South Dakota Bill Allowing Insurance Tax Credits for Scholarships Signed

By James Nord | March 28, 2016

South Dakota insurance companies would get tax credits for donating to private school scholarships under a measure Gov. Dennis Daugaard signed into law, providing the financial backing for a school choice program that supporters say gives parents an opportunity to be more active in the education of their children.

The measure was one of more than a dozen of the final bills that Daugaard acted on before lawmakers return to Pierre next week for the last day of the 2016 session. They’re set to consider the governor’s three outright vetoes and to weigh style-and-form vetoes of two other measures.

Backers of the new school choice law cheered the Republican governor’s decision.

“I’ve got such a great sense of gratitude,” said GOP Sen. Phyllis Heineman, a main sponsor of the bill. “Now, we’ve got to make the program a success.”

With Daugaard’s signature, South Dakota joins more than a dozen states that have tax credit school choice laws.

Insurance companies can get an 80 percent tax credit for total contributions to a grant organization that would provide the scholarships. The total amount of credits is capped at $2 million each budget year.

Heineman has said the tax credits are aimed at businesses that pay an insurance company tax because it is a stable source of revenue that shows consistent growth. She said work now shifts to setting up a scholarship granting organization and contacting insurance companies with the goal of having scholarships available for the upcoming school year.

Students under the South Dakota program will be eligible for the scholarships if their families the year before made up to 150 percent of the income standard used to qualify for free or reduced-price lunch, among other conditions.

But public education advocates opposed the measure, saying that the state has an obligation to provide public education and that the measure could unconstitutionally direct public funds to religious schools.

Critics also worry that it could lay the groundwork for a larger program that would siphon a significant number of students and support from public schools in the future.

“Who’s next in line to ask for a tax credit?” said Rob Monson, executive director at School Administrators of South Dakota.

The governor vetoed a plan that would have offered tax incentives to put in buffer strips between cropland and waterways. Both legislative chambers had approved the measure with margins that suggest the veto could be overridden.

The bill would allow farmland along a lake, river or stream that has been turned into a 50-foot buffer strip of vegetation to be classified as non-cropland for property tax purposes, which would mean a lower tax burden for those landowners.

Buffers help trap fertilizers, pesticides and sediments before they reach a waterway.

Daugaard said in his veto message that he’s concerned in part that it’s unconstitutional and that it would shift the property tax burden from people taking advantage of the plan onto other property owners.

“I would hope that everybody maintains the vote they had the first time,” said Democratic Sen. Jason Frerichs, a supporter of the bill. “I’m very confident.”

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