Gov. Mike Rounds asks South Dakota state agencies to consider proposing budget cuts

Governor asks SD state agencies to consider cuts

PIERRE, S.D. — Gov. Mike Rounds has asked state agencies in South Dakota to consider requesting budgets for next year that are 10 percent below the amount they are authorized to spend this year.

Jason Dilges, the governor’s budget director, said the state will get a lot less federal stimulus money in the budget year beginning next July and state tax collections are unlikely to recover enough to cover ongoing spending.

“I think that behooves us to be proactive in this so that if things don’t recover as hoped, we’ll at least have a contingency plan, meaning the next governor and the next Legislature will have that contingency plan,” Dilges said.

Rounds, who is term-limited, will consider the agencies’ suggested cuts when he proposes a state budget in December. The next governor, who takes office in January, could decide to modify Rounds’ spending plan or start the budget process from scratch.

Dilges said state agencies under the governor’s control, other elected officials’ offices and the judiciary and Legislature were asked to propose spending cuts. They were not requested to propose across-the-board cuts, but instead were asked to look for programs they could streamline or do away with while still providing necessary services, he said.

“I’m just speculating here, but I don’t think you’ll see every department be reduced. I think you’ll see some that may and some that may not,” Dilges said. “I think it depends on putting the puzzle together that’s the appropriate mix of services and reductions to services and ensuring that we’re doing what we need to do to make sure that South Dakotans get what they need out of state government.”

Sen. Jean Hunhoff, R-Yankton, chair of the Senate Appropriations Committee, said she likes the governor’s plan because it will provide a more thorough analysis of possible cuts before the legislative session starts in January. If cuts are first proposed during a legislative session, lawmakers do not have enough time to find out the impacts of those cuts, she said.

“This just gives us a head start,” Hunhoff said.

Hunhoff said if the state’s financial situation improves by early next year, lawmakers will find it easier to add money instead of making last-minute cuts to the budget.

“We know there’s going to be a shortfall. I think the clamor we’re hearing across the country as well as within our state is we’ve got to make sure the spending we do is prioritized on the projects,” Hunhoff said.

The Legislature this year balanced the general fund portion of the budget by using $76.5 million in federal stimulus funds, cutting some spending and making some one-time transfers of money. The budget, which spends more than $1.1 billion, also did not increase state aid to school districts, and state employees for the second straight year got no pay raise.

Dilges said South Dakota law, which ties state education aid to the inflation rate, would boost state aid to schools by 1.3 percent next year, but the 2011 Legislature will decide whether to give schools more or less than that.

Tom Dravland, the governor’s chief of staff, said it’s impossible to say whether state employees will have to go a third year without a pay raise. “I don’t know where that will shake out,” he said.

Dilges and Dravland said the state will have $47 million in federal stimulus money to help balance its budget next year, but that’s less than the $76.5 million in stimulus money in this year’s budget. The state’s share of spending on the state-federal Medicaid program also will rise, and the state needs to spend $13 million or more to replenish disaster funds that have been used to deal with blizzards, floods and tornadoes.

Dilges said state tax collections are not growing much so far this year. Receipts from the sales tax, the state’s largest source of general revenue, are about the same as last year.

However, it’s too early to predict how big the budget gap will be in the year that begins next July, Dilges said.

Dravland said the governor’s staff has met so far with about half the state agencies to discuss their spending requests. The staff will eventually discuss those requests with the governor as he puts together his budget proposal, he said.

“Its too premature to say how it’s going to shake out,” Dravland said.