Opting-Out: What is Driving the Tax Madness?

Is it frivolous spending, cost drivers that need to be addressed, or both?

The State of South Dakota has limitations on how much property taxes are allowed to increase in a year. These limitations are based on the Consumer Price Index. If a county, municipality, or school district wants to collect taxes beyond this limit, they have to “opt-out”.

To opt-out, the commission, council, or school board (“board”) has to approve the tax increase with a 2/3 vote and then has to notify the taxpayers via a standard legal procedure. Then the citizens have 20 days to get thousands of signatures, if they want the tax increase to go to a vote. In the Sioux Falls School District, for example, this is around 6500 signatures (that’s nearly impossible in 20 days).

Opt-outs are presented as a yearly amount, but these special taxes generally extend for long periods of time. That means a $7.5 million opt-out for 10 years is really $75 million.

The opt outs in school districts are generally 10 years. Some School Districts opt-out (add taxes) every year and others rarely or never opt-out.

Here is the current opt-out schedule for the Sioux Falls School District.

Yes, the residents of this school district pay extra taxes every year. Next year the extra taxes will total $17.6 million (that’s a little over $130 million in the last10 years). There is a group that is working to bring the $21 million opt-out ($2.1 million a year for 10 years) to a vote. People can sign the petition at the locations listed at the bottom of this article.

In Minnehaha County, the opt-outs are generally 25 years (there are two forever opt-outs that were put in place before a defined duration was required).

click on agenda packet page 119

While Minnehaha and Lincoln Counties and the Sioux Falls School District have many things they could (and should) cut from their budgets (including money for fancy new buildings, large contingency funds, non-profits, fairs, commissioner trips, payments to lobbying groups, etc.), it is true that they have some costs that are beyond their control. Specifically they are being overwhelmed by crime from prison reentry and appear to be having significant issues associated with the families of foreign workers (indentured servants).

For example, the law enforcement/judicial budget in Minnehaha County increased by 43% in 5 years (click on the budget recap links $69.4 million - $48.5 million). They also had to construct a new juvenile facility to process the rapid growth in juvenile crime (which rolls over to schools too). In addition, Lincoln County is constructing new law enforcement and judicial facilities.

Part of the problem stems from crime dumping. Lincoln and Minnehaha Counties have less than 1/3 the population in the state, but have 61% of the prisoner reentry (location where people and their kids reside after they get out of prison) and almost 90% of the reentry for people who are in the prison for serious things like murder, rape, and aggravated assault (Level 3, 4, and 5 crimes) is coming through these two counties.

In addition, about 12% of the students in the Sioux Falls School District do not speak English (and many are significantly below grade level). Having children who are not at grade level and kids who are having issues because a parent was/is incarcerated could be part of the reason it is difficult to run an efficient operation.

Obviously, people can’t afford any more taxes so it’s time for our government entities and schools to tighten their belts (cut costs) and figure out how to work together to get rid of the cost drivers, so the citizens can get some relief.

P.S. Signing locations for the group that is trying to get enough signatures to get the latest Sioux Falls School District opt-out (tax) on the ballot.