SD governor proposes modest boost in spending

PIERRE, S.D. (AP) -- Gov. Dennis Daugaard on Tuesday proposed a $4.1 billion state budget plan to the Legislature that would include modest spending increases on schools, health care and public worker salaries but wouldn't make up for last year's deep spending cuts.

The Republican governor's plan calls for roughly 3 percent increases in spending on schools and universities, as well as hospitals, nursing homes and other facilities that provide medical services to the poor. The increases would more or less offset inflation, and education and health care officials have repeatedly said such hikes wouldn't come close to restoring 2011 funding cuts made to close a $127 million budget shortfall made worse by the most recent recession.

Daugaard said the final budget, which the GOP-controlled Legislature must pass before adjourning in March, has to be based on conservative revenue estimates and must ensure ongoing revenue is sufficient to cover ongoing spending. Any one-time money should only be used to pay for one-time expenses, he said.

The governor warned that problems could come from the lingering drought, the growing federal debt and uncertainty about what President Barack Obama and Congress will do to prevent automatic federal tax increases and spending cuts.

"Because of these uncertainties, I think we need to be conservative about committing to future new ongoing expense," Daugaard told lawmakers.

Daugaard's budget would authorize South Dakota to spend $4.1 billion in state, federal and other funds in the fiscal year that begins July 1, down slightly from this year because of the loss of some federal aid and decreased spending of state money designated for specific projects. The portion from state general tax funds would exceed $1.3 billion, which would represent a $95 million increase in ongoing spending.

It would leave $26.5 million uncommitted over the next two years, and most could go toward one-time expenditures such as those used in this year's budget to help offset some of the 2011 cuts. Next year's plan only includes the inflationary increases, so health care and education interests are expected to lobby for additional money.

Daugaard said he and lawmakers would decide together how to spend the uncommitted money. Funds available on a one-time basis should be used to eliminate state liabilities, build or improve long-term assets or create endowments that can provide money in the long term, he said.

House Democratic Leader Bernie Hunhoff of Yankton said the Republican governor's speech failed to address the state's top issue of adequately funding schools.

"I was hopeful with the rosy revenue estimates and hundreds of million in reserve funds, we could come up with a bipartisan approach to help the school districts catch up to some kind of normal level of funding," Hunhoff said.

Senate Republican Leader Russell Olson of Wentworth said many people will propose ideas for spending the uncommitted $26 million.

"I do promise you that out of that one-time money, there will be investments in education," Olson said. But he added such spending might not include state aid to school districts.

Sandy Arseneault, president of the South Dakota Education Association, said the teachers union is pleased that education funding is increasing again after the earlier cuts, but education groups need to come up with a long-term plan for funding public schools.

Under Daugaard's plan, state aid to school districts would rise by 3 percent next year under a state law that calls for that aid to increase each year by the rate of inflation up to a maximum of 3 percent. Reimbursements to hospitals, nursing homes and other facilities that provide services to poor people under the Medicaid program also would increase 3 percent, and the university system would get a 3.2 percent boost.

The governor proposed 3 percent pay hikes for state employees in July, with employees earning below the midpoint of salary ranges for their jobs getting an extra 3.5 percent.

Daugaard also proposed adding $16.5 million to the current year's state budget, including $7.9 million for the state employees' health insurance plan, $5 million to cover incentives offered to attract two companies to the state before voters in November rejected the law allowing such payments, and $2.6 million for a new state program aimed at reducing the prison population by treating more nonviolent convicts outside prison walls.

He said he also plans to submit a special spending measure that would authorize the use of $1.3 million in state funds, $23.6 million in federal money and $14.8 million in state bonding to build a new state veterans home in Hot Springs.

Other special spending bills would pay the state's share of fighting forest fires last summer, build facilities at the new Blood Run State Park, and finance efforts to curb the spread of mountain pine beetles in the Black Hills.

Daugaard devoted a big part of his speech to describing how federal budget problems could hurt South Dakota, either because programs end or the state has to spend more to offset lost federal funding. Federal spending eventually must be cut to deal with a growing deficit, which exceeded $1 trillion in the last federal fiscal year, he said.

"I don't want you to think I'm crazy when I say we've got to worry about this in the future. We do. We really have to worry about this," the governor said.

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