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.