- Associated Press - Tuesday, January 12, 2016

PIERRE, S.D. (AP) - Lawmakers should pass a half-cent sales tax increase to improve South Dakota’s lowest-in-the-nation teacher pay so it’s competitive with neighboring states, Gov. Dennis Daugaard said Tuesday in his State of the State address.

The sales tax increase would raise more than $100 million in the upcoming budget year, most of which would be put toward helping raise the state’s target average teacher salary to $48,500 per year. If approved, it would be the first permanent increase to South Dakota’s sales tax rate of 4 cents per dollar in nearly half a century.

About $62.4 million from the sales tax hike would go toward teacher salaries, and about $40 million in additional revenue from the increase would go to property tax relief, according to the governor’s office.

“This is the year,” Daugaard told lawmakers in his speech on the first day of the 2016 legislative session. “This is the year to get out of last place. This is the year to act.”

It takes two-thirds support to pass a tax hike through the Legislature, and it could face opposition among Republicans in both GOP-held chambers.

“To do two tax increases in a row, back-to-back is tough,” House Majority Leader Brian Gosch said, referring to fuel tax increases that lawmakers approved last session for road and bridge funding.

But pressure has mounted to raise teacher pay, which a state task force studying education funding said is the lowest of the 50 states and District of Columbia. South Dakota’s average teacher pay of $40,023 in 2013-14 lagged an average of the six states that border it by $11,888 a year and was $8,643 behind the next lowest neighbor, North Dakota, according to the group.

Daugaard also wants to encourage efficiency from school districts, and will push incentives to share services across districts. He’s also proposing to reinstate caps on school reserve funds so that new state dollars are actually used to increase teacher pay.

The proposal sends the message that the state needs to do everything it can to attract and retain teachers and that “it’s no longer acceptable to be 51st,” said Mary McCorkle, president of the South Dakota Education Association, a more than 5,000-member education professionals’ organization.

South Dakota’s Democratic legislative leaders also welcomed Daugaard’s plan to put new revenue toward teacher pay, but said more money is necessary.

Democrats proposed a 1-cent sales tax increase - with a corresponding exemption on food - to put about $130 million toward a target average teacher salary of $50,000 and other programs.

On other issues, the governor again exhorted legislators to consider an expansion of the Medicaid health coverage program for disabled and low-income people. Daugaard’s position a departure from other Republican governors nationally who have declined to expand because they oppose President Barack Obama’s federal health overhaul.

But Daugaard has said the state’s costs for expansion would have to be covered by savings in part by expanding access to services that are fully funded by the federal government. That would free funds for boosting potential enrollment by about 50,000 residents.

The deal needs the backing of the federal government, the Legislature and South Dakota’s Indian tribes, who are a key part of the plan. Tribal members would see more accessible and improved health care if the changes go through, according to a group Daugaard established to study expansion.

The governor asked skeptical Republican lawmakers to reserve judgment on the expansion plan until the state receives final word from the federal government. The Republican governor said he shares some of their concerns.

In response to a murder-suicide last year involving two employees of a Platte-based educational cooperative, Daugaard said he has asked Lt. Gov. Matt Michels to lead an effort to review the state’s oversight of outside entities that manage grants for the state.

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