Lawmakers pass budget, tax cut in same day
State lawmakers are passing a budget they say constituents should be proud of.
It includes the largest tax cut in state history as well as generous funding increases for state services.
House and Senate reached an agreement Thursday morning to cut the overall sales tax from 4.5 percent down to 4.2 percent. That will result in a roughly $104 million cut to state revenue collections annually. However, the tax cut will come up for debate again in four years.
House Majority Leader Will Mortenson said both chambers compromised to deliver the tax cut.
“I don’t think the Senate will tell you they’re cutting taxes the way that they want to. I don’t think the house is cutting taxes exactly the way that we want to, but that’s the process," Mortenson said. "These bills have to come through the legislature. I’m really proud that we landed at the largest tax cut of these proposals. It’s over $100 million and allows us to take care of our other obligations.”
Those obligations include seven percent funding increases for education and state employee salaries.
Lawmakers are increasing funding for all community service providers by five percent, while targeting dollars to fund long term care services at 100 percent.
Leaders say they hope that will address salary compression, employee retention and stave off any nursing home closures. Funding those obligations into the future was a major hold up on the Senate side. The tax cut passed overwhelmingly by lawmakers will lapse in four years.
That was a requirement Senate Republicans, like assistant Majority Leader Mike Diedrich, wanted.
“Fiscal responsibility ties into the sunset in four years. That gives us adequate time to understand that and adequate time to address that,” Diedrich said. “The legislature can address it anytime they want to anyways, regardless of the sunset clause.”
Both the tax cut and state budget now head to Gov. Kristi Noem’s desk. Noem has expressed concern about the sunset on the tax cut and has hinted at possible vetoes. She has two weeks to weigh in on the bills.
SDPB employees are state employees and are subject to salary increases.