Former Senate boss Lee Schoenbeck says the Governor and Legislature wouldn’t have to play word games to break the school-funding law if they would just cowboy up and raise the sales tax:
Schoenbeck said the state could live up to the index factor this year by immediately returning the state’s sales tax to 4.5%. The Legislature and then-Gov. Noem temporarily reduced the rate to 4.2% in 2023, costing the state more than $100 million in annual revenue. The tax is scheduled to go back up to 4.5%, but not until 2027.
“Put that back to where we had it and you’d have your problem solved,” Schoenbeck said. “Now these people in the Legislature will have to decide if they have the courage to pay their bills” [Makenzie Huber, “How South Dakota Lawmakers Get Around a Law That ‘Dictates’ Increased Funding for Schools,” South Dakota Searchlight, 2026.01.05].
Schoenbeck told his fellow legislators not to lower the sales tax four years ago. He tolerated the 2023 sales tax cut but originally wanted the sunset to happen on July 1, 2025. Now in retirement, Schoenbeck has to leave it to sensible Republican Representative Will Mortenson (R-24/Fort Pierre) to lead the charge to raise sales tax back to 4.5%.
Isn’t there something your l’il state can sell or do to raise money?
Restaurants have a new tip line for MAGAs. Added to 15%, 20%, or 25% it says zero. It also refers to their personality.
Coming off a COVID and record spending, this was just a bad idea to lower the tax rate at that time. For them not to let things level off after COVID before thinking about dropping the sales tax is just short sighted in the name of a “tax break”. Just was not very smart at the time.
The South Daktoa Searchlight articles gives the outlines of the funding formula issue, but the history is very interesting. Several states, including South Dakota, changed their funding formula system around the early to mid 1990s, adopting similar ways of limiting property taxes through the funding formula. Multiple states, including South Dakota, at the time were facing property tax revolts. None of these states actually understood what the local districts needed, or what would provide an education students, but they arbitrarily decided on the rate of inflation as the benchmark. That wasn’t the point of the change in funding. In fact, educational costs had been increasing at rates that exceeded the relativeely low rates of inflation in the 1990s for a number of reasons, inclduing needing to put technology into schools and provide for special education students. All states that adopted this funding system used increases in state funding to only partially backfill the money they were going to prevent local districts from collecting through the property tax. In essence this wasn’t an education funding mechanism, It was a property tax reduction mechanism. Each state started out with good intentions, but they just didn’t have a clue that what they were willing to provide from state coffers was not going to be adequate over the long haul. As soon as the states economies soured, each states would violate state law to balance their budgets. Both education and property tax reduction would be hurt.
All states had opt outs, called different names in other states, that allowed local districts to tax above the limit when necessary. When the state reneges on its funding promises, districts have little choice but to use drastic budget cuts or opt outs. At this point, districts are pretty lean, so I would expect some opt outs to come.
I think many knew in the Janklow administration) that the formula wouldn’t meet the need. As a matter of fact I think they set it too low on purpose so the tax fight would move from the state to the local school districts.
The open enrollment law came at about the same time and the thinking was that students from small districts would exodus to larger ones resulting in the closure of some small schools. That idea backfired as the opposite happened, strengthening small school numbers.
Super sweet, I think there was not really any idea by the Governor or legislators what the costs of education were or were going to be in the near future or long-term. hey never studied it, and they didn’t care, really. They wanted to get Dackota Prop, an initiated property tax reduction initiative, off the table. They did know that districts had reserve funds. The first thing districts did was spend down their reserve funds, so there was no need for opting out at first. Then by 2000 those had mostly been spent so there was a round of slashing courses and programs, reducing administration, etc. Some of that cutting hurt education, but some probably didn’t, After all that was done is when the opting out started. So, I don’t think their purpose was to drive the taxing issue down to the locals. It was to try to solve the property tax issue by pouring more state money through the state aid formula an limit local taxing. It’s just that the state didn’t follow through with its end of the bargain and its end of the bargain was not based on educational need but a political goal of making Dakota Prop unnecessary.