Susan Smith, Community News Service

PIERRE – Gov. Mike Rounds says he has found how to make up for a $54 million budget shortfall for fiscal year 2004 and as he’s promised he’s not done it on the backs of state workers.

“Today we put the meat on – the muscle on,” Rounds told lawmakers in his budget address Jan. 16. Coming into the governor’s job Rounds faced the economic fallout of a year where two-thirds of the state was crippled by drought, the job growth rate was essentially zero and revenue continued its downward spiral. The state also experienced increased costs in Medicaid and corrections health care.

“I need your help,” Rounds said. “None of us can do it alone.”

He offered a road map he plans to use to bring the budget under control.

By reducing state employee pay periods from 26 to 24 per year he’ll eliminate a 27th period that comes around every 11 years, knocking $3.5 million from a list of expenditures Janklow gave state lawmakers in December 2002.

A transfer of $15 million from the Petroleum Release Compensation Fund to the highway trust fund to cover state matches of federal dollars wasn’t needed. Rounds said he wants lawmakers to approve transferring that money back to the petroleum fund and then to the general fund. The one time money will add $15 million to Rounds’ budget.

He wants the Legislature to increase taxes on tobacco and alcohol, which will amount to a 30-cent per pack increase for smokers and a 54 percent increase on the cost liquor manufacturers charge wholesale distributors.

The liquor tax was last raised in 1987. Two-thirds of the membership in both houses of the Legislature will have to approve the increase. Rounds thinks together those will generate $18.5 million.

Currently cell phone users are charged sales tax on calls going in and out of the state, but land lines aren’t.

Rounds wants to change that. He would charge sales tax on calls originating in South Dakota or that come into the state but are billed to someone who lives in the state. His proposed tax would bring $4 million to the state budget.

He also will revise fees charged by the Secretary of State’s Office to net $700,000.

Rounds told lawmakers he thinks that his proposals will eliminate the $54 million deficit and bring in an extra $441,941.

He cut $12.6 million from budget requests, but then added in $15.9 million in “priority spending.”

Rounds wants $15.1 million for education this year and that’s figured into his budget projections. He also wants to give more money to medical service providers and higher education.

He hopes his proposed budget means reserves don’t have to be used this year.

Currently the state has $115 million in savings. Rounds also found money for fiscal year 2003 that he thinks will mean less has to be taken out of reserves to balance this year’s budget.

A $19 million estate tax windfall will help.

The shortfall was projected at $36 million for fiscal year 2003, but Rounds said now it will be closer to $21 million. Health care costs were higher than projected, which eats up some of the estate tax money.

At the end of fiscal year 2004, he expects the state to still have $95 million in the reserve fund if the Legislature goes along with all of his proposals.

“I think that it’s important that we try not to use reserves if we don’t have to,” he said. “We don’t know how much worse it will get next year.”