SD gov. expected to propose modest spending boost

PIERRE, S.D. (AP) — Gov. Dennis Daugaard likely will propose a state budget that provides only modest spending increases for education, health care and other top priorities, South Dakota legislative leaders said Monday.

Daugaard has said in recent months that state revenues aren’t growing fast enough to boost state aid to schools much beyond the inflationary increase required by law. Hospitals, nursing homes and other health care operations that provide services to Medicaid patients usually get the same increase as school districts.

The Republican governor will unveil his spending plans for the year beginning July 1 in a speech to the Legislature on Tuesday in Pierre.

Senate Republican Leader Tim Rave of Baltic said he expects Daugaard to propose a conservative budget in light of uncertain tax receipts and a possible hit to the economy after an early fall blizzard that killed tens of thousands of cattle in western South Dakota.

“I certainly haven’t seen or heard anything that’s going to be a real surprise,” Rave said.

But Rep. Bernie Hunhoff of Yankton, leader of the House’s minority Democrats, said schools and health care providers need more money from the state. Lawmakers from both parties will seek extra funds for such priorities when the 2014 legislative session opens in January, he said.

“The status quo just isn’t good enough,” Hunhoff said.

State law requires that aid to school districts increase each year by the level of inflation, up to 3 percent. That would require a 1.6 percent increase in state aid next year. In some years, the Legislature has given schools extra money, but there was no increase in 2010 and aid was cut in 2011, when the sluggish economy limited tax collections.

A legislative study committee has recommended that school aid next year be raised by 3.8 percent to provide $4,805 per student, the amount schools received before the 2011 cut.

Rave noted that budget decisions will be influenced by a recent announcement that unclaimed property receipts have provided an extra $70 million in unexpected revenue to the state treasury this year. He said he’s interested in how Daugaard will propose using that $70 million.

“That’s just a good starting point for discussion for all of us,” Rave said.

Unclaimed property includes account balances and other items of value that banks, businesses, governments and other institutions must turn over to the state where they reside when the owner cannot be found.

The state expected about $53 million but took in almost $122 million. That’s because the Legislature changed the law so unclaimed property must be turned in to the state after only three years of inactivity, instead of the previous five years. And two large banks located their home offices to South Dakota.

In his budget speech, Daugaard also is expected to recommend that South Dakota not expand the state’s Medicaid program to cover the health care costs of more low-income people, at least not for now. The federal health care law gives states the option of expanding the Medicaid program, and officials have said an expansion would add 48,000 South Dakotans to the program.

Daugaard has said he’s leaning against expanding Medicaid, at least until he can obtain more information on who would be covered. He also is uncertain whether the federal government can meet its pledge to pay most of the costs of expanding Medicaid.

Hunhoff said he believes many Democratic and Republican lawmakers will consider expanding Medicaid because the federal government would cover all the extra costs through 2016 and the state’s contribution would rise in stages to 10 percent of the medical costs by 2020.

Expanding Medicaid would not only improve health care for those added to the program, but also would help small hospitals, Hunhoff said.

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