Anyone who watched Gov. Mike Rounds' annual budget speech Tuesday may have noticed the governor seemed less optimistic than usual.
Rounds, who we generally consider a glass-half-full governor, seemed to struggle in the opening stages, almost as if he had bad news for the Legislature seated before him.
Turns out, he did.
When it comes to the next budget for South Dakota, the governor is taking a cautious approach. An economic slowdown has caused some belt-tightening, he said.
If the governor's proposed budget is approved, annual raises to state employees will be 2.5 percent, down a fraction from the usual 3 percent. And in what likely will draw the most ire, the governor said the bump in money that will go to the state's schools also will be limited to 2.5 percent.
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The reasons? Higher gasoline prices, rising interest rates and a dipping economy, among other things. The governor is worried that people have less money to spend on items that are subject to state sales taxes, the main revenue source for the state.
When it comes to raises for state employees and the aid to schools, we would like to see both increased to a flat 3 percent. We expect that once the Legislature tinkers with the budget during the coming session, one or both likely will be given a bump.
We can't say we're surprised at the less-than-optimistic budget. Although revenue from state taxes is expected to show a 6.4 percent increase this year, that's a misleading figure, since part of that rise can be attributed to increases in South Dakota's cigarette tax. Since the idea behind the tax is to get more people off tobacco, it's not a rock-solid increase that can be counted on in the coming years. As more people kick the habit -- or buy their cigarettes in nearby states -- the tax benefit to the state will steadily decrease.
And other financial worries are evident. South Dakota's Department of Transportation, for instance, is in financial shambles.
The governor said growth for the next budget year is projected at 3.8 percent and that's the reason behind his conservatism. And as for the increase to schools, we aren't surprised at the 2.5 percent figure. Rounds has publicly shown his disappointment that more than 70 schools are backing a lawsuit against the state for more funding. Right or wrong, perhaps his figures are a reminder to those schools that they aren't legally entitled to anything more. Also, he knows the education funding issue may be settled soon enough, in court.
Again, it's important to note that Rounds' speech Tuesday only outlined his proposed budget. There will be much restructuring in the coming months. But we tend to agree with the governor that at the moment, South Dakota's financial glass is not half full.
