State treasurer asks panel to fund data matching to return millions in unclaimed property

State Treasurer Josh Hader told the Joint Appropriations Committee on the morning of the hearing that his office can proactively return roughly $19 million to South Dakotans by expanding a data‑matching program, but it needs committee approval for one‑time expenses totaling about $800,000.

The proposal would run across two fiscal years. For fiscal 2025 the treasurer asked for $147,000 in contractual services and $52,000 in supplies plus a plan to send about $4.8 million back to rightful owners; for fiscal 2026 the request includes $442,000 in contractual services and $157,000 in supplies and plans to return about $14.2 million. Hader said the Treasury’s estimate is a conservative, phased approach focused on South Dakota records and claims of $2,500 or less.

Hader said the treasurer’s office previously ran a test match that returned $2.8 million to more than 14,000 South Dakotans and that other states using data matching have mailed more than 1.8 million checks worth nearly $500 million. “These funds belong to them first, not any of us,” he told the committee.

The treasurer described the all‑in operating costs for the program over an 18‑month period as about $800,000. Breakdown he provided to the committee included warrant printing ($296,000), data validation via commercial services such as Accurint ($162,000), envelopes and postage ($274,000), letters and claim forms ($41,000) and accounting processing ($25,000).

Treasury staff said the data‑matching effort would focus on records tied to South Dakota residents and would validate names, Social Security numbers and addresses provided by holders (mostly financial institutions). When matches are confirmed, the treasurer’s office would initiate claims and issue payments to claimants. The office estimated a high cash‑rate for payments; in the pilot about 80% of mailed checks were cashed.

Committee members pressed the treasury on process, timing and the source of funds. Hader and Deputy Treasurer Jason Williams said the one‑time costs would come from unclaimed property receipts, not general taxpayer dollars, and that the state’s budgeting process treats the amounts to be returned as informational items because the state technically holds those funds in perpetuity under state statute. Hader and Unclaimed Property Administrator Lee Desjave explained that when holders (banks and other companies) remit unclaimed items, the treasurer must request appropriations to return money to claimants.

Hader warned the committee that the statewide balance of claimable property has grown substantially in recent years and now totals about $1.2 billion across 2.5 million claimable properties. He said South Dakota‑claimable properties total about $98 million across roughly 957,000 properties. He urged the committee to prioritize returning property before committing additional ongoing spending from those receipts.

Committee members asked operational questions about mailing, electronic payment options and fraud mitigation. Lee Desjave said almost all holdings convert to cash (stocks and securities are sold within statutory time frames) and that the office rejects and investigates potentially fraudulent claims; the office reported rejecting 266 fraudulent claims and flagging an additional 939 likely fraudulent claims during the period covered.

Several legislators noted structural concerns. Sen. Howard and others asked whether the state should consider a trust fund to protect principal and spend only investment earnings rather than continue to rely on unspent balances for ongoing budget items. Hader said he supports legislation to create a trust mechanism and warned that using unclaimed property for ongoing spending increases the state’s exposure if receipts fall.

The committee did not take a vote during the hearing. Hader asked the committee to approve the one‑time spending and to allow his office to proceed with the larger data‑matching plan; he said he hoped the committee would authorize the expenses so staff could proceed to return the funds.

Looking ahead, Hader said his office will return to the committee for follow‑up and work sessions. He also asked the committee to consider the long‑term policy questions about using unclaimed property receipts for ongoing expenditures.