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HB 1216: House Taxation Approves Repeal of Janklow’s Property Tax Cap

Rep. Dennis Feickert (D-1/Aberdeen) brings House Bill 1216, which would repeal the cap on property tax increases for counties, townships, and other taxing districts. Under SDCL 10-13-35, local governments may not boost property tax revenues by the lesser of 3% or the consumer price index without going through the opt-out process. This cap was, as the Department of Revenue's Mike Houdyshell referred to it yesterday, the "heart" of Governor Bill Janklow's property tax reform in 1995. HB 1216 disposes of this cap and answers counties' cries for more revenue by restoring their authority to tax property at whatever rate they see fit.

Note that HB 1216 does not affect school district levies, which are set by the Cutler-Gabriel formula in legislation outside the code repealed by HB 1216.

Fifteen of the sponsors of HB 1216 are Democrats; twelve are Republicans. One would think that, since HB 1216 (1) comes first from Democrats and (2) opens the door to higher taxes, it would be dead already. But yesterday, the House Taxation Committee approved it 10–4.

Listen to Tuesday's hearing (start at 36:12 in the SDPB audio), and you'll hear two signals that the seven Republicans (Reps. Beal, May, Rasmussen, Rozum, Russell, Solkum, and Willadsen) who joined the committee's three Democrats (Bartling, Killer, and Kirschman) in supporting this potential tax increase aren't passionately seeking passage of this bill.

First, no one offered amendments. No one tried to tinker with the formula. If Republicans thought this bill might pass, we might have seen a divergence of opinion on details.

Second, yesterday's vote seems to be about having a discussion rather than implementing this solution. Rep. Lance Russell (R-30/Hot Springs) said he walked into the hearing prepared to vote against HB 1216, and he still feels this bill is "not necessarily the answer," but the problem of counties struggling to find the funds to meet increased state mandates deserves discussion on the House floor. Taxation chairman Rep. Roger Solum (R-5/Watertown) said he too would like to see the bill on the floor. These Republicans thus seem willing to use the Democrats' provocative proposal (and yes, undoing Bill Janklow's property tax reform is a big deal) to spark a discussion of the financial strains on local governments that legislators are increasingly acknowledging.

Rep. Mary Duvall (R-24/Pierre) voted against HB 1216 yesterday, but even she acknowledged that the Legislature needs to fix the "starvation diet" on which it has put counties. Rather than repealing the cap, Rep. Duvall agreed with a statement Rep. Feickert made, that the state needs to talk broader tax reform. She said she hopes the Governor's education task force can come up with a better funding formula that relies less on property tax for K-12 education and frees those dollars up to meet the burgeoning local road and law enforcement needs discussed in Tuesday's hearing.

Don't expect HB 1216 to survive House floor debate. But do expect some passionate speeches as more legislators awaken to the needs their local constituents are struggling to meet.


  1. Lanny V Stricherz 2015.02.11

    It is way past time, that the cap is lifted. Property tax is what our county, water control districts and school districts were/are designed by the State government to run on. Meanwhile, State and City governments who also get a share of that tax, continue to raise the sales tax to general fund the money to meet their constitutional responsibility to fund their share of education. They then somehow find a way to ignore that constitutional responsibility and use that money they put in the general fund, and back door it to their own priorities, such as Keystone pipeline, Keystone XL, SDME railroad, as well as many more projects all in the name of economic development, which is only trashing our quality of life.

    The property tax freeze was designed to protect the homeowner, but in shifting the funding responsibility to sales tax, hits the renter, whose landlord got no property tax freeze and then consequently has to raise the rent every year to pay the tax. The renter then has to pay the increased sales tax as well as the higher rent. How is that fair?

  2. Tim 2015.02.11

    A state income tax and true property tax reform is whats needed. Education should be funded from a state income tax, not property taxes. My biggest fear is how many breaks republicans would give business, in this state they seem to think business gets a pass, that is the real problem.

  3. deb 2015.02.11

    Having served with Dennis on the Brown County Commission for 12 years, I know there is no one that understands the struggles of the counties more than he does. The state government in all it's wisdom continues to pass down mandates with no way to fund them. We need this bill for counties to do their business.

  4. Wayne B. 2015.02.11

    If the problem is unfunded mandates from the state, then lets prohibit unfunded mandates.

    Allowing counties to return to 6% increases annually is not going to curb our state's preference to burden counties and localities with regulation. It will just allow for circular blaming between states & counties.

    If we want counties to be able to get more money, why not look at other tax vehicles. Maybe we reduce the state sales tax rate to 3 cents and give one cent to the counties.

  5. Paul Seamans 2015.02.11

    Hooray for Mary Duvall for saying that the task force should come up with a better funding formula for education. Property taxes should be used for projects that pertain to property. Education should be funded by other sources, like a state income tax or sales tax. Definitely a corporate tax.

  6. Craig 2015.02.11

    The idea that we can raise taxes over here to lower taxes over there never works. Sure it sounds nice, but how many times have we been fooled in the past? Remember all that video lottery money is supposed to fund education right?

    I've never really been a fan of income taxes, only because I see so many states that do just fine without them. I also know South Dakota doesn't have a lot of selling points to draw people into our state, so one thing we do have in comparison to our neighbors is a lack of an income tax. I wonder how many SD residents would relocate to MN or IA if the income tax was a wash either way? How many good paying management and executive jobs would relocate to other states when they realize there is no tax advantage to staying in Sioux Falls when they can work from a different company office in Nevada, Arizona, or Florida? Perhaps it wouldn't be significant - but I can't help but wonder. Cities like Dakota Dunes essentially exist because of the tax advantages. Years ago when Gateway was still viable, employees quickly realized they could keep a lot more of their income by moving from Sioux City to Dakota Dunes or Elk Point... and it was a visible migration.

    I suppose I'd be ok with an income tax if they adjusted property taxes and removed regressive taxes on food and clothing... but something tells me if we had an income tax our sales taxes wouldn't drop a penny... it would be another one of those unfulfilled promises that are so abundant in Pierre.

  7. Lanny V Stricherz 2015.02.11

    Tim, Deb, Wayne, Paul and Craig, you all make excellent points, but unless and until the legislature and the governor are not allowed to put their slimy fingers in the cookie jar, changing, adding to, or taking away (freezing) taxation options, there is no way the system is going to change or be fixed.

    At the federal level with no constitutional mandate (as there should not be) for a balanced budget, Congress has attempted to keep the budget more in balance, by passing pay/go measures. Something similar here would be helpful, especially since we have a constitutional mandate for a balanced budget.

    But balancing the budget by stealing from reserves to balance the budget, by building such huge reserves in the first place and then underfunding the constitutional mandates just does not make any sense. Redundantly, I say, freezing the taxation ability of the counties, school districts and the water districts, and then underfunding the items in education that they are responsible for, is criminal.

  8. caheidelberger Post author | 2015.02.11

    Tim, given that businesses already get the biggest break by having no income tax at all, wouldn't almost any new state income tax, even riddled with GOP crony loopholes, still be fairer than the current system?

  9. Bob Klein 2015.02.11

    Democrats should follow, rather than lead, this exercise.

  10. caheidelberger Post author | 2015.02.11

    Yeah, Paul, but what's Mary Duvall going to do about it?

  11. Deb Geelsdottir 2015.02.11

    States that "balance" budgets by reducing education funding lose out in the long run. Well, even in the short run. States whose educational funding is hit or miss are not successful states. To get the facts I base my assertions, check this link:

  12. caheidelberger Post author | 2015.02.11

    Sure enough, the full House killed HB 1216 today, on a 22-46 vote. Reps. Beal, Russell, and Rozum changed from "Yea" in committee to "Nay" on the floor. Republican Yeas were Reps. Lana Greenfield, Hickey, Kaiser, May, Al Novstrup, Rasmussen, Schoenfish, Solum, and Wollmann.

  13. Lanny V Stricherz 2015.02.11

    Well, I guess I have to keep talking. I am encouraged to see that Wollman voted the way he did. He and I were in the same discussion group at the Sioux Falls Main library last fall when Joy Smolinsky did her South Dakotans talking tour discussing taxing issues and the funding of education. I was pretty impressed with this young man.

  14. Tim 2015.02.12

    Cory, it would be fairer and should be implemented, my question is, why should business get the breaks they do? They stand to gain the most with a well educated workforce. Of course, if you educate the workforce, will they still be willing to stay and work under these conditions and wages? Maybe that's the reason to leave things as they are, keep the workforce stupid and continue to convince them that voting republican is in their best interest.

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