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Aid uncertainty spurs S.D. budget concerns

PIERRE -- Uncertainty over what Congress will include in the federal stimulus package is complicating the process of passing a state budget, Gov. Mike Rounds said Thursday.

PIERRE -- Uncertainty over what Congress will include in the federal stimulus package is complicating the process of passing a state budget, Gov. Mike Rounds said Thursday.

The size of the stimulus package sometimes varies as much as $100 billion from day to day, and South Dakota's projected share of money also is uncertain, the governor said.

The Legislature is struggling to pass a budget, but lawmakers do not know how much federal money South Dakota will get or which programs would get that money, Rounds said in his weekly press conference.

The U.S. Senate Democratic Policy Committee says the Senate's version of the economic stimulus plan could mean more than $660 million in additional federal money over the next two years for South Dakota.

In any event, extra federal money likely will provide state budget breathing room for only a year or two, the governor said. The Legislature also must help make sure ongoing state tax collections cover ongoing spending in the long run, he said.

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The only way to fix the long-term problem is to increase revenue or slow down spending, Rounds said.

In recent years, Rounds and the Legislature have used reserves to balance the state budget, but the recession has cut tax revenue to the point that all remaining funds from the most accessible reserve account likely will be used in the next 18 months.

The governor's revised budget proposal says that once reserves are used, about $70 million in cuts and extra revenue will be needed to balance the budget for the rest of this fiscal year and the budget year that begins July 1.

Rounds said much of the stimulus package money South Dakota gets would pay for highway construction and water projects, which could be started quickly because they would be run through existing state programs.

The effects of other kinds of proposed aid are harder to calculate, the governor said. For example, if the federal government picks up more of the state-federal Medicaid program that covers medical expenses for poor people, the state might be required to spend more money in other areas, he said.

South Dakota would get some Medicaid assistance in some versions of the stimulus package, but not in others.

The stimulus measure also might provide extra federal money to increase benefits for jobless people, but that could require more state spending on unemployment benefits after the federal aid has ended, Rounds said. That would mean South Dakota businesses would have to agree to higher unemployment insurance tax rates before the state agrees to take the one-time federal money, he said.

If the stimulus package details are known early enough, the Legislature might be able to pass a state budget taking into account the extra federal money before the main run of the current session ends in March, Rounds said.

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But if questions remain, the Legislature might have to pass a state budget without taking the federal money into account. Lawmakers then could return in a special session to change the budget based on money received in the stimulus package, Rounds said.

"It's up in the air," he said, referring to prospects for a special legislative session.

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