The U.S. House approved a $26 billion spending package Tuesday that could bring up to $49 million to South Dakota.
It could also bring less than half of that, depending on whether Gov. Mike Rounds decides to accept all of the money.
Rounds said Tuesday that the bill approved by the House and previously passed by the U.S. Senate will bring $21 million to $23 million to South Dakota in federal assistance for the state’s growing Medicaid burden. But another $26 million in education-jobs funding is a more difficult question, Rounds said.
That stimulus money could come with stipulations, possibly including a requirement that the state and local property taxpayers add more money to the school-aid formula. That would be a problem, Rounds said.
“We’d like to use the $26 million. But if it means we need to raise local property taxes to go along with it, I don’t think we’d go along with that,” he said.
The rules should be clarified in coming weeks, so the state can decide on the education funding, Rounds said. Meanwhile, Brian Aust of the Associated School Boards of South Dakota said it would be a mistake to presume that complications will prevent the state from using the much-needed education aid.
There is some question whether property taxpayers would have to match the federal money at the local level if the general state school aid formula is used, Aust said. And there are other options – including a federal education grant program – that could send the money to local schools directly, he said.
“At this point, I think it’s a mistake to rush to judgment on this,” he said.
There don’t seem to be any such complications with Medicaid assistance, which Rounds expects the state to get. He was one of 47 governors who asked earlier this year for more assistance from the federal government to face heavier burdens from increased Medicaid case loads brought by the recession. Additional federal funds for Medicaid could free up state funds for other needs, including meeting federal disaster-assistance funding tied to extreme weather events in South Dakota, the governor said.
“It could help us by saving (state) general funds for the emergency match,” he said.
The benefits of the House bill and the fact that it is being paid for by certain cuts and a tax increase on some multi-national corporations convinced Rep. Stephanie Herseth Sandlin, D-S.D., to support it. Herseth Sandlin said that unlike a similar package she had previously opposed, this legislation pays for itself and is predicted to lower than national deficit over time. Benefits to medical services and education are obvious, she said in a news release.
“This is about doing the right thing for South Dakota’s children and seniors, and the bill won’t add a dime to the deficit,” Herseth Sandlin said. “It will preserve access to critical health care for seniors and can help avoid severe cuts in education for our state’s children.”
The overall package approved by the House is worth $26 billion -- $16 billion in Medicaid assistance to the states and $10 billion more in education-job preservation funds. Unlike many of the previous spending plans through the federal stimulus package, this one is designed to pay for itself. Herseth Sandlin calls the increased tax on some corporations “closing a tax loophole that rewards companies for shipping American jobs overseas.” The Congressional Budget Office has determined that the bill will help reduce the national debt over time, she said.
Herseth Sandlin and her staff have been talking to medical providers and others in South Dakota about the benefits of the money. The South Dakota Association of Healthcare Organizations and the hospitals, nursing homes and home health agencies it represents supported the aid package and urged Herseth Sandlin to vote for it. Additional funds are essential as states try to meet growing Medicaid needs in tight budget, association senior vice president Ken Senger said.
“Medicaid continues to grow as the economy struggles,” he said. “State support is more and more threatened. And your concern is that the state will back off on its support” without additional federal funding.”
Herseth Sandlin’s Republican opponent, state Rep. Kristi Noem, would not have supported the package approved Tuesday, campaign manager Josh Shields said.
“She would have opposed it,” Shields said in an e-mail. “It’s another bailout paid for by tax increases and re-labeling stimulus bill funding among a few other items. It also prohibits states from responsible budgeting.”
As a state legislator, Noem joined the majority in voting to use about $250 million in federal stimulus money to plug holes in three consecutive budgets. That allowed the state to avoid a number of previously discussed program and staff cuts.
House Speaker Nancy Pelosi called members back from their August recess to vote on the legislation Tuesday, after the Senate approved its version last week.
Both types of federal aid included in the legislation would have to be used during the current state budget year, fiscal year 2011, which began July 1 and ends next June 30. The money could help balance an expected structural deficit – where spending is expected to be more than revenues -- once estimated at about $100 million for the fiscal year 2012 budget, which begins on July 1, 2011.
The federal funds could free up money that is already part of the budget. How the additional federal funds would be used isn’t entirely clear, state budget director Jason Dilges said.
“If properly managed, I believe that we could use at least the Medicaid money to help with part of the deficit,” Dilges said. “However, since it’s only one-time, it would not do anything to improve the structural deficit.”
South Dakota’s two U.S. senators split their votes when the Senate approved the package last week. Sen. Tim Johnson, D-S.D., was one of 61 senators to vote in favor of the package last week. Sen. John Thune, R-S.D., joined those opposing it.
The money will help South Dakota, even though it is in better shape than some states, Johnson said.
“Fortunately, South Dakota is not experiencing the high levels of unemployment and budget shortfalls that other states are suffering but (the funding) will certainly benefit the 2011 budget,” he said.
Thune said he understands the short-term benefits but worries about raising taxes for the affected corporations and continuing to borrow money against the future.
“That does relieve some fiscal pressure on the state, but to me it allows a lot of these states to put off the hard decisions until down the road and they become increasingly addicted to federal money,” Thune said.
Thune said four Republican U.S. senators who previously served as governors – Mike Johanns of Nebraska, Jim Risch of Idaho, George Voinovich of Ohio and Kit Bond of Missouri – have urged other Republican senators not to support the additional spending.
“They said it’s the worst thing you can do for the states,” Thune said.
Contact Kevin Woster at 394-8413 or firstname.lastname@example.org