Week Six

The 97th session of the South Dakota Legislature is down to its last two weeks, and we are getting to the nitty and gritty part of the session. This is the point where each chamber will finish hearing bills that originated in the other chamber. Monday, March 7th, is the final day for a bill or joint resolution to pass both houses.

Last week saw two bills that would have reduced the state's sales tax rate. Senate Taxation Committee heard SB 166 is an act to remove the sales tax rate on food over the next five years. I sit on the Taxation Committee, and I voted in favor of the bill, but it did fail by a 5 nay - 2 aye vote. HB 1327 is an act to reduce certain gross receipts tax rates and a use tax. That's a complicated way to say HB 1327 would reduce the state's sales tax by one-half of one percent, one quarter this year, and one-quarter next year. HB 1327 did make it out of the House, but it failed in Senate State Affairs Committee by a vote of 8 Aye votes to 1 Nay vote. I have supported the effort to roll back the sale tax statewide ever since the Legislature increased it by one half of one percent for teacher pay, which I supported only because the Partridge Amendment had a mechanism to roll back the state tax rate every year when revenues increased by 20 million dollars. Well, needless to say, that has never happened. I support the effort to roll back the sales tax on food as it would help out the poor more and have a lesser effect on the general fund. I believe the reduction in tax on food would cost the general fund North of 80 million dollars, and the reduction in the general tax rate would be over 140 million dollars.

My bill, SB 114, which would have refunded the .02% contractors excise tax to the buyers of new affordable housing, went to the 41st day in Senate Appropriations by a vote of 5 Ayes to 4 Nays. The effects of SB 114 would have given back approximately six thousand dollars to the home buyers. That number is based on an affordable housing cost of 300,000 dollars, which is the number South Dakota Housing has set in their first-time home buyers program. SB 114's effect on the general fund would have been in the neighborhood of 4.5 million dollars.

I believe the reason these bills to reduce taxes, and others, are being killed is because of the need to build a new state prison, which has a price tag of over 200 million dollars. Medicaid expansion is on the ballot, and the feared passing of Medicaid expansion. The expansion will have an 80 million dollar cost impact on the State budget in the first year, and both of these are real concerns with very expensive price tags. I personally feel that we could offer tax relief and still have the needed funds to take care of these expected future expenses. Outside of fiscal year 2015, which saw reduced general fund receipts of 58 million dollars, the state general fund has exceeded projections. This year the general fund has exceeded expenditures by 92 million dollars, and over the last ten years, the running average is 82.5 million dollars in receipts over expenditures.

I can be contacted with your comments and concerns at herman.otten@sdlegislature.gov