State lawmakers came into this year’s legislative session dead set on bringing property tax relief. The renewed call is part of a multi-year effort to address skyrocketing home values resulting from the COVID-19 pandemic.
Of the multiple property tax relief ideas proposed this legislative session—lawmakers advanced only one. It’s a proposal crafted by Republican Gov. Larry Rhoden and a working group of state lawmakers.
“With property taxes, you’re always playing the long game," said Gov. Rhoden during a recent press conference.
As a state lawmaker, he worked on property taxes in the past. In the early 2000s, Rhoden said state lawmakers put stopgap measures in place to slow the rise in valuations on ag land. He said that corrupted the tax system and had to be addressed a decade later.
“And then we had to bite the bullet and deal with it," Rhoden said. "It was a huge issue to overcome because in that case, in my county, our valuations on ag land went up 50 percent overnight.”
That’s something Rhoden said he’d like to avoid with a proposal that’s now landed on his desk. It tamps down assessment growth to three percent for five years, as well as limits the amount taxing districts can capture during that same timeframe.
The package also increases income limits for those who qualify for a property tax freeze.
Many describe the proposal as limited in scope that will only affect counties that are growing the fastest—Minnehaha, Lincoln and counties in the Black Hills.
Nathan Sanderson, with South Dakota Retailers, said as certain areas grow, so to do the need to build schools, maintain streets and provide services.
On the flip side…
“If the building slows down—both on the school level and housing level—that likely means that demand is going down as well. So, then, the value will go down and the property taxes will go down as well," Sanderson said. "But none of this happens immediately. It’s going to take a while before all of these things balance out.”
Sanderson said the property tax issue is a part of growing pains for the state.
There are three property tax classifications. Agriculture, owner occupied and commercial. According to a report by the state Department of Revenue, since 2017 the property tax burden has shifted from agriculture onto owner occupied.
As lawmakers debate the issue, some want to make sure the burden doesn’t shift onto agriculture. However, others say the issue comes down to spending by taxing districts that collect property taxes.
While House Majority Leader Scott Odenbach voted for the governor’s bill, he said the property tax issue is intrinsically tied to spending by school districts and counties.
“Let’s not always just look at holding harmless various units of government, but for once start to say, ‘How are we going to hold taxpayers harmless?’" Odenbach said. "We need to start doing that.”
Over the next several months, state lawmakers are forming an interim study group to conduct a thorough review of government spending at the state and local levels.
Odenbach said the task force could look at consolidating counties and school districts. He also said the uniform levy passed by state lawmakers every year creates disparities across the state.
According to a 2023 study, 80 percent of county expenditures are required by state law. Because the state sets the levy every year, schools are only able to raise as much money as state lawmakers allow. That is unless the district opts out of the limit.
Some worry the focus on property tax relief could lead to cuts to public education.
“Our school districts are stretching every dollar they can, but they have a lot of needs," said Sandra Waltman with South Dakota Education Association. She said schools across the state are challenged to offer competitive salaries for teachers and support staff.
"I don’t think there’s a school district in South Dakota that is spending money to spend money," Waltman said. "They’re spending it make sure we have the supports out students need. They’re spending to make sure we have the teachers out student’s need.”
With inflation at or around three percent and state lawmakers looking to give education funding a 1.25 percent increase, Waltman said schools will already head into the next fiscal year taking a cut.
