It’s unclear what Rhoden’s county funding initiative will look like, but it’s speculated a county sales tax will be on the table
PIERRE, S.D. – New revenue streams for South Dakota governments that lean almost entirely on property taxes to pay their bills will be a key initiative coming out of the governor’s office this spring.
Gov. Larry Rhoden is expected to make a recommendation to a task force convened by the state Legislature charged with coming up with further property tax relief initiatives in the coming days. And though the still-new governor isn’t yet sharing the details, he’s said it’s likely to entail creating a new source of funding for cash-strapped governments blamed for the recent escalation on homeowners’ tax bills. Chief among them — counties.
“There are a lot of different things we’re considering right now, but we want to present a bill that gives individual counties options,” Rhoden told members of the media during a recent news conference at the state Capitol.
Those remarks came amid ongoing gripes among South Dakota property owners and lawmakers alike about the level of taxation being placed upon property owners. And though the lone piece of legislation aimed at property tax relief to survive the recently finished legislative session had his name on it — Senate Bill 216 — Rhoden has acknowledged it doesn’t reduce property taxes. Rather, it slows the rate at which local governments can grow the amount of property taxes they can collect.
But the longtime legislator is quick to point out that of all the property taxes paid across the state, state government gets none of it. Rather, 56 percent funds schools, 27 percent goes to counties, and 13 percent goes to municipalities. The rest is split among townships and special taxing districts.
That means, Rhoden said, property tax cuts are only feasible with spending cuts at the local levels, retooling the state’s property tax formula to shift tax burdens onto agriculture or commercial property, or finding new revenue sources.
“If you want to cut those property taxes, you have to cut schools’ budgets, and there’s never been much desire to do that in the Capitol. You could cut budgets, which means cuts to county roads and public safety and the like—also not much appetite for doing anything like that. Or you could shift the burden to another class of property,” he said, adding that he’ll propose a policy that’s optional for counties and not a mandate.
Rhoden said more specifics will be shared in a matter of “days, not weeks,” and hinted in his weekly op-ed sent to South Dakota newspapers Friday that his proposal will allow “each county (to) decide for themselves, either through their county commission or by a vote of the people.”
But garnering support for new revenue sources — particularly for local governments — has proved difficult in the past, too. Although it’s unclear what Rhoden’s county funding initiative will look like, it’s speculated a county sales tax will be considered by the Property Tax Relief Task Force.
Lawmakers in recent years have considered legislation to allow county commissions to either create a sales tax or put the question of a county sales tax to county voters.
Those proposals, though, have failed to earn passage. And lawmakers say any new taxing authority proposed for local governments would again face stiff opposition unless it came with conditions aimed at property tax relief.
“With the current structure and body we have, there would have to be some guardrails in place …. otherwise I wouldn’t support that,” said Senate President Pro Tempore Chris Karr, who carried the legislation behind the creation of the Property Tax Relief Task Force.
New revenues need to be part of the conversation as much as potential caps on local government spending growth and classification adjustments, the Sioux Falls Republican added.
“Everyone is going to have to decide if they really want property tax relief or not,” Karr said. “Everything has got to be on the table — counties, schools, funding — all of it.”
Rhoden has hinted his proposal will be more than granting taxing authority for counties, saying it would also bring “direct property tax relief” to counties that choose to implement it, if approved by lawmakers at the state Capitol and the task force alike.
“My plan is to offer a proposal to them as an option on how to reduce property taxes in a meaningful way and a targeted way,” he said, referring to the panel that will be composed of eight state senators and eight members of the state House. An appointee of the governor as well as the commissioner of the South Dakota Bureau of Finance and Management will also serve on the task force as non-voting members.
“We’ll continue to have our conversations and … we want to give that task force as early a start as we can to start looking it over.”
