Governor proposes cut in state aid to schools

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Gov. Mike Rounds shakes hands with Lt. Gov.-elect Matt Michels, while South Dakota Supreme Court Justice David Gilbertson looks on after Rounds’ budget address Tuesday at the Capitol in Pierre. Rounds laid out his plan for the 2012 fiscal year. (Chris Huber/Republic Photo)

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• Photo gallery: Gov. Mike Rounds budget address
• Legislators await Daugaard budget

PIERRE — Gov. Mike Rounds proposed Tuesday that state aid to school districts be cut by 5 percent next year, a move South Dakota education groups quickly urged state lawmakers to reject because they said it could hurt the quality of education.

After Rounds delivered his budget address to a joint session of the House and Senate, Associated School Boards Executive Director Wayne Lueders said the proposal would reduce funding to the same level as four years ago. School districts would have trouble maintaining programs, teachers and other staff at current levels, he said.

“It’s going to hurt school districts,” Lueders said.

The state’s main teachers’ union, the South Dakota Education Association, and the South Dakota Coalition of Schools, which includes more than half the state’s school districts, also said they hoped the Legislature and Gov.-elect Dennis Daugaard will reject the Rounds’ recommendation.

Some lawmakers said Rounds’ proposal could force communities to boost their property taxes to offset the reduction in state aid.

In his 65-minute speech, the Republican governor proposed 5 percent cuts in state school aid and the payments given to doctors, nursing homes and others who provide services in the Medicaid program that cover health care for low-income people. He said the cuts are necessary to help balance next year’s budget as state tax revenues grow only slowly.

Rounds also proposed that state employees get no inflationary pay raise for the third straight year, and asked lawmakers to use about half of state government’s reserve funds to make it through the rest of the current budget year and the next year.

Daugaard said he will put forward a revised budget after the Legislature convenes in January, but that he is likely to support most of the spending cuts in Rounds’ proposal because they are necessary to close the budget gap.

“I think it represents a very good start,” Daugaard said. “It certainly has some painful choices, but we can’t spend money we’re not receiving.”

The governor’s proposed budget would spend a little less than $4.1 billion in state, federal and other funds in the budget year that begins July 1, down slightly from the current year. Spending of state general tax funds would be about $1.2 billion, up about $31.5 million — mostly because of social programs.

Rounds said even though he is proposing a cut in payment rates, the state’s total Medicaid spending will increase because more people are qualifying and the federal government is requiring the state to pay a larger share of the program.

Rounds said the state must deal with its budget problems next year because the federal stimulus money that has helped balance the ledger in the past three years will end.

“It will be a very basicneeds budget,” Rounds told lawmakers. “An unpredictable economic recovery is still with us.”

South Dakota school districts are financed with a combination of state aid and local property taxes. State law provides that state aid will increase each year by the rate of inflation, up to 3 percent. That would provide for an inflationary increase of 1.3 percent next year, but Rounds is proposing that the Legislature pass a law to reduce school aid.

In March, the Legislature froze state aid to schools this year at last year’s level. Rounds said his proposal would save $23.5 million by cutting base state aid from the current $4,804 per student to $4,564 next year.

Rounds said he believes school districts can handle a cut in state aid because they have increased their reserve funds in recent years.

“They have saved some money, recognizing at the national level there are some challenging times,” Rounds said.

But Gayville-Volin Superintendent Jason Selchert, president of the Coalition of Schools, said he hopes the Legislature looks at other programs to cut.

“Balancing the budget on the back of students to fund state government will be no way to start a Daugaard administration,” Selchert said.

House Democratic Leader Bernie Hunhoff of Yankton said he worries that communities would have to boost property taxes to make up for a cut in state aid.

“Somebody has to educate the 120,000 students they have in the schools,” he said.

Senate Republican Leader Russell Olson of Madison said Rounds’ proposal is just the starting point in a process that will lead to legislative approval of a budget in March.

The South Dakota State Medical Association urged the Legislature not to cut Medicaid reimbursements. Most doctors report that current payments do not cover their expenses, and many would reduce the number of Medicaid patients they see if reimbursement levels drop, the association said.

Rounds said ongoing state revenue is expected to fall about $75 million short of ongoing spending next year. After using $37 million from the final stimulus measure and another $1 million from a one-time source, the state could balance the budget using $37 million in reserves, he said.

The Interim Appropriations Committee met Tuesday shortly after the governor gives his budget outline.

The Joint Appropriations Committee in the 2011 legislative session will use the governor’s proposal as a starting point to draw up a state budget.

The committee is cochaired by Sen. Jean Hunhoff of Yankton and Rep. Larry Tidemann of Brookings. Both are Republicans.

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