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does not affect school district levies, which are set by the Cutler-Gabriel formula in legislation outside the code repealed by HB 1216.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