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South Dakota legislative round-up: Five items you missed this week

Taxes, cannabis and legislative minutiae. Here is some of what you may have missed during the second week of session in Pierre.

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Sen. Larry Zikmund of Sioux Falls gives a speech welcoming students from the University of South Dakota to the South Dakota State Capitoo\l on Jan. 19.
Jason Harward / Forum News Service
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PIERRE, S.D. — With eight days and 198 bills and resolutions under their belt, legislators are off to a fast start in Pierre. Here are five happenings you may have missed.

Grocery, property tax proposals inch toward collision

As the saying goes, you can’t have your cake and eat it, too.

And with two significant tax cuts relatively equal in cost coming down the legislative pike, lawmakers keen on keeping the state fiscally sound and fully funded while returning surplus revenues to taxpayers will likely have to decide between two options: cutting the sales tax on food, favored by Gov. Kristi Noem, and easing the property tax burden for homeowners, supported by a cross-section of Republicans in the House and Senate.

“They could be [in competition],” said Rep. Trish Ladner, of Hot Springs. “I hope not. My pie-in-the-sky wishes are we can do both. But I don't know if the money's there.”

Ladner, who chaired the summer study where the proposal was birthed, supports a cut on the first $100,000 in home value, specifically targeting the portion of the property tax headed to local schools. Replacing these education funds, the second part of the policy offers these local schools a matching increase in state aid. Cost estimates on the bill, though not yet public, sit at around $82 million, according to Ladner.

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“In all my travels and dealing with constituents in running for office, no one has ever come to me and said, ‘I really hated paying $1.04 for this candy bar,” Ladner said. “But every single one of them has complained about the property tax. So I hope we can do something for them.”

Sharing the collision course with the property tax, and referenced by Ladner as potentially not top of mind for her voters, is the full cut to the 4.5% state sales tax on food, submitted to the docket this week by Rep. Mary Fitzgerald, of St. Onge, and Sen. John Wiik, of Big Stone City. The proposal would return just over $100 million in tax dollars to South Dakotans next year.

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Gov. Kristi Noem delivers her State of the State address to a joint session of the state legislature. Noem is in favor of a repeal of the state sales tax on food, introduced during the second week of the 2023 legislative session.
Jason Harward / Forum News Service

“On property tax, I think it's really hard to determine what would be the most equal effect to taxpayers in South Dakota, where the grocery tax is fairly transparent; it benefits everyone,” Fitzgerald said of the merits of the grocery tax cut. “Property taxes benefit homeowners, but there are a lot of people out there that can't afford homes who are renters, and let's get relief to those families.”

That more narrow benefit is one reason the grocery tax cut has long been part of the Democratic platform in the state. However, due to a desire to better fund providers in the state and match state obligations to rampant inflation, the caucus proposed two alternatives — a one-cent and two-cent decrease to the state sales tax on food, respectively — for legislators who may be intimidated by a full 4.5% cut.

“I think it is going to be very difficult to get 4.5%, but can we take 2% off this year and then re-evaluate,” said Sen. Reynold Nesiba, a Democrat from Sioux Falls. “Gov. Noem is going to be in office for four more years. We have time to phase this out.”

Trade Secrets: Why settle for $1?

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Sen. Michael Diedrich of Rapid City speaks on the Senate floor on Jan. 19.
Jason Harward / Forum News Service

As of Jan. 20, three separate appropriation proposals on the legislative docket are not asking for much.

In fact, a proposal from Sen. David Wheeler, of Huron, to fund career and technical education grants to local school districts, along with two proposals from Rep. Mike Derby, of Rapid City, to “enhance the economic health” and “increase the success” of the state of South Dakota, is only asking for one dollar each.

“When you attach a dollar figure to it right away, it can scare people,” Wheeler said of the approach.

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Creating an appropriation proposal without attaching any set dollar figure to it is an often-implemented way to keep the idea alive, give it a committee hearing and move it through the legislative process on time, Sen. Michael Diedrich, of Rapid City, explained.

With the ever-present option of amending the bill at any stage in the process, agreeing on the actual dollar figure can come later, when appropriators have a better idea of the state’s obligations and financial outlook.

As with every legislative maneuver, not everybody is a fan, as the majority of appropriations bills come with a dollar figure that the sponsors feel is adequate.

“It would be nice to start with the dollar figure you’re thinking about,” said House Majority Leader Will Mortenson, of Pierre.

$18 million tax break for South Dakota businesses passes House

The first tax cut of session is on the move, as an estimated $18 million total annual break for South Dakota businesses is headed over to the Senate side of the State Capitol after the House unanimously approved House Bill 1011 on Jan. 18.

The bill makes changes to the required contribution rates from businesses to the state’s reemployment assistance program, commonly known as unemployment insurance. The legislation, sponsored in the House by Rep. Neal Pinnow, of Lemmon, lowers the rates paid by businesses when the fund is solvent — as it is today — and allows a mechanism for raising the rates if the fund gets dangerously low.

“It’s a huge win for businesses,” Pinnow said. “It’s going to lower the employment costs per employee for every business in South Dakota.”

Currently, the reemployment assistance fund has reserves almost double the “recession-level benefit” amount; essentially, were the state’s fund to take in no more revenue, it could pay out unemployment benefits for two years to a historically-high unemployment pool.

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That number is much higher than the level that the state’s fund aims for, meaning businesses have been overpaying and the state can afford to offer them a break, according to Dave Owen, the president of the South Dakota Chamber of Commerce.

“We want to keep one-and-a-half [times recession-level benefits] in the trust fund so we can easily sustain the next big crisis,” he said.

Pinnow said he was confident that, considering the drama-free passage of the tax cut in the House, the Senate would have little trouble quickly moving the bill to the governor’s desk.

Medical marijuana debate in Senate reveals program potentially not living up to promise

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Sen. Jim Bolin of Canton asks Sen. Erin Tobin of Winner a question during debate over Senate Bill 1 on Jan. 19, 2023. The bill eventually passed the Senate 20-15.
Jason Harward / Forum News Service

After making the trip out of committee with relative ease, Senate Bill 1, a proposal to add eight qualifying conditions to the medical cannabis program and move oversight of future conditions to the legislature rather than the state Department of Health, initiated an intense debate on the Senate floor.

While the bill passed 20-15 on Jan. 19 and will make its way into the House Health and Human Services committee as early as next week, several senators used their comments on the bill to discuss their concerns with the medical program as a whole.

Specifically, their concerns revolved around the lack of participation from physicians and the use of “pop-up clinics” offering medicinal marijuana cards, arguing this practice violates the doctor-patient relationship that proponents of the program say protects it from abuse.

“My assumption was that people who had a condition that medical marijuana would help with would go to a doctor. And if they received a written prescription, it would be administered under doctor's supervision with appropriate follow-up,” Sen. Jim Mehlhaff of Pierre said during floor debate. “And if there was a benefit, and at some point, that condition went away, then the prescription would go away. I don't think that's what's happening in this state.”

Still, Sen. Erin Tobin, of Winner, the prime sponsor of the bill, said she shares the wishes of the opponents to make sure medical cannabis is prescribed, if at all, in a way that considers other treatment options, prescriptions and potential risk factors.

However, she argued that replacing the current statute, which uses vague symptoms to guide doctors, with specific conditions could lead to more reputable physicians signing up for the medical program in the first place.

“As someone who actually has the ability to prescribe medical marijuana, this would make me feel more comfortable prescribing for patients within a primary care setting because I have a list and not just a few little symptoms,” Tobin, a nurse practitioner, said. “So this will actually revert patients from pop-up clinics.”

Those concerns are not going away, and on Jan. 20, Rep. Fred Deutsch of Florence introduced legislation requiring more comprehensive follow-up work from practitioners who prescribed medicinal cannabis.

House heats up with first ‘smoke out’ of session

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Rep. Chris Karr of Sioux Falls stands to offer a motion for a "smoke out," a check-and-balance among members on the committee process, on the House floor on Jan. 18.
Jason Harward / Forum News Service

On Jan. 13, a bill changing the process by which a legislative oversight committee can issue a subpoena was tabled to the 41st legislative day by a 9-3 vote in the House State Affairs Committee, a committee mainly made up of moderate House Republicans.

In a session limited to 40 days, this tabling mechanism is a sly euphemism for sentencing a bill to legislative purgatory.

However, on Jan. 18, Rep. Chris Karr, of Sioux Falls, who served on the oversight committee this past session, stood on the House floor to propose a “smoke out,” a legislative mechanism for moving a bill that has failed in committee directly to the floor.

The motion, which requires one-third of the chamber to succeed, earned 37 legislators in favor. In a chamber with a strong contingent of ultra-conservative rank-and-file legislators compared to moderates across leadership, this sort of dissension may become commonplace.

“It’s a check and balance on the committee system,” Karr said. “Since the Speaker appoints the committees and assigns the bills, we have the opportunity as members to say we don’t think you got it right.”

The proposal, House Bill 1001, would undo a 2018 law that required subpoenas issued by the oversight committee to be approved by the legislature’s Executive Board.

While Karr and others on the Government Operations and Audit Committee — the interim oversight committee from which the bill emerged in unanimous fashion — say the bill is important for streamlining their investigations, the majority on the House State Affairs committee felt it was a “solution looking for a problem,” according to Rep. Rocky Blare of Ideal.

After all, in the last two interim sessions, only one subpoena has been proposed; while the subpoena was approved by the Executive Board, the document targeted by the subpoena ended up being freely provided to the committee.

Following the successful “smoke out,” a majority of lawmakers must approve placing the bill on the calendar, setting the date when the actual piece of legislation will be voted on by the full chamber.

During the calendaring debate on Jan. 20, Majority Leader Will Mortenson made a plea to his members to vote against placing the bill on the calendar, appealing to the committee structure and the experience of the members of House State Affairs.

"If we're going to have every bill that dies — and we don't like it — come through this body, we don't need to have committees," Mortenson said.

Mortenson's warning was not heeded, and the vote to place the bill on the calendar passed 37-32. It will be debated on the floor early next week.

MORE BY JASON HARWARD
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Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or jharward@forumcomm.com.

Related Topics: TAXESMARIJUANA
Jason Harward covers South Dakota news for Forum News Service. Email him at jharward@forumcomm.com.
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