IM 15 puts decision with voters on tax for schools, MedicaidThe last time South Dakota voters decided to increase a statewide tax was 1932.
By: Bob Mercer, Republic Capitol Bureau
NOTE TO READERS: This is the sixth in a series of stories about the four constitutional amendments, two referred laws and one initiated law that South Dakota voters will decide on the Nov. 6 general election ballot.
PIERRE — The last time South Dakota voters decided to increase a statewide tax was 1932. That November they imposed a tax of 10 cents per pound on butter substitutes. This fall they will get the chance to tax themselves at a higher rate on margarine, butter and much, much more.
Initiated Measure 15 seeks to increase the state sales tax on most items and many services to 5 percent, from the present 4 percent, starting on Jan. 1, 2013. The state treasury would receive the first payments from business people in February.
The additional tax is forecast to generate $85,100,036 from January through June, the final six months of the state 2013 fiscal year.
For the 2014 fiscal year that starts July 1, 2013, the additional tax is expected to produce $182,769,014.
The revenue would be dedicated to K-12 school districts and Medicaid services. They would split the money. The proposed law also prohibits the Legislature from using the new revenue to offset what’s already being provided.
Tax increases and new taxes require a two-thirds majority in both the House of Representatives and the Senate for passage by the Legislature.
Voters reaffirmed that requirement in the South Dakota Constitution in 1996. That rule doesn’t apply to a public vote, however.
The South Dakota Association of Healthcare Organizations and the South Dakota Education Association formed the organization for the petition drive to put IM 15 on the 2012 ballot.
The proposed law would distribute the schools’ half of the money on the basis of fall enrollments. Each school district would be allowed to decide how to use the money.
The Medicaid half isn’t as clear cut. Four-fifths of the money would be earmarked for increasing rates paid to Medicaid services providers, while one-fifth would be set aside to cover expanded use by Medicaid recipients.
The method and timing of payments to Medicaid providers however aren’t determined yet, according to state Social Services Secretary Kim Malsam-Rysdon. Those need to first be approved by the federal Centers for Medicare and Medicaid Services.
“The CMS approval process can take several months, and it requires that proposed rate increases consider actual costs of services as well as federal regulations that limit costs for certain services in the Medicaid program,” she said.
The proposed law also seeks to impose a catch-up provision regarding the inflation factor that school districts are supposed to receive through the normal education funding formula.
Under IM 15, if there is a year when state revenue grows by a percentage smaller than the inflation factor is supposed to grow, the difference would be made up in subsequent years.
The petition initiators for IM 15 were SDAHO’s David Hewett, SDEA’s Bryce Healy and the head of the Moving South Dakota Forward organization, Andrew Wiese.
One of their arguments is that recession cuts made to school funding and Medicaid by the Legislature in 2011 need to be recovered. Opponents argue that the additional money would be three times the amount of the cuts.
School districts would receive their share of the money on the same quarterly payment schedule used for other state aid to schools in January, April, July and October.
Gov. Dennis Daugaard opposes the measure because, in his opinion, South Dakota doesn’t need a $180 million tax increase.
His finance commissioner, Jason Dilges, said the governor hasn’t formulated a recommendation for state funding of K-12 schools in the 2014 fiscal year.
The governor will deliver his speech outlining his 2014 budget proposal in early December, one month after Election Day.