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Governor won't yet reveal his plan for school funding; Medicaid consolidation planned

PIERRE -- His predecessor proposed a 5 percent cut in general-education funding to South Dakota's public school districts. The Associated School Boards of South Dakota's leadership is telling members to brace for possibly a 10 percent reduction, based on rumors from legislators.

But what Gov. Dennis Daugaard has in mind remained a public mystery Tuesday, even after his first speech to the Legislature.

Daugaard didn't touch the question in his State of the State address, and he refused to tip his hand to reporters afterward. Instead, he told them the answer will come next week, when he delivers his budget recommendations to the Legislature on Jan. 19.

"I'll talk about it then," he said.

His remarks to the Legislature only provided more fuel for speculation.

He said the agencies under the control of the governor will be cut "at least 10 percent" but didn't clarify whether that standard applies to services such as Medicaid and to state support for K-12 schools, state universities and technical institutes.

He also said his proposal will eliminate state government's structural deficit -- the gap between ongoing revenues and ongoing spending -- which former Gov. Mike Rounds estimated would be about $75 million for the general fund in the coming budget.

Daugaard said he wants the budget balanced without raising taxes, without using one-time funds for ongoing purposes, and without tapping reserves except for "unexpected needs."

Daugaard wasn't completely silent on education issues Tuesday. He repeated his campaign promises to sponsor legislation that removes the 100-student minimum for school districts to operate, and removes the cap on the amounts of reserve funds that school districts can hold.

He also said he'll sponsor legislation to increase the bonding capacity for technical institutes so they can expand campuses and add programs.

Beyond the 10 percent cuts in agency budgets, Daugaard called for a study of state government's travel spending and travel fleets, including highway vehicles and aircraft. The state Department of Transportation will conduct the analysis.

He said one idea under consideration is reducing the government's number of passenger vehicles and compensating state employees to use their personal vehicles instead for business travel.

As part of his reorganization of state government, Daugaard plans to shift three major divisions all heavily funded through Medicaid, including the state mental hospital at Yankton, to the state Department of Social Services from the state Department of Human Services.

State government typically pays about 30 to 40 percent of Medicaid costs, depending on the year and the specific program, with the rest coming from the federal government. Social Services is the main agency that deals with Medicaid.

Medicaid is the largest single cost to state government and has consumed a growing percentage of state revenue, while education funding has received a decreasing percentage, during the past decade.

"I am hopeful that this realignment will allow Social Services to work with these agencies to find efficiencies and save Medicaid dollars," Daugaard said. Last month, then-Gov. Rounds proposed a 5 percent reduction in state payments to providers of government health-care and related services to the needy.

Rounds proposed the 5 percent cuts for provider payments and K-12 general-education funding as steps toward closing the budget deficit.

Daugaard said he supports the fight against the health-coverage changes passed by Congress and President Barack Obama. Daugaard said he agrees with the decision by former Gov. Rounds and state Attorney General Marty Jackley to challenge the law, and he backs attempts in Congress to repeal it or reform its worst provisions.

"Over 90 percent of South Dakotans have health insurance. Here, our most serious problem is cost. Yet the federal law focuses almost entirely on getting coverage for the few without insurance and does little to control rising costs for the many insured. This is a law that doesn't make sense for South Dakota," Daugaard said.

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