State treasurer tells appropriations panel unclaimed property surged after COVID; data-matching and budget requests aim to return funds

State Treasurer Josh Hader told the Joint Appropriations Committee that South Dakota has seen an unusually large increase in unclaimed property receipts in recent years, driven in part by COVID-era account closures and a large, one-time holder report.

"Unclaimed property ... refers to accounts within financial institutions or companies in which there has been no activity generated regarding the property for ... the dormancy period, and in South Dakota, the dormancy period is 3 years," Hader said, explaining the legal threshold that moves property into the state's custody.

Hader and Unclaimed Property Administrator Lee Desjave described the types of property the program receives (checking and savings accounts, payroll checks, unredeemed money orders and gift cards, stocks, trust distributions and safety-deposit-box contents) and explained how holders (financial institutions or companies that hold property) are required to make good-faith attempts to contact owners before filing a report with the state.

The treasurer's office said three facts are driving this year’s unusually high receipts: 1) a surge of account closures tied to COVID-era funds passing the three-year dormancy threshold; 2) data cleanup and acquisitions by a large corporate holder that reported roughly $60 million this year where it normally reports $8–10 million; and 3) sizeable foreign deposits that can become high-dollar claims. Hader told the committee the state received about $300 million this fiscal year and expects the influx to normalize within one to two years absent another large holder.

On returns and outreach, the office reported several program metrics and costs: live events (13 events last year) produced about 3,400 claims worth roughly $11 million; social media accounted for about 32% of advertising impressions (281,000 ad impressions and 51,000 click-throughs); newspaper notices were required by statute (South Dakota Codified Laws 40-3-41(b)(19)) and ran in 83 newspapers; television advertising accounted for roughly 17% of the advertising budget and was associated with about 217,000 website sessions and 2,300 claims (tracked to about $7 million).

Hader described the claims-processing workflow: low-dollar, well-documented claims qualify for a paperless "fast-track" and are paid promptly; other claims are returned to the claimant with a request for documentation. Claimants who do not respond are notified after 60 days; claims are inactivated after 120 days if documentation is not provided and must be restarted. The office is also conducting a data-matching initiative (starting with fiscal years two years prior) intended to identify additional rightful owners and return funds.

Cost and staffing details presented to the committee included:

- CAPS database management costs: about $160,000 annually (noting an average annual increase of roughly 6%).

- LexisNexis identity-verification costs: approximately $500 per month (variable based on volume).

- Audit expenses: the office contracts with multistate audit firms; fees are billed as a percentage of funds recovered in audits (currently about 10–15% depending on firm and scale).

- Processing cost estimate for data-match returns: roughly $4 per claim. The office identified about 200,000 properties that meet criteria for potential return; at $4 each that equates to approximately $800,000 of processing cost across the request period (presented as part of the budget submission).

Hader said the unclaimed property division wants $6,000 for foreign-language assistance to help process and verify high‑dollar foreign claims, noting the office has four staff dedicated to unclaimed property and limited foreign-language capacity.

On projected returns from a one-time data-match request, the office estimated it could generate about $19 million in additional claim payments; if realized, that would increase returns by about $4 million in the current fiscal year and about $14 million next fiscal year, subject to legislative approval of the expense authority needed to complete the work.

Committee members asked for follow-up materials on the treatment of COVID-related funds that arrive in the unclaimed-property system, details about audits and how long the current elevated receipts might persist. Hader said he expected the large receipts to abate in one to two years unless another large holder report occurred and offered to provide additional written detail on fraud-tagged COVID funds and on the trust-fund proposal he plans to present in a forthcoming bill.

"When we receive funds in, we have a great deal of ... foreign funds coming in through a couple of large international banks, and that is our high dollar properties and therefore our high dollar claims," said Lee Desjave, describing why foreign claims demand more staff time and translation work.

The treasurer did not ask the committee to take immediate formal action on a bill during the briefing, but he said the office will bring forward a trust-fund bill and other requests for legislative approval later in the session.