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Looking for tech funds, Mickelson seeks $1 tax on pack of 20 cigarettes

PIERRE — The legislator who's sponsoring two possible ballot measures asking voters to raise tobacco taxes in South Dakota said he wants the money to help fund the public technical institutes in the state.

State Rep. Mark Mickelson, a Sioux Falls Republican, said Thursday he'd circulate what's labeled "version 2." It proposes adding $1 of state tax to a pack of 20 cigarettes and increasing the state tax on other tobacco products such as cigars and smokeless to 55 percent of wholesale price.

South Dakota's current tax rates are $1.53 for a 20-pack of cigarettes and 35 percent of wholesale price for other tobacco products.

The proposal also calls for creating a tuition reduction and workforce-training fund for technical institutes in South Dakota.

Version 2 says $20 million of tobacco taxes shall be deposited annually in the technical institute fund.

State laws already required the first $30 million of tobacco taxes to be deposited in state government's general fund and the next $5 million of tobacco taxes to be used for the tobacco prevention and reduction trust fund.

South Dakota can expect to receive an estimated $55 million from tobacco taxes for the current 2018 fiscal year that began July 1, according to the revenue forecast adopted in March by the Legislature.

No estimates have been made for fiscal 2019 or 2020. The Mickelson tax increases would take effect July 1, 2019, making their revenues part of the fiscal 2020 number.

Currently there are four institutes that would receive the Mickelson money. Local public school districts operate them.

They are Mitchell Technical Institute at Mitchell, Lake Area Technical Institute at Watertown, Western Dakota Technical Institute at Rapid City and Southeast Technical Institute at Sioux Falls.

Mickelson, R-Sioux Falls, said Thursday he didn't know how much money the technical institutes needed when he submitted the two ballot measures.

He said he doesn't plan to circulate version 1. It would increase the tax by 50 cents on a pack of cigarettes and raise the rate to 45 percent of wholesale price for other tobacco products. Version 1 proposes placing $15 million annually in the technical institute fund.

The Legislative Research Council finished its review of the two versions June 15. State Attorney General Marty Jackley published his official explanations Aug. 1.

Mickelson wants his proposal to attract enough support to make the general election ballot for November 2018. He needs valid signatures from at least 13,871 registered South Dakota voters by Nov. 6, 2017.

If voters approve the tobacco tax increases in 2018, they would take effect on July 1, 2019.

Legislation sponsored in the 2017 session by Sen. Jim White, R-Huron, changed the effective date to a uniform July 1 for all constitutional amendments, initiated measures and referendums.

State law previously had ballot measures take effect the day after the State Canvassing Board completed its official canvass. Waiting for July 1 adds seven months.

The change also inserts into the waiting period a regular session of the Legislature, which the South Dakota Constitution says must open in January.

Lawmakers could modify or repeal altogether an initiated law such as the tobacco tax increases before it takes effect.

Mickelson said he chose the ballot-measure route because he didn't want to face tobacco lobbyists in the 2018 legislative session. He is House speaker, the chamber's presiding officer, for the 2017-2018 term.

"Found out we were third highest in the country, double Nebraska, Wyoming and Montana and 40 percent higher than every other state we touch," Mickelson wrote in an email. "... No way to grow a trained workforce."

Tim Dougherty, a lawyer from Sioux Falls, lobbies for Altria, a tobacco company.

"I expect that Altria will join forces with others to oppose Mickelson's tobacco tax initiative," Dougherty said.

Dougherty noted that in 2016 voters in Colorado, North Dakota and Missouri rejected tobacco tax increases on their states' ballots.

Mickelson got his answer regarding South Dakota's need, when the LRC staff released an issue memorandum June 6 analyzing tuition and fees for technical institutes.

South Dakota's tech schools cost about $6,320 for tuition and fees in 2016-2017, according to the study. That was highest of seven states in the region and third highest in the nation for two-year public institutions.

LRC fiscal analysts Jeff Mehlhaff and Stephanie Gruba concluded that South Dakota would have needed about $19.2 million of additional state support for 2016-2017 to reduce its tuition and fees from an average of $6,320 to $2,980 and match Nebraska at lowest in the region.