

I am always anxious to hear your comments, questions and suggestions.  You can reach me by e-mail at sen.hansen@state.sd.us or by phone at (605) 773-3821 at the Capitol, or can reach (605) 352-8480 at home. 

Be Sociable, Share!

•