MERCER: Deadline arrives for tax-hike petition effort

• Bob Mercer

Bob Mercer

Talk about it

PIERRE — Within the coming days South Dakotans will know whether they will be voting on a statewide sales-tax increase in the 2012 elections. The petition deadline is Tuesday. Then we will have a full year to discuss who would be paying the additional $175 million and who will really be getting the money.

The ballot measure would raise the state’s sales tax to 5 percent from the current 4 percent on most items. South Dakota, which doesn’t charge a state tax on personal income, has long been criticized for relying on the sales tax because it disproportionately affects the lowest income people.

On the other hand, visitors to South Dakota pay sales taxes. That means some of the burden will be exported. In that respect, a sales tax might be preferable to higher property taxes, especially for home owners and agricultural producers who don’t have the ability to pass on their tax costs.

The two groups leading the petition drive to get the measure on the ballot are the South Dakota Association of Healthcare Organizations and the South Dakota Education Association, the labor organization that represents teachers and other educators.

Under their proposal, the revenue would be split 50-50.

Half would be earmarked for Medicaid reimbursements to health care providers. Of that half, 80 percent would be for increasing the reimbursement rates, and 20 percent would be for covering larger caseloads.

The other half would be dedicated for increased state aid to K-12 public school districts. The money would be distributed on a per-student basis using fall enrollment, rather than the as-needed basis of the current state-aid system.

Asking people to pay an extra $85 million or more to give to hospitals, clinics, doctors, dentists, nurses and other providers of Medicaid services prompts a question in return: What does the taxpayer get back?

In South Dakota we already pay what’s been an ever-rising amount as our share of the Medicaid program, to the point where the state treasury is strained and cuts have been ordered by the Legislature.

Spending more on Medicaid to help the needy has come at the expense of state aid to public schools. The budget strain has likewise led to a cut in school aid this year.

Asking people to pay an extra $85 million or more to send to public school districts prompts a different question: How much will the local school system benefit?

Using fall enrollment, Sioux Falls and Rapid City should get a better return under the proposed tax increase than their school districts currently receive through the state aid system.

Statewide, the estimated total of state aid to schools for the current fiscal year is $290 million. School districts meanwhile will raise about $271 million through general-education tax levies on local property.

Many school districts, including Pierre, Watertown and Mitchell, receive more in state aid than is raised locally through general-education tax levies on property. Others such as Sioux Falls, Rapid City, Spearfish and Aberdeen, don’t.

The Sioux Falls district is scheduled to collect nearly $54 million in general-education taxes from property owners in fiscal 2012 while getting nearly $40 million in state aid.

The Rapid City district will collect an estimated total of nearly $36 million from property owners in general-education taxes while getting a little over $22 million in state aid.

To illustrate how there are widespread winners and losers within the same geographic area under the state-aid system, consider three school districts in Brown County.

Property owners in the Aberdeen school district currently pay slightly more in general-education levies than the district gets back in state aid.

Groton property owners pay three times more in G-E levies than their district gets in state aid. Frederick property owners pay two-thirds in G-E levies of what their district gets in state aid.

While Aberdeen is nearly in balance, consider some of the other ESD Conference school districts. Brandon Valley gets about one-third more in state aid than its property owners provide. Brookings property owners pay about one-quarter more than their district gets in state aid.

Huron gets in excess of 50 percent more in state aid than its property owners pay. Mitchell gets about one-sixth more in state aid than from property owners. Pierre gets about one-third more in state aid, than from property owners.

Watertown gets slightly more from state aid than from its property owners. Yankton gets about 20 percent more in state aid than from property owners.

Then there are districts such as Spearfish, where property owners will pay in general-education taxes more than twice the amount their district will get in state aid; and Shannon County, where almost zero property taxes will be paid and the school district gets more than $2 million in state aid.

If the ballot measure passes, from where will come the majority of the additional sales-tax revenue? State Revenue Department statistics are available that show the percentages of taxable sales by county and city.

Rounding to the nearest one-tenth of a percent, here are the numbers for fiscal 2011 (July 1, 2010, through June 30, 2011).

Huron had 1.5 percent of total statewide taxable sales, Brookings 2.8 percent, Aberdeen 4.1 percent, Watertown 3.6 percent, Mitchell 2.9 percent, Pierre 1.8 percent and Spearfish 1.6.

The big numbers come from two places: Sioux Falls and Rapid City.

The part of Sioux Falls that is in Lincoln County generated 0.8 percent and the part in Minnehaha County 21.6 percent. For comparison neighboring Brandon accounted for 0.5 percent.

Out in Rapid City, the share was 12.6 percent.

The 2010 fall enrollment totaled 123,629. Enrollments in districts reporting approximately 2,000 students or more were Sioux Falls 21,390; Rapid City 13,280; Watertown 3,743; Yankton 2,744; Spearfish 1,960; Pierre 2,578; Mitchell 2,468; Meade 2,443; Huron 2,140; Harrisburg 2,377; Douglas 2,520; Brookings 2,853; Brandon Valley 3,283; and Aberdeen 3,959.

The 2011 enrollments will be reported in the weeks ahead. Then the number crunching can begin.

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