PIERRE, SD – ASBSD Executive Director issues the following statement regarding Gov. Rounds’ FY11 budget request.

The sluggish economic recovery challenges state policymakers with tight budgets and hard decisions, a combination that South Dakota school board members have unfortunately been facing for more than a decade. The proposed budget will make it even more difficult for school districts to maintain basic education programs in the face of rising costs.

South Dakotans strongly value public education and believe that K-12 education should be the top priority in the state budget. In order for the governor’s recommendations to stand, lawmakers will ultimately have to convince the public that education funding was frozen as an absolute last resort.

At first glance, it appears that the governor has proposed more than $50 million in new state spending while preserving nearly $75 million in state reserves and at the same time balancing the budget, in part, by forgoing legally required K-12 increases and shifting education spending to local property tax payers. We are encouraged that the proposal does support continuing a number of K-12 formula provisions, including aid for districts with fluctuating enrollment and funding for districts serving sparsely populated areas.

ASBSD will spend the coming weeks reviewing the governor’s entire proposed budget. We anticipate a healthy dialogue leading up to and during legislative session, and we intend to participate fully in the coming discussion.

In particular, we hope the administration shares the new information they’ve learned that caused them to reverse an argument made a year ago that changing the state aid funding formula is not permissible under the conditions of the American Recovery and Reinvestment Act.”

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Citing a slowly recovering economy and increased expenses from federally subsidized healthcare programs, Gov. Mike Rounds told lawmakers during his FY11 budget address that this year the state can’t afford to provide K-12 education with the legally required 1.2 percent per-student increase.

By forgoing the increase, which amounts to $57 per student, the state can save $4 million next year. The governor also plans to freeze property tax levies for FY11, a maneuver that will shift an additional $4 million from state expenses onto local property tax payers, bringing the state’s total cost-savings to $8 million.

The governor issued warnings regarding the health of the state in recent weeks, reportedly telling various groups that the state’s budget hole was as large as $170 million. During his budget address to lawmakers on Dec. 8, Gov. Rounds fleshed out the state’s economic picture.

According to Gov. Rounds, the state has a $16 million deficit in the current fiscal year (the year that ends June 30, 2010). The gap, created by a drop in state revenue, will be closed using money from a variety of cash accounts without using the state’s two reserves accounts.

Looking forward, the governor forecasts a slight economic recovery. State revenues are projected to increase $34 million in FY11, a 3 percent increase above FY10. Revenues will be bolstered next year by stronger sales tax projections and a rebound in contributions on interest earned from the state’s trust funds.

While revenues are believed to rebound next year, the governor’s budget still paints a bleak financial picture for the state. According to Gov. Rounds, “mandatory” expenses will grow more than $50 million next year and the state will have to use $32 million in reserves to balance the FY11 budget.

In his address to legislators, the governor also urged cautious spending in FY11 in order to lessen the impact of budgetary shortfalls in FY12; the year stimulus money is set to expire. According to his budget numbers, the state will have a $107 million budget gap in two years. The large gap will only exist, however, if the state’s economy does not recover further and lawmakers do not enact spending cuts.