Watch the communicators monday night at 8 00 eastern on cspan2. Governor Dennis Daugaard outlined his legislative agenda for 2017 in his annual state of the state address. He spoke to state legislators at the state capital. This is an hour. [applause] thank you very much. Thank you. Ok, sit down. Sit down. Sit down. Thank you. Thank you very much. That was very kind of you. Thank you. It is good to have you back in pierre to the new members of or legislature, welcome. Im sure youll enjoy this experience immensely. Before i begin today, though, id like to note a historical milestone. Today is the beginning of Lieutenant GovernorMatt Michaels session as president of the senate and prior to that he presided forever four sessions as speaker of the house. Those 11 sessions make Matt Michaels the longest serving presiding officer the history of the south dakota state legislature. Lets recognize and thank him for that service. [applause] thank you very much. Over the past six years, we have undertaken many significant initiatives together and have made progress in many years. Today im going to provide updates on many of our efforts in the areas of education, transportation, criminal justice, work force, and Tribal Affairs among others. I want to update you on our accomplishments and also in some cases talk about adjustments that we can make to continue to improve. First a brief update on the state revenue situation. I have some good news and some bad news. Ill start with the bad news. Since we met in december, revenue has not strengthened. Sales tax continues to run below even revised projections. Overall revenue is dont 5. 8 million. So we will need to continue to watch revenues over the next two months to ensure we adopt a structurally balanced budget in march. We all know that the farm economy is one reason for weakness in the says tax, and another reason is the continued growth in online sales. Many online retailers do not collect and remit sales tax, as you know. The state has taken self steps over the years to try to collect more of that tax, and after last session the department of revenue reached out to many online retailers to encourage them to remit tax. And that is the good news. Today im pleased to announce they state has reached an agreement with amazon to collect and remit state and local sales taxes and south dakota. Amazon will begin volunteerly to collect sales tax february 1st and remit in late march. Amazon is a leading online merchant, growing every year by double digits. Their decision to collect sales tax doesnt solve the problem but is a big step in the right direction. Eileen sullivan is here today representing amazon and for their decision as a good Corporate Citizen to union the many south dakota retailers who collect and remate the sales tax, i ask her to stand so that we can thank her. Eileen . [applause] gov. Daugaard thank you again. In past years ive talk about a better government initiative, a constant effort to make State Government more efficient, more open, and accessible, and we made good strides over the past six years, and ill be asking you to help us further improve this year. First we continue to work on red tape repeal efforts. Over the past six years we hey have proposed and you have passed repeal of over 4,000 sections of obsolete or unnecessary laws and rules accounting for nearly 470,000 words. We will be proposing more of these bills this year. Another important component of better government is to be more open, accountable, and accessible. Ive made this a pry port and we i have made this a priority and we have made considerable progress. Launched an online part don online pardon application site, making south dakota the first statement with an pardon with an online pardon application process. This year i will support the attorney generals proposal to make booking photographs, known as mug shots, open to the public, as in most states. Last year i asked the Lieutenant Governor to lead an effort to improve our states internal controls. You passed legislation creating the board of internal controls and that body has been meeting monthly since may. Internal controls within State Government itself are already strong. In fact we just completed our comprehensive annual Financial Report for fiscal year 2016 with an unqualify cleaned a did from with an unqualified clean audit from the department of legislative audit but we must do a better job of monitoring federal funds that pa through funds that passed through the state to nonstate entities. This is a complex area but the board is working hard to establish standards. One requirement is avoiding conflict of interest. Most conflicts of interest are innocent and can be avoided through education. Two years ago you passed and eye signed legislation creatings new conflict of interest standards for state employees. That system is working well. We now have a system that makes state employees more aware of potential conflicts so they can be prevented or publicly disclosed and identified as not against Public Interest. Last year, i signed similar legislation for state board and Commission Members and for local school board members. After one Years Experience ill experience, i will support legislation this year to clarify and streamline the law so that boards can achieve our objective of bringing transparency to the situations. Over the past six years we have taken many steps to make State Government information more accessible. We put Economic Development grants online. We put restaurant inspections online. Information on oil, gas and water drilling is now online. Open. Sd. Gov is redesigned and is a central hub for information, checkbookgrants, level detail on vendor payments. The state legislature has been a leader in this area. It was 20 years ago that the legislature launched an excellent web site that allows for online tracking of legislation and live and archive streaming of all legislative meetings. Rules. Sd. Gov allows sunshineses to track and comment on propose d rules. Two years ago we launched a portal to centralize information on state boards and commissions in one place. Membership information, agendas, meeting materials, minutes, Financial Reports and audits. This year i will ask you to support legislation to institutionalize the boards and commissions portal. Today i can require state agencies to utilize the site but i want the law to require it after i am gone. This site only work if bordeser required to potion their if boards are required to potion their Information Online , just as we required them to post their Public Notices at a location where a meeting is held. Were also making state board and Commission Meetings accessible with internet streaming. South dakota public broadcasting sd. Net, aaunched onestop web site to stream legislative proceedings and board and Commission Meetings as well as other public broadcasting coverage such as High School State tournaments. And while these efforts have paid off in 2011 shortly after i took office south dakota received a d plus for Online Access from the Public Interest research group. As of the 2016 report, south dakota has improved that sore to an aminus. One reliable advocate for openness over the years has been News Reporter bob mercer. As a reporter bob has written about the need for openness. But when he has seen opportunities to improve he has shared them with my office. And ive always appreciated that. Several of these improvements were bobs suggestions, including the rules web site, the expansion of the boards boards and commissions portal and even the case outside the Capital Building for posting notices. Bob has some Health Challenge is and bill not be their cover the legislative session but i hope we keep bob and this family in our thoughts. Since i spoke you last year at this time, im very proud that south dakota has now obtained triplea ratings from am ethree aaa ratings, from all three major Credit Rating agencies. One reason is for the breadth of Financial Information made available and it has a positive financial impact. The triplea ratings saves money when our tech schools, universities and hospitals issue bonds. We get a lower Interest Rate because of our bond rating. Two years ago the behest of the governor, you passed legislation that allows School Districts to benefit. Districts can now leverage our Credit Rating. Since this began, at least eight School Districts have realized savings. Red field assist 185,000, meade county 150,000. , the Lakota School district was able to refinance a 2013 debt and save 3 million. Our triplea rating is the consequence of the many sound Financial Decisions that governors and legislators have made over the years. We balanced our budget for 128 years and recently placed an explicit requirement for a balanced but the constitution. We have made it the norm to have a structurally balanced budget which supports ongoing expenses with ongoing revenues only. We built and maintain a rainy day opportunity that is 10 of the general fund budget. We have been conservative in estimating revenues and expenses and when when he have onetime money to spend we used it to repay debt early, secure an existing asset and endow an ongoing as set for create a new asset and we can be very proud of the management of the south dakota retirement system. The plan is wellfunded and routinely rates as one of the strong nest the nation. That is no accident. Over the past few years the Retirement System Trustees have proposed and you have passed several important adjustments to the plan that have strengthened it for the long term. The years the trustees are bring another bill that will protect the plan from swings and inflation or investment returns and hope youll support that also. Some management involves the stewardship of tangible assets, regular maintenance of state own ed facilities prevents larger problems in the future. We need to reevaluate our need for the facility that we have. When i first ran for governor i talked about the need scrutinize land this has been going on for six years. We first addressed the Human Services center in yankton and we sold unneeded land and demolished many vacant buildings. We also negotiated a lease purchase with the Yankton CountyHistorical Society for the historic need building. If you have not seen it, this building is being lovely restored. Is being beautifully restored. Next we looked the campus of the south Dakota Developmental Center in redfield. Like the yankton facility this large campus was built to house over a thousand south dakotans with developmental or Mental Health issues, often for their entire lives. Today the campus serves only about 120 persons. This year i will be asking you authorize the transfer of several vacant buildings and adjoining lands from that campus. We are also evaluating the former state training campus. The property has been leased over a decade to a private company that operates the aurora plains academy. We are considering the potential to sell the campus. I will be asking you to authorize a sale as well. Im also asking you to approve the potential sale of the star academy property outside of custer, which closed last march. There are too few juvenile thursday correction systems to justify this large campus. And even if a future increase of juveniles in corrections even a future increase of juveniles in corrections would not justify reopening star academy. We would use smaller, more efficient facilities. My hopes that the star academy property at a black hills locationening be sold and to create jobs. The construction of a new state Veterans Home has led to us evaluate the adjoining lands and buildings and ill be asking you to approve legislation that allows to us explore repurposing portions of that campus. Likewise, building formerly used by western dakota tech in rapid city will be reverting to state ownership and i hope to continue to discuss with the board of regions the former school for the deaf buildings and property on east tenth street in sioux falls. We owe it to the taxpayers to keep the states footprint to a minimum to avoid spending tax dollars on maintenance of unneeded facilities and return the properties to the tax roles rolls when possible. We also have transportation infrastructure and over the past six years have made great progress with refurbished two significant stretches of stateowned rail line. In 2014 you appropriated 7. 2 million in general funds to upgrade the stateopened line. The state owned line. We also provided grants and a federal tiger grant. Because of this upgrade we constructed a 50 million grain handling facility. In addition we upgraded the britain line, aided bay loan from the state rail fund. This line runs from aberdeen into north dakota and connects shippers to the Canadian Pacific rail line and Burlington Northern rail line. As a result of this upgrade, the wheat elevator and united green built a 40 million facility. That facility opened this fall and is shipping grain today. Both of these upgrades have created more shipping and ,elling options for farmers created jobs in rural areas and added significant grain handling facilities to the property tax rolls and also making Major Investments in highways. One example is highway 100 in sioux falls, major phase of the project will connect the urban corridor to i90. That should be completed by 2019. We have also provided aid to local government infrastructure, to years ago we created the bridge Improvement Grant Fund which is now granting millions each year to reduce the backlog of necessary repairs to local bridges. As still another piece of state infrastructure i spoke about the need to replace the state Animal Disease Research and diagnostic laboratory at sdsu. Even in a lean budget year im hopeful we can secure our Animal Health laboratory which protects our citizens and livestock industry. Beyond our tangible infrastructure, a critical duty of our state is to provide aa provide a system of k12 education. We need to recruit and retape good teachers, and we compete with neighboring states to do that. Last year we pailsed major legislation to increase teach ever pay and rewrite the School Funding formula. We are already seeing success. On teacher pay, when the Blue Ribbon Task force met our average teacher salary was just over 40,000. The new formula was designed and funded to afford an average of 48,500. We knew we wouldnt reach that average in one year because schools need time to become more efficient and repurpose their own funds into salaries. Still, according to the preliminary School Reports our average salary this fall is 46,936. Just short of 47,000. The states average salary increased by 11. 9 . Our smaller, rural districts are especially challenged to attract teachers, so i was particularly pleased that preliminary data shows sizable salary increases in many small districts. In jones county the average teacher salary increased by 22 . In ethan increase bid 20 . In pollock, salaries up 25 . In faith, up 18 . Florence, up 20 . Burk, up 19 . Ulrich up 21 . And the highest increase in south dakota, as a percentage, was in wabbay whose average salary is up 26. 3 . Larger School Districts enjoyed sizable increases but had higher salaries to begin with, and their percentage increases are lower. Ive already heard from many superintendents these changes are having an impact. Fewer teachers are departing. Fewer vacancies are left unfilled. Positions are getting more applications and nor teachers are staying in south dakota rather than leaving the state. I know some have expressed concern about the new formulas impact on Small Schools. Because the new formula cuts relates state aid based on actual number of enrolled students. In other words, it no longer allows a school with declining enrollment to receive funding based on the higher enrollments of past years. Even with that change, however, the new formula was actually more favorable to Small Schools than larger ones. Statewide, schools received an average increase of 526 per student. Large schools over 600 received only 507 more per student. Some schools received 579 and schools of under 200 students the best of all, they received 653 more per student. Those numbers are after the change to actual fall enrollment. The state aid formula is not the only way the state directly supports k12 education. Our successful dual Credit Program for High School Student is now in its third year. This dual Credit Program is a winwinwin. Students win because these are the cheapest College Credits they