State Senate advances higher cap on insurance company donations to private school scholarships

A bill that would increase tax credits available to insurance companies for helping low-income students attend private school took its next legislative step Tuesday at the Capitol in Pierre, passing the Senate on a 25-7 vote.

The legislation would raise the tax credit cap available to insurance companies from $3.5 million to $5 million. The tax credits are one-to-one for every dollar donated toward scholarships.

Students must meet the state’s free and reduced lunch program requirements to qualify for the scholarship program. Each student receives about $2,000 per year, according to the bill’s prime sponsor, Sen. Jim Stalzer, R-Sioux Falls.

“This bill is a win for everyone,” Stalzer told fellow members of the Senate, saying the bill “keeps my taxes low” while giving low-income parents a choice in their kids’ education.

Private schools are responsible for ensuring students meet the requirements, according to Senate President Pro Tempore Lee Schoenbeck, R-Watertown, who has supported the program since its inception in 2016. At the time, the tax credit cap was $2 million, and insurance companies earned 80% back for every dollar donated.

Sen. Herman Otten, R-Tea, said a $3.5 million cap is more than enough.

“Where does it stop?” Otten asked.

He said that as public schools lose out on state funding, they’ll seek higher local property taxes to make up the gap.

Sen. Reynold Nesiba, D-Sioux Falls, shared similar concerns.

“We want the best public schools in the country, don’t we?” Nesiba said. “I want a system that’s so good that kids don’t feel like they need to go anywhere else. And taking $5 million out of the general fund is not going to improve public education in South Dakota, and that’s the system we’re all responsible for.”

The names of the insurance companies and how much they are donating is confidential tax information, according to the Department of Labor and Regulation.

The bill now heads to the House of Representatives.

This article originally appeared on Sioux Falls Argus Leader: Higher cap on insurance donations to private school scholarships advances