Taxing the land
June 11, 2015
As a rancher, landowner, small business owner, legislator, wife and mother, Elizabeth May knows how to pinch pennies.
But she also knows that without a penny, there is nothing to pinch.
This summer, upon May's recommendation, a committee of legislators will research funding ideas for counties struggling to cover basic expenses. Many of these counties have significant amounts of un-taxable federal land.
Only two interim studies were chosen to be funded, and May's requested county government study was number one.
Funding road upkeep, court costs, ambulance maintenance and staffing, police expenses and more are a challenge for counties comprised of large amounts of federal or trust land that can't be taxed. The landowners who do pay taxes are left to finance the county budget.
"What little money that comes in is funding schools. There is nothing left for roads, law enforcement and other services," May said.
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Shannon, Bennett and Jackson county are close to bankruptcy, she said.
The road that May travels to her home is a county road that hasn't been bladed in five years, she said. "But we pay taxes," she points out.
Darren Bauer, a rancher and Corson County commissioner said that of the approximately 1,621,000 acres in his county, taxes are collected on about 971,000 acres. The entire county lies within the confines of the Standing Rock Reservation.
"Almost all our money for our sheriff, deputies, jail services, snow removal, and to operate the county is from property taxes unless you opt in to have a wheel tax," the Morristown, South Dakota, man explained.
About 549,728 acres are held in trust by the federal government for the Bureau of Indian Affairs and about 23,823 are national grasslands which is managed by the U.S. Forest Service. Payment in lieu of taxes or PILT money is paid on the forest service property at about 63 percent of the going property tax rate.
"If you can't tax the whole base, the people left behind pay a higher tax," he explains. His county keeps up over 780 miles of roads.
The private, trust and federal land is "checkerboarded" but the county is responsible for many of the roads and other services, he said.
"If someone put up a house on trust land, near my place, the rural electric company would have to run a line off the main feeder and it would be the county's responsibility to keep that road up, even though we can't collect taxes on that quarter," he said.
In an effort to fund basic county services, he suggested to his legislator an optional wheel tax on just motorized vehicles. The idea took the form of a bill this year but it died and later a broader county wheel tax was included in SB 1 "Now we are going to have a wheel tax on trailers, everything," he said
Shannon and Fall River County auditor Sue Gange said the Shannon County Commissioners had met the day before the phone interview for this story.
"The biggest issue they have is the land that is in trust. There is a lack of a tax base."
Of the 147,840 acres of federal lands – mostly national park – the county receives PILT for just 1,978 of them.
With 1,342,000 acres and only 14 percent taxable only 81 individuals are sent a bill for property taxes.
"We've had talks of opt-outs but how to you put additional taxes on those 81 people?"
Schools on reservations get "impact aid," Gange said, to make up for the lack of property taxes. "They are recognizing schools can't levy but they haven't gotten to the point of recognizing that a county can't levy."
May believes there is no easy solution but she would like to see the state return excess money to counties after budgeting is done, rather than spending it on added projects.
She said that the "balanced budget amendment" in South Dakota is misleading. "Everyone thinks we are a conservative state. We do balance the budget. There is always money leftover. And what happens to it? Do we send it to counties for tax relief? No, everyone fights over it for their own project ideas. That is wrong."
May said the state could be more frugal by saving that money for tough economic times like the state experienced in 2010.
Besides better management at the state level, May said the state needs to address the inability of the state to collect taxes from national parks, trust land and other federally managed lands.
Counties have been receiving PILT money for U.S. Forest Service and Bureau of Land Management land, but the payment is less per acre than property taxes on comparable private land in the county, said Jackson County auditor Vicki Wilson. "They (the federal government) have their own formula for figuring PILT. It is closer now to the tax rate but it is still less." Plus it can't be counted on, she said, and is often considered unnecessary in times of budget cuts at the federal level.
Unfunded mandates like the juvenile justice bill and the common core educational curriculum are adding to counties' financial woes.
"I've been asking for three years, who's going to pay for it? They've been using up the reserve. Well the jig is up. They don't have any more money. There isn't money to pay for it unless you have a big tax increase and in my district we can't do it," May said.
Jackson county's court expenses approximately tripled this last year due to the juvenile justice bill and criminal justice bill.
Shannon County has had to "wipe out of their budget" county assistance, court-appointed attorneys, and other things.
The commissioners stopped paying for mental illness costs but the bills haven't stopped coming. In total, $30,000 in unpaid bills from the state hospital are sitting in limbo.
According to the Rapid City Journal, the county-government study members suggested are representatives Kristin Conzet, R-Rapid City, Mary Duvall, R-Pierre, Dennis Feickert, D-Aberdeen; Leslie Heinemann, R-Flandreau; Joshua Klumb, R-Mount Vernon; Elizabeth May, R-Kyle; and Jim Schaefer, R-Kennebec; and senators Bob Ewing, R-Spearfish; Deb Peters, R-Hartford; Jim Peterson, D-Revillo; and Mike Vehle, R-Mitchell. Conzet and Ewing will serve as chair and vice chair.
Something like PILT money on reservation trust land would help round out the budget, Bauer said. "If the federal government wants to be wards of the state, they need to reimburse the county," he said. But he doesn't expect it to happen.
"If the county can't raise funds, they will have to cut services to make stuff work. If at some point there is a disaster, a flood or something, there will be a catastrophic breakdown for those counties that are really strapped," said Bauer.
"We see this thing coming. There is going to be a revolt," May said. "Why do we want to wait?"
May predicts a statewide sales tax will be approved soon. "You mark my word. I don't know how else they are going to pay for this."
According to Representative May there are no dates set yet for the public county-government study meetings. Tri-State Livestock News will provide meeting dates when we are made aware of them.