South Dakota News Watch
By: Stu Whitney
The 100th session of the South Dakota Legislature in Pierre will be historic not just for its centennial landmark but because of transitions in power.
Gov. Kristi Noem is scheduled to give her State of the State address Jan. 14 and then head to Washington for hearings on her nomination to become secretary of the Department of Homeland Security in the administration of President-elect Donald Trump.
She can’t be officially confirmed until about a week later, when Lt. Gov. Larry Rhoden is expected to be sworn as South Dakota’s 34th governor, just in time for a legislative session rife with Republican power shifts and looming budget battles.
Even with these developments, the 2025 session in Pierre is more about issues than eras. Lawmakers are prepared to tackle the three Ps – property taxes, pipelines and prisons – as well as school vouchers, Medicaid funding and child care programs.
It’s hard to keep up without a scorecard, so here’s a primer on what to watch for as the South Dakota legislative session opens Tuesday.
Raising sales tax to cut property taxes
Property tax relief is a hot topic in Pierre, given that total payments have increased by nearly 60% for residential housing and nearly 50% for commercial property over the past decade in South Dakota.
The problem with cutting property taxes, which help fund local school districts and city and county governments, is that typically you need to backfill that lost revenue with general fund dollars to pay for education and reduce the local effort for school districts.
Rep. Tony Venhuizen (R- Sioux Falls) has floated a proposal to increase the sales tax rate from 4.2% to 5%, which would raise an estimated $280 million in general fund revenue. That money would be used to reduce the levy for owner-occupied homes to fund education at the local level to zero.
“This is meant to start the conversation on property tax relief and to make the point that it costs a lot of money,” said Venhuizen, whose plan is co-sponsored by Sen. Randy Deibert (R-Spearfish). “I’d say that property tax relief is easily the top issue that I hear about from other legislators.”
Raising the sales tax rate, which legislators temporarily lowered from 4.5% to 4.2% in 2023, would require a two-thirds majority vote in both chambers. It could encounter turbulence from limited-government leadership in Pierre, even with the property tax offsets elsewhere.
Proposal sparks school voucher debate
Lively debate is also expected on Noem’s push for “education savings accounts” that would provide state money to help students enroll in private schools or help parents pay for homeschooling outside the traditional public school system.
In her Dec. 3 budget address, the governor proposed spending $4 million in ongoing state dollars to provide about $3,000 per eligible student to offset the cost of private or alternative schools as a way to “prioritize education” in the state.
In her budget explanation, Noem said the funds would initially be eligible for “South Dakota kids who need it most” but added that the program could later expand to make all families in the state eligible for payments.
The proposal was formally introduced on Jan. 8 as House Bill 1020 by House Majority Leader Scott Odenbach (R-Spearfish) and Senate Majority Leader Jim Mehlhaff (R-Pierre).
The so-called school choice bill would allow the money to be used for tuition at private schools and “micro-schools” for materials for homeschooling or for entrance exam or virtual learning fees not covered by a local school district.
Critics of the proposal — including several organizations focused on improving public education — said it is a veiled attempt to begin a school voucher program. Voucher programs in other states have resulted mostly from conservative-led efforts to enable more children to attend private, religious or charter schools or to expand home-schooling.
Anti-pipeline forces target eminent domain
Republican populists are still feeling the energy from the 2024 election defeat of Referred Law 21, a “Landowner Bill of Rights” package that critics decried as more favorable to ethanol producers and carbon pipeline companies.
Groups such as the Freedom Caucus and Dakota First PAC exploited the pipeline issue in GOP primaries by highlighting the votes of incumbent legislators, several of whom were defeated to set up the leadership shift.
Though the fate of Summit Carbon Solutions’ $5.5 billion, 2,500-mile pipeline plan will likely play out in the courts and Public Utilities Commission hearings, expect more fireworks in Pierre.
Jim Eschenbaum of the South Dakota Property Rights and Local Control Alliance told News Watch that the focus will be on tightening restrictions on eminent domain, which involves taking private property for public use while requiring fair compensation.
Whether Summit Carbon Solutions qualifies as a “common carrier” under state legal parameters for eminent domain is being litigated in court and will likely play a large role in legislative debates.
Legislators take aim at Medicaid expansion
South Dakota voters passed Medicaid expansion in 2022, extending health care coverage to more low-income residents under the Affordable Care Act, with the federal government covering 90 percent of the cost.
That arrangement will cost South Dakota about $20 million each fiscal year if the matching rate remains the same.
Venhuizen and Sen. Casey Crabtree (R-Madison) have put forth a joint resolution proposing a constitutional amendment that ties Medicaid expansion in South Dakota to the level of federal assistance.
If the federal matching rate drops below 90%, as some have suggested it could as the Trump administration looks to reform spending strategies, the South Dakota Constitution would no longer require the state to continue Medicaid expansion.
“As things stand now, if they cut the match rate from 90% to 80% or 70%, we would have no choice,” said Venhuizen. “We would have to come up with the money and pay it.”
Medicaid is a joint federal and state program that helps cover medical costs for qualified individuals with limited income and resources.
Noem seeks to close prison deal
South Dakota Department of Corrections officials have informed legislators that the guaranteed maximum price for a planned new men’s state prison is $825 million, higher than previous estimates.
That includes $737 million in construction for the 1,500-inmate facility at the proposed site between Harrisburg and Canton in Lincoln County, making it the largest one-time capital investment in state history.
The fact that the prison involves “one time” dollars puts it on a different tier of budget discussion from ongoing expenditures such as health care and education funding, but the governor is looking to close the deal.
Noem’s proposal includes putting $182 million in a prison fund that, combined with interest already accrued, would fully fund the project, a clear priority when it comes to shaping her executive legacy.
Bart Pfankuch contributed reporting to this story, which was produced by South Dakota News Watch, an independent, nonprofit organization. Read more stories and donate at sdnewswatch.org and sign up for an email every few days to get stories as soon as they’re published. Contact Stu Whitney at [email protected]