The Senate Taxation Committee split Friday on competing property tax proposals, advancing one bill to create a homeowner tax relief fund and shelving another that would have committed the state to at least $100 million a year.
The losing measure depended on the scheduled end of the state’s 4.2 percent sales tax rate in 2027.
The committee voted unanimously to send Senate Bill 125 to the Senate floor. The bill establishes a homeowner tax reduction fund designed to hold future property tax relief dollars but does not dedicate any revenue to the fund.
Sen. Randy Deibert, R-Spearfish, the bill’s prime sponsor, described the measure as a foundational step.
“This bill represents the first step toward meaningful and long-term property tax relief for South Dakota homeowners,” Deibert said.
Supporters said the fund would be protected from being swept into the general fund under the bill language, allowing lawmakers to clearly track dollars intended for property tax relief.
Nathan Sanderson, executive director of the South Dakota Retailers Association, told the committee the approach allows legislators to separate policy decisions.
“You create a bucket. Step two would be put money in the bucket. And step three would be figure out how to distribute the bucket,” Sanderson said.
The committee later took up Senate Bill 118, sponsored by Sen. Casey Crabtree, R-Madison. That bill would have required the state to deposit at least 100 million dollars annually into the homeowner tax reduction fund beginning in fiscal year 2028, using sales and use tax revenues that are now part of the temporary 4.2 percent sales tax reduction.
“This proposal turns a temporary sales tax cut into permanent property tax relief,” Crabtree said.
The Governor’s Office opposed the bill, warning that committing future legislatures to automatic funding could limit budget flexibility.
Steven Kohler, deputy commissioner of the Bureau of Finance and Management, told the committee the measure would reduce lawmakers’ ability to respond to changing fiscal conditions.
“Setting certain funding two fiscal years from now to be automatic, regardless what the future holds, reduces this body’s ability to be responsive,” Kohler said.
After extended discussion, the committee rejected a do-pass motion on SB118, then voted to send the bill to the Legislature’s 41st day, effectively killing it for the session.
SB125 now advances to the full Senate for further consideration.
