Senate Bill 123 made it through committee yesterday on a 6&ndash1 vote. The electric co-ops are winning the argument that changing their tax structure is a fairness issue, giving them a cap on annual tax increases akin to what private utility companies enjoy. But after a $52 million cut in education funding last year, Rapid City educators see this further reduction in revenue for schools as cause for deeper frustration:
SB123 would change the way rural electric cooperatives are taxed. Currently, they pay tax on gross receipts with the money going toward schools. The bill moves to change that. Such a change would mean $1 million less each year to the Rapid City School district, said Dave Janak, budget manager for the district.
[Rapid City school superintendent Tim] Mitchell expressed great frustration over the situation. "They're taking revenue away," he said. "I'm not sure what's going on."
Janak expressed equal amounts of frustration. "At what point is enough is enough," he said after the meeting. Janak added that while the funding cuts are created by the decisions made in Pierre, the budget crisis might have to be solved closer to home [Lynn Taylor Rick, "3rd Forum Highlights Budget Cut Crunch," Rapid City Journal, 2012.01.31].
In his testimony against SB 123 yesterday, Wade Pogany of the Associated School Boards of South Dakota noted that last year's budget cuts shifted a significant amount of funding burden to local property tax levies. He says that local districts just can't absorb further cuts with increased local efforts.
SB 123 may level the taxation playing field for electric cooperatives. But if it removes another million dollars a year from Rapid City's school budget, and if we can extrapolate that loss to the other 150 districts around the state, then the Legislature has an obligation to find a way to offset the loss of millions of dollars through some other mechanism to at least maintain status quo funding for our already underfunded K-12 system.
SB123 Doesn't reduce taxes paid by electric cooperative members--it slows the growth. Where the "$1 million less each year to the Rapid City School district" attributed to Dave Janak, budget manager for the district came from, is beyond me. The TOTAL gross receipts taxes paid by the electric cooperatives in 2011to the Rapid City School district was less than half of that amount. With the tax proposal in SB123 the school district would have received more not less. Someone (either this publication or Mr. Janak) needs to take another look at the numbers in the interest of truth. You didn't get that one right.
If slowing the growth of taxes in SB 123 is not that great of an amount and will cause little impact on schools, then why is (that little amount) a major importance to the REA's? What seems to be a major amount of money paid by the REA's somehow becomes amount of money that schools should not worry about. I don't see the consistency here.
SB 123 doesn't reduce current taxes paid to the schools by electric co-op members. It reduces future increases to about 3-4% per year instead of the almost ten percent per year of the past decade. Does it reduce next year's taxes paid to the Rapid City School District? NO! Does it reduce taxes that would be paid ten years from now if something isn't changed? YES, but taxes still increase at an estimated 3.7% per year. Only consumer-owners of non-profit electric co-ops are seeing 10% increases now...and every year for the past decade.