PIERRE, S.D. (KELO) — South Dakota’s 2023 legislative session that opens Tuesday afternoon will be marked by rapidly rising prices for construction projects, including several proposed state prisons, as well as unexpected growth in state government revenue, and whether that additional revenue looks sustainable enough to afford tax cuts during a time of higher inflation, according to top lawmakers.
The state Bureau of Finance and Management on Monday reported that state government’s receipts through the first six months of the fiscal year were $145.7 million more than the estimate legislators adopted last winter. That included $92 million more than expected from state sales tax.
Pre-filed legislation had already passed the 100 mark as of Monday morning. There are more than one dozen measures so far that would appropriate or supplement previously-approved spending on building projects, including a proposed $60 million new women’s prison in Rapid City and a proposed $341 million replacement for the men’s prison in Sioux Falls.
On the elections front, there’s legislation to let candidates for governor choose their running mates and to have nominations for secretary of state and attorney general decided by voters in statewide primary elections rather than at the summer political-party conventions. Another election proposal calls for a 2024 ballot measure to have voters decide whether circuit court judges should be subject to retention elections, similar to South Dakota Supreme Court justices.
On possible tax cuts, the state Department of Labor and Regulation wants to reduce employers’ re-employment rates, while one of the Legislature’s interim committee proposes to eliminate the first $100,000 of taxable value of owner-occupied homes.
Legislators will likely hear Tuesday afternoon during her State of the State address how Governor Kristi Noem suggests they should eliminate South Dakota’s 4.5% sales on groceries, which she promised during her 2022 re-election campaign. House members last year turned an attempt at repealing an intellectual-diversity reporting requirement for public universities into a grocery-tax exemption and passed it, but the much-amended legislation failed in the Senate.
There’s also legislation to work out differences between the governor and the Legislature on a $200 million program for housing infrastructure approved last year but the South Dakota Housing Development Authority declined to tap without further clarification.
Other topics that have been in the news lately and might come up as legislation include how eminent domain is exercised by carbon-capture pipelines serving the ethanol industry; size of raises for employees of public schools, state government and providers of Medicaid services; public universities’ tuition rates, which the state Board of Regents wants to freeze; and funding for long-term care facilities.
All four House and Senate caucuses have new leaders for the 2023 session. Will Mortenson of Pierre takes over for the 63 Republicans in the 70-seat House of Representatives, while Oren Lesmeister of Parade leads its seven Democrats. In the Senate, which has 35 seats, Casey Crabtree of Madison will head the 31 Republicans and Reynold Nesiba of Sioux Falls will lead the four Democrats.
“Over the course of the 38-day legislative session we will address extremely challenging issues regarding rural healthcare, inflation, corrections, workforce and many more,” Crabtree said.
“The good news,” he continued, “is we have talented and dedicated folks in the Legislature that want to tackle these issues and fix the problems that are affecting families across South Dakota. I’m confident that the Legislature and executive branch will work well together and ensure South Dakota’s best days lie ahead.”
Said Mortenson, “The budget is always the most important topic – but this year is a little different. Because of our fiscal restraint in South Dakota, we are in a strong enough financial position to consider tax cuts. We have heard ideas for cutting property taxes, exempting food, clothes, or baby supplies from sales taxes, and cutting the sales tax rate.
“I suspect even more ideas for tax cuts will emerge before all is said-and-done,” Mortenson added. “We have the next couple months to weigh our options and how large a cut we can afford. Tax cuts will dominate this year’s legislative session.”
Mortenson said state government has “a core obligation” to protect the public and that includes maintaining adequate prison facilities.
“The (Noem) administration projects that we are going to have 20% more women in prison in the coming years, and that another women’s prison is needed. We are also looking at replacing the men’s prison in Sioux Falls, which was originally constructed back in the 1800s when South Dakota was still a territory,” Mortenson said.
He continued, “No one in the Legislature is smiling about spending money on prisons, but we have to fulfill our obligation to protect the public and provide adequate prison facilities. Prison construction expenses are in the hundreds-of-millions and will receive a lot of interest and scrutiny from the Legislature. We also need to remember – building prisons is the cheap part; housing people in prison is the expensive part.”
Mortenson also expects “a lot” of legislation on South Dakota’s election system.
“South Dakota has one of the premier election systems in the country, but we can’t rest on our laurels. We’re going to look at ideas to make our elections more secure, easier to administer, and more straightforward for voters,” he said.
Nesiba said South Dakota’s $300 million ongoing surplus “foreshadows that budget negotiations will continue to be one of the biggest issues this session. The governor’s proposal to eliminate the state share of the sales tax on food, as well as her far-too-low 5% cost of living adjustment for education, providers, and state employees will give us opportunities to debate on both the revenue and expenditure sides of the budget. We also need to revise last year’s housing bill and put those dollars to work creating housing.”
Nesiba expects that healthcare debates will also dominate, “with multiple bills related to reproductive freedom and privacy, mental health care access and funding, Medicaid expansion implementation, long term care reimbursement rates, and decriminalizing fentanyl testing strips.”
As a past member of the Appropriations Committee that sets state government’s budget, Nesiba said education funding levels for K-12, debating a tuition freeze for Board of Regents, and increasing South Dakota Opportunity Scholarship amounts for students are worthy topics that will demand legislators’ attention.
“We should also be addressing our workforce challenges by tackling the childcare crisis. However, without leadership from the governor’s office and state general fund dollars we cannot have high-quality, affordable childcare that pays a living wage,” Nesiba said.
Nesiba, a professor of economics at Augustana University, said South Dakota government continues to ignore what he called “the brain drain” of educated young people.
“Reversing the flow of this most precious resource would also help us address our workforce challenges,” he said.