Education groups push back on grocery sales tax cut

Education groups in South Dakota are worried a loss of revenue for the state could trickle down to their funding.
Published: Jan. 30, 2023 at 6:20 PM CST
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SIOUX FALLS, S.D. (Dakota News Now) - Repealing or cutting South Dakota’s grocery sales tax has been a mission for many in the state for years, and it became a focal point during the last general election. Now that there’s momentum to follow through with the effort in the state legislature, some groups are pushing back. Statewide education groups in particular are opposing the efforts, as they fight for more funding to keep up with teacher pay and support.

Three House bills, HB1075, HB1095, and HB1096 all deal with either eliminating or lowering South Dakota’s tax rate on groceries. Both Governor Kristi Noem and her opponent at the time for office Jamie Smith voiced their support to repeal the tax late in their campaigns for office last year. Completely eliminating the tax would cut out around $100 million from the state’s budget. That move though is drawing opposition from education groups and school boards.

“When we got together in November with school boards from all over the state, they sent their representatives, it was crystal clear that we will oppose any tax cut that doesn’t have some form of replacement with it.” Associated School Boards of South Dakota Executive Director Wade Pogany said.

MORE: SD House committee passes grocery tax cut bill

That’s because the ASBSD and groups like it fear that education spending will also face cuts if and when a tax cut is implemented. Organizations like the School Administrators of South Dakota and the ASBSD aren’t opposed to a sales tax cut, as they know it would benefit their communities. But instead, they’re afraid that if the tax is lowered or cut completely, that loss of revenue could trickle down to schools.

“Listen, I’m a citizen, I’m a taxpayer too. We all look for ways to take care of those families. I recognize that at face value a sales tax cut or reduction to food certainly has merit, and would no doubt provide support to our some of our most financially at-risk families. At the end of the day, we have an obligation to our taxpayers in the same way. We have to be able to provide free and appropriate public education for the students in the state of South Dakota.” SASD Executive Board President Nick Gottlob said.

“The issue really for us isn’t about grocery taxes. The issue for school boards is when you remove $100 million plus out of the state budget, that could very well have an impact on state aid,” Pogany said. “That’s what schools live on, primarily is the money we get from the state. There’s a question about could that have a negative impact. So we’re not going to be in the debate about grocery taxes and that kind of stuff. We’re in the debate about is there a replacement.”

Pogany said their argument applies to any tax cut or loss of revenue for the state that doesn’t include a replacement. That could be property taxes for example, which he said they would support but only if it didn’t threaten the funding schools and other state institutions receive.

“We would love to reduce property taxes. We would love to reduce grocery taxes, that’s not the issue.” Pogany said.

“We have a real concern that even though those sales tax reductions have merit and appeal at a face basis, without a replacement for that revenue, we would need some sort of assurance that school districts will receive operating budgets in order to be able to maintain services to our students,” Gottlob said.

Pogany said South Dakota already faces low spending on education compared to other states in the region. A loss of revenue for the state and in turn a loss of funding for them would damage their fight to stay level in teacher pay.

“We’re not all about just spending taxpayers’ money. We’re about making sure that we have the resources that we need. It’s interesting because sometimes when you have resources like the state has now, there’s money there, there’s a tendency to say, ‘Let’s pull back on that.’ That might be true short term, but long term then, what happens with that money? Because you’ve pulled it back, so you don’t have that to spend later on,” Pogany said. “We’re not trying to get ahead, we’re just trying to keep up in doing that. We desperately need to attract and retain teachers in our state. They’re a valuable group for us.”

Gottlob said the efforts from the state legislature in the past to increase education spending helped South Dakota start to climb out of the bottom of the national rankings. But walking back on how much the state takes in now would throw that progress into jeopardy.

“The work of the Blue Ribbon Task Force several years ago certainly also had merit in trying to find ways that we could maintain the level of general fund operations to fund our schools and fund teacher pay. We continue to struggle to meet those mandated levels of funds.” Gottlob said. “This to me is simply not just about a reduction in food sales tax. It’s a discussion about revenue, and the way the state and our legislature will choose to now and moving forward fund our fiscal obligations. I’m certain that SASD and other agencies in the state would be willing to have a robust discussion on the way that we fund programs. We’re certainly not opposed to having a dialogue regarding revenue and expenditures related to education.”

Ultimately, Pogany said until something is proposed to make up for the lost revenue to the state’s budget, the ASBSD and other organizations wouldn’t be able to support a tax cut.

“So in this case so far, we have not seen any kind of replacement revenue for that,” Pogany said.

HB1075 passed out of the House Taxation committee and is currently in the House Committee on Appropriations. The other two bills, HB1095 and HB1096, were referred to the House Taxation committee and have yet to be voted up or down.