Last week Governor Daugaard delivered his FY 2017 budget address and in it he went into depth about some important issues for our state. One important issue—the Blue Ribbon Task Force recommendations—was acknowledged, but we will have to wait until the State of the State Address in January to learn our executive branch’s recommendations for how we implement and pay for the task force’s important recommendations to raise South Dakota teachers’ salaries.
There is a fair to fund the needed $75 million in new and ongoing funding needed to increase teacher salaries’—set the agricultural property tax rate at the same rate paid on the owner-occupied properties. This would raise $77,717,862 additional tax dollars, based on 2015 values and the owner occupied tax levy, and is the only reasonable source of increasing funding for education.
(See my previous blog posts which explain in detail how this amount is reached: The benefits of fairness, How our children are being cheated, and What would happen if education were funded fairly?)
In its final report, the Blue Ribbon Task Force recommended an increase in state sales and use tax to fund the increase in teacher salaries, but this wouldn’t address the inequities in our current funding formula—it would only increase them.
The agriculture sector doesn’t pay sales tax on many purchases and receives a sales tax exemption benefit greater than any other group. For example, the agriculture sector doesn’t pay sales tax on parts & repairs to farm machinery, agricultural services, seeds, fertilizers & pesticides, livestock, feed, nondomestic animals, fuel, and more. In a 2013 South Dakota Department of Revenue report, Summary of State Sales Tax Exemptions, the 2010 sales tax loss from the agricultural sector was estimated at $221,911,821. That’s a $221,911,821 subsidy to agriculture in sales tax alone, in 2010 alone.
The $221,911,821 was based on the current 4% state sales tax. If the state sales tax were increased by 1% it would mean an additional $55 million subsidy to agriculture interests—yet another state revenue source where agriculture isn’t paying its fair share.
Instead of giving them another subsidy, let’s ask agricultural properties to pay part of their fair share. This property tax rate proposal isn’t for the $221,911,821 in sales tax lost in 2010 (and each year)—by comparison it is modest. By simply taxing agricultural property at the same rate as owner-occupied properties we would not only meet the $75 million need identified by the Blue Ribbon Task Force, we would exceed it by $2.7 million.
If we divided the additional $77,717,862 raised through property taxes by the number of South Dakota students each school district could receive an additional $597.59 per student, based on 2015 numbers. That would mean more than $1 million in additional funding for the Sioux Falls, Rapid City, Aberdeen, Watertown Brandon Valley, Harrisburg, Brookings, Mitchell, Yankton, Douglas, Pierre, Meade, Huron, Spearfish, and Todd County school districts.
Of the school districts with opt-outs, Sioux Falls, Brookings, Mitchell, Harrisburg, Madison Central, Wagner Community, Dakota Valley, Deubrook Area, Parker, Sioux Valley, Scotland, Mobridge – Pollock, Florence, Colome Consolidated, Redfield, Plankinton, Lemmon, and Timber Lake would receive an amount greater than their opt-out.
The time has come for us to make much needed increases in teacher pay, to increase our investment in education—and we can do it. We just need to stop letting one group pay less than its fair share.
A Way to Go 
I’m just wondering why you want to run the remaining family farmers out of business. Believe me, plenty of South Dakota businesses that support ag (and collect sales tax from the farmers they serve) will suffer from yet more consolidation of farmland into the hands of the Ted Turners of the world.
Why not tax quarries and mines more vigorously, Sen. Adelstein?
Though I am no longer in that business, quarries are already taxed as commercial property nearly 9 times, NINE – 900%!! of the assessment charged for Ag – and more than twice the amount for Owner Occupied.
All that this proposal is raise Ag to the SAME as owner occupied. If Ag went to the same as quarries, their taxes would go up about $180 million.
Stan Adelstein
I’m just curious here, but are you then willing to improve the services that those farmers and ranchers already pay for that arent as good for as those that live in town? Fire department within five minutes, police the same. How about the inequalities of insurance for that live closer to those services compared to those in the country? What will those ag people see for the jump in property taxes? 80% go for education, and that doesnt leave a whole hell of a lot for those other services.
The Blindman
this deals only with funding of education, not services. Since the beginning of statehood, the value of real estate has been used to pay for all education. mill Levy for services will remain as they are.
Stan Adelstein
People that live within 5 minutes of a fire department usually live within city limits so they pay tax to the city that provides those services. When they look at their tax bill they have an additional taxing entity digging into their pockets that the people living in the country don’t have.
Here is an idea, lets tax the the churches and religious groups, some of the wealthiest businesses in the world,this would solve the problem 10 times over.
Adelstein the farmers already do it tough enough, and many of those in the AG business are in it simply because the generations before them where in it. What you propose will kill any AG business left and will displace families that have had farm land since before your Grandfather was born. Are you prepared to kick elderley families of their land because they can’t pay taxes.
The only benefit will be to the wealthy property owners like you who will buy up the deserted or city repossessed AG land and develop it, for your own profit. You do not have the states interest at heart yo have your own financial gain.
Plenty of other ways to make this funding requirement then taking from those who settled the area.
Stan Adelstein, to quote you
“The time has come for us to make much needed increases in teacher pay, to increase our investment in education—and we can do it. We just need to stop letting one group pay less than its fair share.”
This statement is intriguing at best so you wish to tax farmers, you wish to place a burden on our already struggling agriculture industry. DO you not understand that South Dakota largest industry is Agriculture, many of the farm owners are farm owners simply because their family before and the family before them settled here and established South Dakota. Without Agriculture our very existence is at risk. Your proposal will see the already struggling farmers unable to afford the farm that has been in their families for generations, it will see grandmothers and great grandfathers forced to abandon their struggling farms as the city takes possession due to unpaid taxes, not because they do not wish to pay but simply because they can not afford to.
Your proposal is not achievable, sure there are some loop holes that could be tightened up with regards to the definition of what really is Agricultural producing land, but this would hit your hip pocket as well, now wouldn’t it.
Mr Adelsten, this is a short sighted fix which is unsustainable!
Once the many farms become vacant or unproductive, the only people that will benefit will be the wealthy property owners like your self who will secure the vacated properties at minimal costs and develop for your own gain, the rest that are to far out of city centers to be considered viable for development will remain barren and unproductive. Where will we get our meat and produce from then outside of the country.
Let me go back to your statement “We need to stop letting one group pay less than its fair share” in considering this statement it brings to mind some of the wealthiest businesses in the world that pay little or no tax at all, that would be religious groups who are afforded various tax concessions,abatement and exclusions, why!
If we tax the CHURCH we will solve many of our funding issues. But that will never happen as these wealthy business have to much control of political interests.
In your example I see many many districts that have lots of students and little land to tax. So us out here in the middle of western South Dakota would have to send our tax dollars to Sioux Falls, Watertown, Brandon, Harrisburg and Mitchell to pay for their teachers. So our one room school with eight kids would still get shorted. The things the big population centers have is INCOME. Tax that.