Both the Minnesota and South Dakota legislatures convene tomorrow. Wouldn't you know, my partner scheduled a much-needed medical appointment in Sioux Falls (delayed from last summer when we both got mild cases of COVID), so I'll be missing out on the excitement.
South Dakota Legislature: Property taxes, ethanol carbon pipelines, prisons (and more)
by Stu Whitney
What to watch for as the state's 105 lawmakers convene in Pierre on Tuesday for the 100th session.
The 100th session of the South Dakota Legislature in Pierre will be historic not just for its centennial landmark but because of transitions in power.
Gov. Kristi Noem is scheduled to give her State of the State address Jan. 14 and then head to Washington for hearings on her nomination to become secretary of the Department of Homeland Security in the administration of President-elect Donald Trump.
She can't be officially confirmed until about a week later, when Lt. Gov. Larry Rhoden is expected to be sworn as South Dakota's 34th governor, just in time for a legislative session rife with Republican power shifts and looming budget battles.
Even with these developments, the 2025 session in Pierre is more about issues than eras. Lawmakers are prepared to tackle the three Ps – property taxes, pipelines and prisons – as well as school vouchers, Medicaid funding and child care programs.
It's hard to keep up without a scorecard, so here's a primer on what to watch for as the South Dakota legislative session opens Tuesday.
Raising sales tax to cut property taxes
Property tax relief is a hot topic in Pierre, given that total payments have increased by nearly 60% for residential housing and nearly 50% for commercial property over the past decade in South Dakota.
The problem with cutting property taxes, which help fund local school districts and city and county governments, is that typically you need to backfill that lost revenue with general fund dollars to pay for education and reduce the local effort for school districts.
Rep. Tony Venhuizen (R- Sioux Falls) has floated a proposal to increase the sales tax rate from 4.2% to 5%, which would raise an estimated $280 million in general fund revenue. That money would be used to reduce the levy for owner-occupied homes to fund education at the local level to zero.
“This is meant to start the conversation on property tax relief and to make the point that it costs a lot of money,” said Venhuizen, whose plan is co-sponsored by Sen. Randy Deibert (R-Spearfish). “I’d say that property tax relief is easily the top issue that I hear about from other legislators.”
Raising the sales tax rate, which legislators temporarily lowered from 4.5% to 4.2% in 2023, would require a two-thirds majority vote in both chambers. It could encounter turbulence from limited-government leadership in Pierre, even with the property tax offsets elsewhere.
The measure is also unlikely to win over Democrats, who are outnumbered by Republicans 31-4 in the Senate and 63-7 in the House of Representatives.
Rep. Kadyn Wittman (D-Sioux Falls) noted that property tax relief does little to help low-income residents and non-homeowners who would be impacted by higher sales tax rates on purchases.
“If you really want to impact every single South Dakotan in a tangible way, it would be better to look at removing the grocery tax,” Wittman told News Watch. “I think that would be a better utilization of our legislative powers.”
Voters rejected a grocery plan repeal on the 2024 ballot, but critics mainly derided the measure’s overly broad language rather than the merits of eliminating the food tax.
Venhuizen’s property tax relief plan harkens back to 1995, when Gov. Bill Janklow pushed through a 30% property tax reduction, offsetting the lost tax revenue to schools by increasing the state's education contribution. The program also updated the state’s education aid formula and established property tax caps.
Rep. Will Mortenson of Fort Pierre, who served as Republican House majority leader the past two years, called the proposal “bold and clear-headed” amid all the property tax noise.
“A lot of people have been talking about property taxes as a campaign issue, but to this point, any changes have been kind of around the periphery,” Mortenson told News Watch. “This proposal would deliver substantial, noticeable property tax relief to homeowners across the state. I wouldn't make a guess as to whether it's going to pass or not, but I applaud (Venhuizen and Deibert) for having the guts to do it.”
Proposal sparks school voucher debate
Lively debate is also expected on Noem's push for “education savings accounts” that would provide state money to help students enroll in private schools or help parents pay for homeschooling outside the traditional public school system.
In her Dec. 3 budget address, the governor proposed spending $4 million in ongoing state dollars to provide about $3,000 per eligible student to offset the cost of private or alternative schools as a way to “prioritize education” in the state.
In her budget explanation, Noem said the funds would initially be eligible for “South Dakota kids who need it most” but added that the program could later expand to make all families in the state eligible for payments. She said the program will create new options for parents and increase competition in the educational landscape across the state.
The proposal was formally introduced on Jan. 8 as House Bill 1020 by House Majority Leader Scott Odenbach (R-Spearfish) and Senate Majority Leader Jim Mehlhaff (R-Pierre).
The so-called school choice bill would allow the money to be used for tuition at private schools and “micro-schools” for materials for homeschooling or for entrance exam or virtual learning fees not covered by a local school district.
Critics of the proposal — including several organizations focused on improving public education — said it is a veiled attempt to begin a school voucher program. Voucher programs in other states have resulted mostly from conservative-led efforts to enable more children to attend private, religious or charter schools or to expand home-schooling.
Noem said her program would not reduce funding to the state K-12 system, though her proposed budget includes only a 1.25% spending increase for public schools, well below the recent inflation rate.
Rob Monson, executive director of the School Administrators of South Dakota, said during a Jan. 8 conference call that conservatives in the Legislature have been trying for years to create a voucher program.
Monson said Noem’s proposal, as well as other proposed measures such as House Bill 1009, will ultimately siphon funding from the public education system that serves all children regardless of income, race, ethnicity or disability status.
Monson said backers of voucher programs try to demonize public education and claim it is failing and “indoctrinates” students, which he said is false. He and other public education backers also pointed out that private schools, alternative schools and home-schooled children do not have to undergo the same levels of transparency and accountability that public schools must meet.
Monson said the new leadership in the Legislature appears to be more favorable to vouchers or Noem’s proposed education savings accounts in the upcoming session, and he expects a big battle in Pierre.
“We’re going to see an attack this year, we believe, on the public school institution bigger than we have ever seen (in South Dakota)” he said.
Anti-pipeline forces target eminent domain
Republican populists are still feeling the energy from the 2024 election defeat of Referred Law 21, a “Landowner Bill of Rights” package that critics decried as more favorable to ethanol producers and carbon pipeline companies.
Groups such as the Freedom Caucus and Dakota First PAC exploited the pipeline issue in GOP primaries by highlighting the votes of incumbent legislators, several of whom were defeated to set up the leadership shift.
Though the fate of Summit Carbon Solutions’ $5.5 billion, 2,500-mile pipeline plan will likely play out in the courts and Public Utilities Commission hearings, expect more fireworks in Pierre.
Jim Eschenbaum of the South Dakota Property Rights and Local Control Alliance told News Watch that the focus will be on tightening restrictions on eminent domain, which involves taking private property for public use while requiring fair compensation.
“I’ve heard people say that the interstate system couldn’t have been built without eminent domain,” said Eschenbaum, who is also running for chair of the South Dakota Republican Party. “But the interstate system was literally for the use of all, and it was for the greater good. This pipeline doesn’t fit that description at all.”
Whether Summit Carbon Solutions qualifies as a "common carrier" under state legal parameters for eminent domain is being litigated in court and will likely play a large role in legislative debates.
Property rights supporters will rally at the state Capitol rotunda on Jan. 13, the day before session opens. Republican legislators expected to attend include Speaker of the House Jon Hansen (Dell Rapids) and House Speaker Pro Tempore Karla Lems (Canton), both of whom are strident opponents of the pipeline project.
Amanda Radke, a Mitchell rancher and ag representative who has emerged as a leader on the issue, will address the gathering. Eschenbaum said he will be on hand to emphasize the need to “clarify the limits of eminent domain.”
The movement will test the remaining influence of mainstream, pro-business Republicans, who have stressed the positive impact of eminent domain for large-scale development projects that create jobs and increase tax revenue for the state.
“The thing that concerns me most is this "not in my backyard" sentiment bleeding over into other areas of commerce or industry,” Mortenson said. “South Dakota has been viewed as a place where you can come and build something without the government getting in the way. I really worry that because of anger over the pipeline, some of these folks will go too far and cut off our nose to spite our face by blocking construction and development of businesses that could keep our small towns vital and allow other towns to grow.”
Legislators take aim at Medicaid expansion
South Dakota voters passed Medicaid expansion in 2022, extending health care coverage to more low-income residents under the Affordable Care Act, with the federal government covering 90 percent of the cost.
That arrangement will cost South Dakota about $20 million each fiscal year if the matching rate remains the same.
Venhuizen and Sen. Casey Crabtree (R-Madison) have put forth a joint resolution proposing a constitutional amendment that ties Medicaid expansion in South Dakota to the level of federal assistance.
If the federal matching rate drops below 90%, as some have suggested it could as the Trump administration looks to reform spending strategies, the South Dakota Constitution would no longer require the state to continue Medicaid expansion.
“As things stand now, if they cut the match rate from 90% to 80% or 70%, we would have no choice,” said Venhuizen. “We would have to come up with the money and pay it. So the point of this amendment is to say, if it drops below 90%, then it’s up to the Legislature. We don't have to get out. If they drop it to 88% or 89%, we would probably stay in. If they drop it more than that, at what point does it become so expensive that the state can’t afford it?”
Medicaid is a joint federal and state program that helps cover medical costs for qualified individuals with limited income and resources.
The Affordable Care Act in 2010 expanded Medicaid to include nearly all adults with incomes up to 138% of the federal poverty level, which translates to an annual gross salary of about $21,000 for an individual or $43,000 for a family of four.
South Dakota was one of the Republican-led states that resisted expansion, which meant childless adults without a disability were ineligible for Medicaid coverage regardless of income level. Many also didn’t qualify for ACA subsidies to help obtain private coverage.
In 2022, South Dakota became one of 40 states to expand Medicaid when voters approved a constitutional amendment with 56% of the vote.
Two years later, Venhuizen sponsored a ballot amendment that allowed work requirements to be used in connection with able-bodied adults receiving Medicaid benefits in South Dakota, subject to federal approval. That measure also passed with 56% approval.
Wittman criticized the latest effort, saying that measures that could eliminate Medicaid expansion in South Dakota altogether show a lack of regard for state residents that require assistance.
“I'm really tired of the South Dakota Legislature continuing to punish people who are vulnerable and marginalized and living in poverty,” Wittman told News Watch. “I really do not understand Rep. Venhuizen's vitriol towards individuals that utilize this particular government support system. If this is truly about him wanting to make smart use of taxpayer dollars, I believe there are other places in our budget where he could focus his efforts and it would not further marginalize an already vulnerable population.”
Budget battle for public broadcasting
Among the belt-tightening measures proposed by Noem in her budget address, cutting South Dakota Public Broadcasting’s funding by 65% has received a lot of attention.
The governor put the $3.6 million budget cut in national terms when presenting her proposal, which earmarked $1.9 million for SDPB in fiscal year 2026. The network had requested $5.6 million.
“Currently, South Dakota has the third-highest per capita funding of public broadcasting of any state in the nation,” Noem said in her budget address. “We’ve been paying more than double the national average.”
SDPB, which relies on state funding and private donations, provides livestreamed coverage of state legislative hearings as well as South Dakota High School Activities Association championship events, in addition to its news, weather and commentary programming, which includes National Public Radio.
“A cut of this size and scale will force significant reductions to all these important services,” the network said in a statement. “This cut is likely to disproportionately affect rural service, where SDPB’s programming is most valued.”
During her 2022 re-election campaign, Noem refused to participate in a debate sponsored by the public broadcasting network, with her team saying in a statement that “SDPB’s extreme leftward swing precludes the possibility of a fair debate.”
While her likely exit from Pierre might shield her from political fallout from the budget cuts, some lawmakers view it differently. Pulling support from something that serves as a conduit to legislative proceedings as well as statewide sports and fine arts events has caused some angst among constituents.
“It’s probably the cut that I've heard the most opposition to since the budget address,” said Venhuizen. “I know a lot of legislators are hoping that we can avoid that cut, but the reality of the budget situation this year is that it's a zero-sum game. And so unless we have cause to increase our revenue estimate in a month, we're going to have to find a dollar elsewhere for every dollar we restore.”
Noem seeks to close prison deal
South Dakota Department of Corrections officials have informed legislators that the guaranteed maximum price for a planned new men’s state prison is $825 million, higher than previous estimates.
That includes $737 million in construction for the 1,500-inmate facility at the proposed site between Harrisburg and Canton in Lincoln County, making it the largest one-time capital investment in state history.
The fact that the prison involves “one time” dollars puts it on a different tier of budget discussion from ongoing expenditures such as health care and education funding, but the governor is looking to close the deal.
Noem's proposal includes putting $182 million in a prison fund that, combined with interest already accrued, would fully fund the project, a clear priority when it comes to shaping her executive legacy.
The Legislature has already committed $87 million to build a new women's prison in Rapid City, with a likely completion date of early 2026.
Some of the same lawmakers who opposed the carbon pipeline project have expressed concern about the men's prison site, which could lead to some interesting discussions in Pierre.
If the project goes through as planned, the outgoing governor will be justified in chalking it up as a win for her administration, said Mortenson.
"It's not a popular thing to build a prison," he told News Watch. "The public would rather spend this money on education or nursing homes or other things, but she saw a need. Our current facilities are falling short of their mission of rehabilitating people and being a Department of Corrections, not just a department of incarceration. She said, 'You know what, we've got the money, let's do something about it,' and I give her credit for that."
Bart Pfankuch contributed reporting to this story, which was produced by South Dakota News Watch, an independent, nonprofit organization. Read more stories and donate at sdnewswatch.org and sign up for an email every few days to get stories as soon as they're published. Contact Stu Whitney at [email protected]
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