The main run of the 100th Legislative Session concluded Thursday, March 13, with the passage of Senate Bill 220, the budget for South Dakota Fiscal Year 2026. The total budget is about 7.3 billion dollars which includes 3.1 billion dollars in Federal funds. Funding for South Dakota Public Broadcasting and the State Library was kept intact despite proposed cuts by the previous executive branch.

Education, State Employees and Health Care providers are commonly referred to as “The Big Three”. These groups received a 1.25 percent increase in funding. SB 6 provides an interest free loan to one school district that adjoins a Federal military installation for construction of expansion from the South Dakota Housing Infrastructure Fund. There are great concerns about setting the precedent for funding going to one school district through legislation; the school already received a high amount of Impact Aid and substantial state aid from a growing number of students. Similar legislation was defeated last year but passed this year. Twenty-eight members of the House voted against SB 6 but only two members of the Senate including myself voted against passage of SB 6.

SB 70 increases sparsity payments to about 12 schools in the state. Sparsity payments go to school districts that are sparsely populated. The amounts have remained the same. I didn’t feel a tight budget year is the year to increase those payments to a few select school districts when education as a whole is getting 1.25 percent this year. I voted against SB 70 which passed the Senate, 27 to 8. There were a number of other bills like these that made up the budget as a whole.

Overall, I think the 2026 budget is doing good things within the requirement by the Constitution to be balanced. I voted in favor of the budget; SB 220 passed the Senate, 34 to 1.

I was the Senate Prime Sponsor for HB 1245 which exempts guaranteed payments to partners from South Dakota Sales Tax. These payments are for services people provide to a partnership they are a partner in. There are a number of partnerships in District 19 that utilize these payments and many more across the state. These services have not typically been subject to taxation in the past but some questions arose recently if they would be since they are not specifically exempt in state law which made the bill necessary. Taxing these services would be the equivalent of an income tax since guaranteed payments flow through partners on a K-1 reported for income tax purposes. The State CPA Society rarely takes a position on state tax policy but they were in support of the bill. It was important to prevent business owners across the state from getting hit with new taxes if interpretations of existing law change. The bill received one ‘no’ vote in the Senate and five ‘no’ votes in the House showing that there are at least a few legislators who aren’t completely opposed to the equivalent of a state income tax. Governor Rhoden signed the bill and included it with a group of other “economic opportunity” bills which were signed into law.

Veto Day will be held Monday, March 31, to take up any bills that may be vetoed by the Governor. If there are any vetoes, I will discuss those and provide further recaps of session in the next article.

I can be contacted at 605-660-6468 or kyle.schoenfish@sdlegislature.gov