PIERRE, S.D. (KELO) — A state lawmaker wants to fund South Dakota’s K-12 public schools with a higher sales tax as a way to reduce property taxes.
Republican Sen. Jim Mehlhaff made the suggestion on Monday in a presentation to the Legislature’s Comprehensive Property Tax Task Force.
Mehlhaff suggested adding 2% to South Dakota’s sales and use tax rate. He said changing the rate from the current 4.2% to 6.2% would generate an estimated additional $702 million.
School districts received from property taxes $470,013,049 for general use and $168,754,326 for special education during the past year, according to the Legislative Research Council.
Mehlhaff’s plan would eliminate the general and special-education levies for K-12 districts. The Legislature sets those levies.
The Legislature in turn provides state funding to balance funding per classroom. State aid is distributed according to a school district’s need through a formula that calculates a district’s total need and subtracts the district’s revenue from property taxes.
School districts received $594.9 million in general state aid and $89.3 million in special education aid last year, according to the state Department of Education. Six districts received no state aid: Agar-Blunt-Onida, Custer, Edgemont, Elk Mountain, Hill City and Lead-Deadwood.
Under Mehlhaff’s plan, school districts could still levy property taxes for other purposes such as opt-outs, capital outlay certificates and bond issues.
His proposal wouldn’t change property taxes levied by municipal and county governments or other local government entities. Mehlhaff said he wouldn’t change any of the current exemptions to the state sales and use tax.
In calendar 2024, K-12 school districts received $973,662,519 from property taxes, according to LRC. They included:
- $452,002,163 general fund
- $176,426,190 special education
- $279,554,837 capital outlay
- $65,679,329 bond redemption
The task force is looking at a variety of ways to potentially reduce property taxes for K-12 education, such as capping growth of assessments, putting in place a circuit breaker for assessments, and changing processes for opt-outs and capital-outlay. Those are among many possible steps that could raise revenue from other sources and restrict growth of property taxes.
The panel meets for the final time on October 22. Republican Sen. Chris Karr chairs the group. He asked that subgroups finish their work and share their proposals by October 14.
