South Dakota Searchlight-Joshua Haiar
PIERRE — Two years ago, South Dakota lawmakers were so concerned about the financial struggles of counties that they devoted a summer study to the topic.
After it was completed, state Sen. Randy Deibert, R-Spearfish, a former Lawrence County commissioner and member of the study committee, said it was illuminating.
“I do believe we’ve had a lot of education that’s taken place because of the summer study — especially with the committee members and the word they’re getting out to constituents and fellow legislators about the hardships counties are having and why they’re having it.”
This winter during the annual legislative session, the conversation has changed. Some Republican lawmakers are arguing that spending — not inadequate funding — is the problem.
Deibert’s fellow Spearfish resident, Republican House Majority Leader Scott Odenbach, has been repeating a mantra this session: “It’s the spending.” He applies the criticism to both schools and counties, saying the growth in property taxes is driven by their budgets.
The shift in rhetoric has the president of the South Dakota Association of County Commissioners frustrated.
“The property tax problem has been caused by the state legislators’ push of all the unfunded mandates onto the backs of the counties,” said Dan Klimisch, who also serves as a Yankton County commissioner.
Sandra Waltman, director of public affairs for the South Dakota Education Association, said recent polling conducted by a coalition of public education advocates shows most South Dakotans think public schools receive too little funding, with only 9% of respondents saying they receive too much.
“We’re 49th in the nation for teacher pay,” Waltman cited as evidence that schools are not overspending.
From cash-strapped to a spending problem
The debate over county and school finances comes amid discussions about property tax reform. It’s a top priority for Republicans responding to voter frustration over increased home valuations and taxes, particularly in areas of the state that experienced rapid growth during the COVID-19 pandemic.
Lawmakers are considering multiple property tax bills that would place stricter caps on local property tax collections, roll back and cap the growth of home assessments, expand eligibility among disabled and elderly people for relief programs, and more.
Rep. Greg Jamison, R-Sioux Falls, introduced a bill that would lower the cap on annual property tax collection inflationary growth from the lower of 3% or inflation to the lower of 2.5% or inflation. He said the bill sends a message to local taxing districts.
“And that message is, ‘give me a break,’” he said. “Property taxes are haunting all of us.”
Last year, after the summer study on county funding, it was counties that were asking for a break. Many lawmakers were inclined to help.
The Legislature funded a $7 million initiative to help local governments with cybersecurity, and approved a $3 million, one-time appropriation to help counties cover costs they’re required to pay for criminal defendants who need public defenders or court-appointed attorneys. Lawmakers also approved the creation of a new state public defender’s office to handle appeals from some of those defendants, taking some of the burden off counties.
Meanwhile, homeowner property taxes continued to rise, demand for relief increased, and many legislators campaigned last fall on delivering relief.
An initial proposal this year from Deibert and then-Rep. Tony Venhuizen, R-Sioux Falls (now the lieutenant governor), would have reduced the property tax levy on owner-occupied homes for general education and special education to zero and raised the state sales tax rate from 4.2% to 5% to replace the revenue.
That proposal went nowhere, and legislators have subsequently focused on proposals — including one from Venhuizen’s new boss, Gov. Larry Rhoden — that would achieve property tax relief through one or more limits on local government spending, with no replacement funding for lost revenue.
Odenbach is calling for greater fiscal restraint at the county and school level.
“You’re not going to get property tax relief until you look at the spending done by our public school system and our counties, because that’s where local property taxes go,” Odenbach said.
Counties and schools are funded mostly by property taxes. Cities receive property tax revenue and sales tax revenue, while the state depends on sales taxes.
Governor’s advice: Find efficiencies
Gov. Rhoden said that when he took office, he told his staff to take inspiration from the Department of Government Efficiency, or DOGE, referencing the federal group managed by billionaire Elon Musk tasked with cutting government spending.
“And I believe the counties should do the same thing,” Rhoden said.
Rhoden pointed to the state’s 10% budget cuts in 2011 as an example of the kind of austerity counties should take inspiration from. He said local governments are often not held to the same standards as the state when it comes to belt-tightening.
But not all Republicans agree. Senate Majority Leader Jim Mehlhaff disagreed with Odenbach’s comments about local government spending during a recent Republican legislative leadership press conference. Mehlhaff was a member of the 2023 county funding study committee.
“I actually do have a little bit more sympathy for the job that our county commissioners are faced with, in trying to maintain the infrastructure, the roads and bridges that they have to take care of,” Mehlhaff said. “I know they are grinding a lot of the roads into gravel.”
Counties: We don’t have a choice
Klimisch said some Republican lawmakers’ shift in messaging ignores the financial realities counties face. He rejected claims of runaway spending, saying counties have been forced to absorb costs the state has offloaded onto them.
He said counties collect 100% of property taxes but only get about 27% of what’s collected. The rest is redistributed to schools, cities and other local entities.
Klimisch pointed to the rising costs of essential county services, including law enforcement, court-mandated public defense, and road maintenance. He highlighted the unpredictable nature of legal costs, noting that a single major criminal case could throw a county budget into disarray.
He and others who represent local governments will be busy lobbying legislators next week. Lawmakers have three property tax relief bills under consideration and four days left in this year’s legislative session.