South Dakota Finds Out That Unclaimed Property Changes Bring Only Temporary Revenue Relief
At the beginning of this year, South Dakota’s legislature and Governor were trying to figure out how to spend an “extra” $33 million in unclaimed property revenue, collected as a result of shortening dormancy periods, additional holders moving into the state, and reduced outreach efforts. As we’ve warned repeatedly, however, such measures are only a temporary fix for state budgets — shortening a dormancy period from 5 years to 3 years, for example, means that three years’ worth of property gets collected in the first year after the legislation passes. After that bump in year one, unclaimed property collections return back to normal.
According to a story in the Argus Leader, South Dakota is finding that out this year. After record collections last year, unclaimed property revenues are down significantly this year and 80% under the amounts projected by the state. While South Dakota has apparently been able to adjust other revenues and spending to account for the shortfall, this serves as a reminder to other states that unclaimed property revenue — especially when that revenue is artificially increased by legislative activity — can’t be relied upon to take the place of prudent planning.