Boomgarden braces school board for tight state budget

District 17 State Rep. Jamie Boomgarden of Chancellor could bring little holiday cheer to members of the Vermillion School Board at their meeting Monday at the Al Neuharth Media Center.

"The financial status has not improved a whole lot yet for the state of South Dakota," he said. "If you look at the fiscal year that we are in that goes until June 30 of next year, the state is expected to have to come up with another $15 million to cover expenses for this year. A lot of that has been attributed to increases in Medicaid and unemployment, as well as decreases in revenues from sales taxes, bank franchise taxes, insurance taxes and so on."

The current fiscal year's budget revenue includes $70 million of federal stimulus funding.

"In the next budget year, which still includes $70 million of stimulus dollars, the state still has to somewhere, in its budget, find $32 million, and that's where a lot of school boards and teachers, etc. are finding a bit of stress with being held at current (budget) levels next year," Boomgarden said.

With an election coming up, the state legislator said this year would be a time of lawmakers taking positions and standing firm on certain issues.

"This would be an easy year, because of the way the budget is set up, to take it as is, meaning we would just go with the stimulus money and take the $32 million from the state's general fund or reserves to cover that cost," he said. "However, if you look into the future, and tack another year onto the upcoming fiscal year, which is 18 months from now, the deficit is actually expected to be $107 million.

"We don't have the $70 million in stimulus money at that time, and we'll still have to borrow another $30 million from the reserve at that time, or find cuts," Boomgarden said. "So, you're going to have a lot of people who will want to see the cuts made now because they don't care about re-election – they are out there to be conservative, make the cuts, and live within our means – and then there's another group who will want to go along with the governor's budget because they will want to give him that support."

South Dakota cannot afford to boost aid to school districts or give state employees a pay raise next year because it is facing a budget crunch caused by declining tax revenues and higher costs in programs that help those hurt by the recession, Gov. Mike Rounds said in a speech to a joint session of the South Dakota Legislature Tuesday, Dec. 8.

Rounds proposed a $4 billion state budget that would increase spending of state general funds by only $52 million, with nearly all going to the federal-state Medicaid program that helps pay for health care for low-income people.

"This is going to be a very basic needs budget," Rounds said. "The emphasis during this budget will be on taking care of people."

The Republican governor's spending plan for the year beginning July 1 would hold general spending per pupil in the state's school districts at this year's level. Doctors, nursing homes and others who provide Medicaid services also would receive no inflationary increase.

And for the second straight year, state employees would get no pay raise.

The governor did not call for any layoffs of state employees. He wants to get rid of the equivalent of 102 full-time positions in state government, but he said those are mostly unfilled jobs.

Rounds proposed using nearly $32 million in reserves to balance next year's budget without any general tax increase.

"One of the problems South Dakota has – believe it or not – we are one of the few states that has increased personal wealth," Boomgarden told the school board Monday. "We have a lot of farmers, a lot of farm ground, a lot of real estate, and those values have gone up so much that we have a lot of wealth in this state compared to other states.

Personal wealth is a factor used at the federal level, he said, to determine the amount of federal dollars a state will receive.

"Because we have so much personal wealth, we get penalized on how much we get of federal Medicaid dollars," Boomgarden said. "It was supposed to be a $15 million hit, and it turned out to be $7.5 million. It's still $7.5 million less (in federal funding) that we will have to come up with to cover the budget that's coming before us."

He predicted there would be increased pressure in the upcoming legislative session in January to spend state reserve dollars to help balance the budget.

"The problem is that we're going to need those reserves in the future," Boomgarden said. "If we spend the reserves all of this year, whether it goes education, whether it goes to the adjustment training centers, whether it goes to the health care providers, the problem is that next session we would be $107 million in the hole and that alone could take care of the two main budget reserves that you usually hear talked about."

Those reserves include the governor's budget, which totals $40 million, and the property tax reduction fund, which is at $63 million.

"Do you want to use all of that money in 2012, or should we start making the cuts now? That's going to be the dilemma we're going to be facing," Boomgarden said.

The District 17 lawmaker told the Vermillion School Board that education never takes a back seat in his caucus group. He is hopeful that during the legislative session, as bills are passed and needed appropriations are earmarked, that out of the state's $3.6 million budget, there may be anywhere from $5 million to $17 million remaining that legislators will "be able to scrabble over."

The governor's proposal would require a change to the formula used to calculate state aid to education. Under the formula, per-pupil funding was to have gone up 1.2 percent in the 2011 budget, which starts July 1.

But faced with an exploding structural deficit that eventually could top $100 million, Rounds said Dec. 8 the state doesn't have the money to increase per-pupil funding next year. That funding was at about $4,800 per student this year.

The state would spend $3.4 million less on education under the governor's plan. There would be some increases in education, such as $2.7 million for technical schools and $2 million for more South Dakota Opportunity Scholarships, but that growth would be offset by reductions in other areas. By keeping per-pupil funding levels the same, the state would save $3.8 million.

Superintendent Mark Froke reminded Boomgarden that if general spending per pupil in 2010-11 stays at current levels, as the governor has proposed, "that puts us back due to the inflationary pressures we have to deal with. I think that it's important that we maintain existing law, however that can be done."

Froke was referring to the 1.2 percent increase in per-pupil funding that the school board was expecting for next year, which would have provided approximately $70,000 to the Vermillion School District.

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