Behind the scenes, legislators gathering to back tax increase

PIERRE - Amendments made by House members last week would require all additional money generated from the governor's proposal to raise the state sales tax would forever be spent only on increasing salaries for teachers at K-12 schools, reducing p...

PIERRE – Amendments made by House members last week would require all additional money generated from the governor’s proposal to raise the state sales tax would forever be spent only on increasing salaries for teachers at K-12 schools, reducing property tax levies for K-12 schools and increasing salaries for instructors at technical institutes.


Those restrictions mean the additional amounts for teacher and instructor salaries and for property tax relief must grow at the same pace that sales tax revenue grows each year. That amendment came from Rep. Lee Schoenbeck, R-Watertown.

Further, school districts would be financially penalized if they didn’t spend at least 85 percent of the additional K-12 money on teacher salaries. There would be an appeal process and a new state oversight board on school spending. That amendment came from Rep. G. Mark Mickelson, R-Sioux Falls.


A third amendment would roll back the tax increase proportionately to increases in state sales tax revenues from remote sellers outside South Dakota. That amendment came from Rep. Jeff Partridge, R-Rapid City. The Legislature in a separate bill is setting out on a strategy to collect from remote sellers who supply goods and services into South Dakota.

The basic proposal from Gov. Dennis Daugaard, a Republican, calls for increasing the state sales tax to 4.5 percent. It has been 4 percent since 1969. Many legislators now believe a sales-tax increase is necessary in order to pay more to teachers, whose salaries on average have been lowest in the nation.

Daugaard’s proposal with the amendments from Partridge, Mickelson and Schoenbeck received 46 ayes in the House of Representatives on Thursday. The measure needed 47, or a two-thirds majority, of the 70 House members. The House will vote again Monday afternoon.

Schoenbeck led the effort Friday to have the House agree to reconsider the governor’s plan with the three amendments on Monday.


Rep. Scott Craig, R-Rapid City, announced late Friday night that he was switching from a nay to an aye. Neither the governor’s supporters nor the opponents including House Republican leader Brian Gosch of Rapid City will know for certain whether the governor now has at least 47 ayes until the tally is taken by the House voting machine Monday.

Gosch and the other House Republican opponents haven’t attempted to amend Daugaard’s legislation, HB 1182, with their own funding proposal. That played a part in Craig’s decision.

“Unfortunately, for most teachers across the state the vote conveyed a lack of support and appreciation, and they are disheartened,” Craig said in his written statement issued Friday night.

“I am looking forward to a seeing a second plan filed in the Legislature and I believe both plans should be debated in the legislative body, and the greater of the two plans should prevail,” Craig continued.


“I’m voting to keep this plan moving forward and I’ll consider earnestly any other plan filed in the Legislature,” he wrote.

Daugaard’s chief of staff Tony Venhuizen said Friday night after Craig’s announcement that the governor appreciated Craig’s decision and the earlier decision by the 46 House members who voted aye.

The Partridge, Mickelson and Schoenbeck amendments helped bring together the 46 ayes Thursday.

No one spoke against the Partridge amendment, which was made on a voice vote.

Mickelson’s amendment was somewhat more complicated.

Daugaard originally proposed penalizing school districts whose teacher salaries didn’t increase by least 90 percent of the school’s additional funding from the tax increase. But Daugaard’s penalty provisions were in a separate measure that is being considered in the Senate.

Some House Republicans criticized the tax-increase legislation because it didn’t contain the penalty. Mickelson’s version sets the threshold at 85 percent rather than Daugaard’s proposal of 90 percent.

Rep. Steven Haugaard, R-Sioux Falls, asked Mickelson how his proposed amendment compared to Daugaard’s penalty provision. Specifically, Haugaard wanted to know whether the oversight board proposed by Mickelson would be the same as the oversight board in Daugaard’s Senate bill.

The House debate paused, as Mickelson walked several aisles over to Haugaard’s desk, where they compared Mickelson’s amendment to Daugaard’s bill. Mickelson then told the House the intention was the two concepts would be the same.

His amendment then passed on a voice vote. “It’s as close to a guarantee as we can get,” Mickelson said later in the debate.

On Friday morning, the Senate State Affairs Committee considered Daugaard’s legislation, SB 131, containing the penalty provision and the oversight board. The senators amended the Senate bill to correspond to Mickelson’s 85 percent amendment in the House tax-increase bill.

The Schoenbeck amendment proved more controversial Thursday because it injected a new purpose into the tax-increase plan.

Daugaard’s original proposal didn’t call for spending any of the tax-increase revenue on increasing salaries for technical institute instructors.

The four institutes are operated as parts of the Watertown, Mitchell, Rapid City and Sioux Falls school districts and are jointly governed by the local school boards and the state Board of Education.

Schoenbeck said he technical institutes have struggled to keep faculty because the instructors’ salaries frequently aren’t competitive with the private sector jobs in the same fields.

The tech-institutes amendment appeared critical to changing Schoenbeck’s position from somewhat of a critic regarding the governor’s original plan last month. He became one of the hardest-arguing supporters behind the scenes and the most aggressive during the House debate Thursday.

Schoenbeck didn’t let up after the narrow lost Thursday. That night he continued to push against Gosch and the House Republican assistant leader, Steve Westra of Sioux Falls.

He posted an Internet message and, at about midnight, he issued the second of two messages on Twitter regarding them specifically.

“Tonight, after the chicken behavior by Steve Westra and Brian Gosch, I’m still so mad I can’t sleep. South Dakota deserves better,” Schoenbeck’s tweet said.

Schoenbeck’s amendment calls for dedicating the revenue each year from the tax increase for three purposes: 63 percent to increasing teacher salaries by school districts; 34 percent  to reducing property-tax levies for general education for all classes of property; and 3 percent to increasing instructor salaries “to competitive levels” at the technical institutes.

He said the property-tax relief, which Daugaard proposed as a flat $40 million, would grow under his amendment. As an example, Schoenbeck said, it would reach $45 million in seven years.

Not all of the representatives who favored Daugaard’s tax increase liked Schoenbeck’s amendment. Speaking against it Rep. Jim Bolin, R-Canton, said he supports technical institutes but the amendment would “siphon money away” from K-12 schools to benefit the tech institutes and called it “a bad amendment.”

A House member – who it was, wasn’t immediately clear from the press box – called out for a roll call vote. After House Speaker Dean Wink, R-Howes, asked the supporters of the roll call motion to stand – only 12 are needed in the 70-member House – he took a count and determined the roll call should proceed.

The vote was 38-31 for Schoenbeck’s amendment. The tally didn’t bear any resemblance to the sides that would form later that afternoon on the final version of the bill.

Opponents of the amendment included a dozen Democrats and Republicans who later voted for the bill, while the amendment’s supporters included several Republicans who later voted against the bill.

The debate took other odd turns throughout nearly two hours. One line of argument was whether last in the nation was good enough.

Daugaard’s target is an average salary of $48,500 for most K-12 teachers, for an average raise of about $8,000, but he has stressed the decisions on how to spread the additional salary money would be made within each school district.

Several House Republicans including Gosch questioned the fairness of increasing the sales tax for workers who earn less than teachers and are the lowest-paid in the nation at their occupations.

Rep. Mike Verchio, R-Hill City, used the example of an emergency dispatcher who has a four-year degree and makes less than the average salary for a teacher in South Dakota. Vechio questioned why one public sector should be singled out.

“Just stop and think about that for a minute,” said Verchio, who voted against the bill.

Rep. Justin Cronin disputed those points from Vechio and Rep. Don Haggar, R-Sioux Falls. Cronin, R-Gettysburg, agreed many people are underpaid in South Dakota and teachers are the largest group.

“Let’s fix this problem and move on. We’ve got a lot of problems ahead of us in this state. We’re not going to fix them in one day,” Cronin said.

Mickelson said the big challenge is that young people are leaving South Dakota when they’re old enough to live elsewhere.

What became clear from supporters and opponents alike is many now believe the Legislature didn’t adequately fund public schools in recent years, and the public schools’ superintendents and school boards in many cases have large amounts of money in reserves.

Westra noted that the average salary for teachers would be $47,700, or about $7,000 more than the current level, if their salaries had tracked other spending in schools.

Rep. Jacqueline Sly, R-Rapid City, said people in South Dakota who hold four-year degrees have an average salary of about $60,000. Adjusted for the nine months teachers work during the normal school year, Sly said that would be $48,000.

That is the general amount Daugaard has targeted and the governor’s Blue Ribbon task force recommended last year.

In the end, many of the Republicans opposed to the tax increase were allies of former Rep. Hal Wick of Sioux Falls, who was the godfather of the American Legislative Exchange Council’s strong influence in the South Dakota Legislature.

ALEC is a pro-business lobbying organization that is repeatedly linked to conservative efforts in states across the nation. Its influence in South Dakota can be seen by the official policy of the Legislature’s Executive Board that in recent years allows South Dakota lawmakers to bill the Legislature for trips to ALEC national meetings.

Another influence against the governor’s tax increase is the South Dakota Citizens for Liberty, based in Rapid City. Its leaders identify the group as a TEA Party organization, for “taxed enough already,” in the words of Barbara Landers.

Landers traveled from Rapid City to the Capitol with four other members to testify last week in favor of earmarking $75 million of video lottery revenue for teacher salaries. To work, the proposal from Rep. Lance Russell, R-Hot Springs, would require budget cuts in other parts of state government.

Landers said the group worked to defeat Rapid City’s school board opt-out, the Rapid City civic center project’s funding and Pennington County’s proposed wheel tax for road and bridge funding.

“The message is clear: South Dakota taxpayers don’t want any more taxes,” Landers said.

The House debate clearly showed legislators are receptive to dealing with school reserves. Daugaard’s main Senate bill calls for caps, reductions and eventually penalties for school districts that choose to keep amounts beyond the limits he proposes.

That measure, SB 131, after being amended to match Mickelson’s House amendment, received a unanimous endorsement Friday from the Senate State Affairs Committee’s seven Republicans and two Democrats.

The full Senate will consider it either Tuesday or Wednesday, after seeing what the House does Monday on the sales-tax bill.

What also appears to be occurring is that Gosch and the other opponents of the Republican governor’s tax increase have become the minority within the House Republicans.

A legislator who asked to be unnamed said Saturday that Schoenbeck, who doesn’t have a formal leadership position, is “the clear House leader for the majority of the mainstream Republican caucus.”

The legislator said Schoenbeck “has been involved in countless behind-the-scenes organizational meetings in preparation for the teacher tax-hike vote, and even today (Saturday) is communicating and preparing for Monday.”

The legislator added that during the past week the legislator “participated in my first joint-party (Republicans and Democrats) caucus to prepare for the vote.”

The Legislature now is at the point where timing and deadlines affect action.

Lawmakers have 13 working days spread over three weeks remaining in the main run of the 2016 session.

More significantly, there are three days left to deal with legislation in the house where a bill began. That deadline is Wednesday, Feb. 24, known as crossover day in legislative jargon, because it’s when each chamber has to make a final decision about what to send to the other chamber for further consideration.

Then the rush starts to get bills through the second chamber. The deadline for a bill to pass in both chambers is Tuesday, March 8.

Starting Wednesday, March 9, is the three-day period reserved for conference committees to negotiate on bills that passed both chambers but in different forms. That period continues through Friday, March 11.

The Legislature takes a two-week break and returns Tuesday, March 29, for the final day of the 2016 session’s scheduled 38 working days.

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