South Dakota Governor Rounds outlines budget proposal to legislature

PIERRE, S.D. – In the wake of the continuing recession and weak revenue collections, Gov. Mike Rounds has proposed a balanced state budget for Fiscal Year 2011 that funds essential services, takes care of other state needs and does not raise state taxes.

“My goal is to slow spending and allow revenues to recover,” he said.

“State finances have been responsibly handled in these difficult economic times of high unemployment and drastically increased demand for state assistance through a variety of health care programs, primarily Medicaid,” the Governor said. "Many families across the state are pinching their pennies to make ends meet, and state government also should do what it can to hold down spending," Gov. Rounds said.

Unemployment at its highest level since 1985 in South Dakota has led to a dramatic boost in the number of people seeking Medicaid services, and that is adding greatly to the state’s financial burden, he said.

Because state revenues have been weak, it’s also necessary to revise the current budget to fill a projected shortfall of nearly $16 million, Gov. Rounds said. That could be accomplished by a transfer of one-time revenues to fill the gap, he told a joint session of the South Dakota Legislature. This one-time use of existing cash would leave the state’s reserve funds untouched through the current fiscal year, the Governor said.

Although federal stimulus funds have been prudently used and expenses carefully managed to bridge the structural deficit – or shortage of ongoing revenues to meet ongoing expenses – that budgetary shortfall is expected to be $107 million by FY2012, the Governor warned. The state must do all it can to hold down expenses until the economy improves, he said, adding that federal stimulus funds will run out after next year.

“The weak national economy has made the annual challenge of balancing the budget more difficult than usual, but we have been able to put together a package that takes care of those who need help – the very young and the very old – protects the public, and provides other government services,” the Governor said.

The growth and increased use of federally-mandated Medicaid services, along with expiring federal stimulus funds and a larger state share of the cost of Medicaid, will cause a $52.2 million increase in ongoing state spending in just those areas for FY2011, he said. Other areas of the budget will be cut or see no increases, Gov. Rounds said in his annual budget address.

The state general fund budget has grown less than 1 percent annually for the last two years, he said.

“This year, we are cutting $573,000 from Executive Branch agencies and departments, the Legislature and Constitutional officers, and we are also cutting 102 FTEs,” Gov. Rounds said.

The Governor is proposing the use of $31.8 million from the Property Tax Relief Fund to balance next year’s budget. State reserves, in two accounts, have remained unchanged at $107 million for the past two years, he said. The state has been careful not to dip into reserves earlier because of the uncertain economy, he said.

The Governor’s FY2011 budget proposal, totaling slightly more than $4 billion, would use general tax revenues of $1.182 billion, $1.916 billion of federal funds and $968 million of other revenues sources.

Education and social programs, such as Medicaid, compromise about 85 percent of the general fund budget, the Governor said. While revenue collections have been virtually unchanged since July 2008, combined expenses just for the cost of the Medicaid program and education will have increased more than $100 million by July of 2011, he said.

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