Update: Money Issues At Core Of First District 18 Forum

Though the central issues of the legislative session are still developing, many questions posed by the audience focused on current and future financial issues facing the state, including the proposal to repeal South Dakota’s food tax.

After having consistently opposed similar measures in the past, Gov. Kristi Noem took on a repeal of the food tax as part of her reelection campaign last fall.

Despite the governor’s support of the notion, the District 18 representatives remain undecided.

Stevens said he is concerned that the state is still coping with federal dollars pumped into it during the COVID-19 pandemic.

“When do we get to our baseline as to where we were before all the federal government money came in?” he asked.

Hunhoff pointed out that there still isn’t a clear picture of how a repeal would impact the budget. The calculated cost to the state of repealing the food tax points to a sum of approximately $101 million-$110 million per year, she said.

“What’s going to generate this additional revenue or replacement?” Hunhoff said. “And, if it isn’t, what would you like us to cut? What services do you not want provided to the citizens of South Dakota?”

Auch noted that some of the language in the bill proposes the inclusion of candy and beer sales in the food tax repeal.

“We need to find a way to replace that tax, and I’m all about cutting taxes, but let’s be smart about it,” she said.

The discussion also touched on Senate Bill 41, which proposes spending $200 million worth of South Dakota’s pandemic surplus money for housing infrastructure loans and grants.

“This bill is a rewrite from a rewrite from last year,” said Auch, referring to the bill as “express 41.” “I will tell you, the way the bill stands, I probably can’t vote for it because, yes, it is for housing, but there are no income guidelines on what kind of a house will be built.”

The funds would be for curb, gutter and pavement — not to actually build the house, she said, adding that the grants can be used by people who have enough money to build their homes — even $700,000-$800,000 homes.

“Quite a few home builders here in Yankton County have said they look at this bill as being competition to them, that they’re not going to be able to sell their houses, that the $150 million being pushed into the building, economic side of it would be more of a hindrance to them,” Auch said.

The label “express 41” isn’t accurate, Stevens said, adding that for there to be any question that there isn’t enough information available on it simply isn’t true.

“It completely went through the Legislature last year,” he said. “It had a committee hearing in the Senate, passed the Senate, went into the House, passed the House committee, went to the House, passed that, and you’ve got to remember, this was passed by a two-thirds majority of both houses and went to the governor, (where) there was some question as to language.”

The funds would already have been distributed had it not been for the question of wording, Stevens said.

“It doesn’t help just large contractors; it helps all of us across the board, and I never received a single email from anybody from Yankton or District 18 that was against it,” he said. “There’s overwhelming support for it.”

Stevens read aloud the list of supporters of Senate Bill 41, which included: Avera, S.D. Rural Electric Association, S.D. Association of County Commissioners, NorthWestern Energy, the South Dakota Bankers Association, the South Dakota Chamber of Commerce, Yankton Thrive, and the S.D. Association of Realtors, among others.

“We put on our badge — at least Representative Auch and I do — that says ‘Representative,’ and I think that sometimes you have to vote for things that you may not be personally supportive of, but if that’s what your district wants, that’s what I think you need to do,” Stevens said. “I think, it’s very clear in our district, that that’s what they want.”

Hunhoff noted that the need for housing is second only to the need for workforce across the state, saying that employers need workers and workers need a place to live.

“With these dollars’ allocation, 30% from the housing infrastructure goes to cities with populations of 50,000 or more,” she said, noting that only Rapid City and Sioux Falls would qualify. “Seventy percent goes to the rest of the state, local communities, small communities.”

Representatives need to know how they can support District 18’s rural areas with those dollars, Hunhoff said.

The housing bill passed by a 56-14 margin in the House Monday.

When asked about how the state should plan for a future with less spending flexibility, the discussion turned to the issue of Medicaid expansion.

Last fall, South Dakota voters passed a ballot measure to expand Medicaid benefits under the Affordable Care Act. According to the U.S. Department of Health and Human Services’ website, the federal annual poverty level for individuals/households is: $12,880 (one person), $17,420 (two person), $21,960 (three person) and $26,500 (four person). Medicaid expansion would raise those limits by an additional 33%-38%, depending on how individual states calculate the income limit. A large percentage of the additional expense would be covered by the federal government, but individual states have to come up with the difference.

“I would like to use the $150 million slush fund that we’re using on housing and sock that away for when (Medicaid) expansion kicks in, so we’re not looking at a possible personal income tax,” Auch said. “I don’t know where we (will) get that money from. No one really can answer that question. I’m sure there’s a plan, but no one knows.”

However, Stevens countered, “We actually do have a plan. We have a reserve fund for just those types of situations. We also really don’t know what the Medicaid expansion is going to cost us.”

In addition to Medicaid expansion funding, which early estimates place at about $80 million, the state will have to fund two new prisons in the near future that could cost anywhere from $400 million-$800 million, he said.

“So that’s why it concerns me so much (as to) getting rid of sales tax (on food), and would I love to do that? Absolutely,” Stevens said “But, we have things that we’ve made obligations for across the state to do for people who need help. I don’t want to be in the position like we had a few years ago — remember how painful that was? We had to cut 10% (of the budget) across the board. I really don’t want to do that.”

Hunhoff said there is already a workgroup focusing on Medicaid expansion funding.

“Keep in mind, for these first two years, Medicaid expansion is for additional Medicaid — that would be the population that’s currently on Medicaid — there will be a 5% increase in fed payment, which equates to 5% less (for the state),” she said. “These dollars are coming in and we aren’t going to have to expend general fund dollars. So, we’re really looking at where can we put those dollars so that they can be used for Medicaid expansion if there are additional costs. It’s really making sure that we’re planning, that we’ve got the revenues to support that.”