Fiscal Year 2006 Budget Address (Continued)

CONTINUED

Also included in this, for the technical schools we call it the postsecondary institutes, of $423,000. Traditionally, we have sent money back to the technical schools across South Dakota. I would continue this and the technical schools will receive about $423,000.

The Ph.D. Program is part of the Board of Regents plan, and I support this. This is where-we want to keep our young people in South Dakota. Today, we don't have Ph.D. programs for many students who want to continue their education and they go out of state. The problem is once they go out of state they also find jobs out of state, they find family opportunities out of state, and they live elsewhere. They don't come back into South Dakota and add to our economy.

What I would like to do is to allow the Board of Regents to follow through with what I believe is a good, solid economic development plan and create some Ph.D. programs within our universities. The cost for that is almost $1.7 million in general funds.

And, finally, the Board of Regents has requested an increase for the cost of their utilities across their different institutions of $647,000.

Now, there are also some reductions that we have found within state government for the education part of our budget. It's about $1.4 million in reductions due to the following.

First, we're going to save about $2 million in technology costs by using e-rate. We anticipate we will receive about $2 million in what we call e-rate money, which will be disbursed from the federal government and we anticipate receiving that in this coming year. Therefore, we can replace the general funds with federal funds with the e-rate dollars.
We also will have a decrease of $500,000 from the elimination of the South Dakota Reads budget. The reason is not because we're eliminating or ignoring an important part of our children's education but because we've found a way to replace South Dakota Reads by a plan that will be funded through a federal grant called Reading First. And, in using that, we will use separate funds to take care of the new program, Reading First, thus eliminating the South Dakota Reads out of the general funds part of our budget.

I'd also like to point out that in this part of the budget I am offering to, and I believe we should, add $500,000 into the Education Department's budget for the extension of the education service agencies, which are the co-op locations that serve small schools around the state. This was your idea last year, and you funded it out of the Education Enhancement dollars. I believe it's important, and I think you did the right thing, so rather than asking you to once again take it out of your discretionary funds which we'll talk about in a minute, I would propose to fund that as a line item in the general bill to the tune of $500,000 this year.

Also, we believe we have a historic agreement being developed between the Board of Regents and the Lake Area Technical Institute which will allow the technical institute to provide certain courses of study that will be transferable to the university system. Some of those core areas, and this is one that you have all been aware of in the past years, where someone would go into a technical school, take a class, and then discover that part of it was not transferable to college credits later on into one of our university schools. We have an agreement, but part of the agreement is in making both of these two organizations whole again, I've offered $200,000 in general funds to make the deal work. Once you've learned about it, I hope you will adopt it and allow us to set that up so we can once and for all start working through the issue of cooperation between the Board of Regents and the technical schools across South Dakota.

Let's talk for a minute now about the K-12 education formula and how this all fits together. With the money that's been included, I'm just going to walk our way through this. There is the statutory 2 percent formula increase that costs us
$2 million. Then there's the declining enrollment, which I've indicated I would like to include, with your permission this year, which will cost $2.2 additional million. Then I've asked for discretionary funds in the amount of $1.3 million to be added to ongoing per student allocation. If you add those three sections up, you will find that the ongoing general education formula would increase this year by 2.9 percent. Additionally, we would add in the special education part of the formula for an additional half a million dollars for special ed needs on a school district by school district basis.

One of the most sensitive things that I think we should talk about, and it's one that I still believe to be a critical issue within our state, is the rising costs of property taxes in South Dakota. I know we have provided, and there is significant state collected dollars that now go back to local school districts that was designed to replace property tax dollars collected from local citizens. As valuations increase, our statutes provide that if we were paying 51 or 52 percent of the costs of the formula, as those valuations increase, unless we change the valuation rate, eventually the property taxpayers will pick up more and more of the costs of education. And, so, years ago, the legislature put in effect a provision that we would add to that property tax relief by changing down the mill levies to keep the proportion between what the local property taxpayers compared to what the state is putting into that part of the fund. In order to do that this year, we will reduce within statute the ag levies, the non-ag Z levies, the owner-occupied levies, and the commercial levies in the following amounts: 16 cents per thousand for the ag land levies, 16 cents per thousand for the non-ag Z, 25 cents per thousand in the levy for owner-occupied homes, and 55 cents per thousand dollars for commercial properties in the state.

I know this particular slide is busy and I'm not going to ask you to try and work on it-you'll have plenty of time to look at this slide throughout the session. It goes back for a number of years, and you've read it. It lays out where we get all the bits and pieces that fit together to come up with how many dollars per child we are providing in terms of the total state aid to education K-12 formula. But let me have you focus on one particular line, and we're going to highlight it in green, and that's the total ongoing per student allocation. This year, we will provide under this formula for an ongoing per student allocation of $4,205.26 per student. That's an increase in the ongoing per student allocation in the formula of $118.70, which is the largest single increase in the ongoing per student allocation in the history of our state.

Now let me emphasize the reason I am talking about the ongoing student allocation. Let me go down to another line here that we're going to highlight next. We used to also include in the last 2 years because we had hoped to have funds coming in from the trust funds that had been established, but for a couple of years the trust funds didn't put any money in. We took money from the general fund 2 years in a row and put it in as one-time dollars on a per student basis-basically, $58 per student per year last year and the year before. But what I heard from many people in education was "Unless you make it permanent, we really can't use it for a lot of the programs that we need." So this year our emphasis is on putting the money into the ongoing focus of continuing the formula. So our allocation increase has focused on the ongoing part of the budget.

Let me show you though where we've gone to for one-time dollars. Rather than put them on a previous line, we're asking people to consider any other one-time dollars to come from the trust funds now, which is what the original plan was in the first place. Last year we provided a line item in the general fund where we simply put in money under the term Education Enhancement Trust Fund Receipts. But we did not allocate where it should be spent. We came to the legislature and said, we understand the frustrations of being a lawmaker coming into session and finding out that not only are you in a structural deficit but the budget is so tight that there's literally no money there to do good things that you want to do for people back home. And so we freed up an allocation and we set it aside as part of the trust fund money for education enhancement. That's what it has to be used for. And last year you put together the opportunity scholarship, you funded the education service agencies, and so forth. You did some other very good things. But this year we will take it out and we will fund the education service agencies separate in the general bill. You will have $3 million available from the education enhancement trust fund earnings that are available for distribution.

On the left hand side, you will find a smaller box that shows one-time Dakota Cement Trust Fund earnings. We earned $600,000 this year more than what we thought we would. That $600,000 comes with strings attached. The Constitution says that we will spend that money-the legislature shall spend the money-for education purposes in the year in which it is earned. So you have the responsibility to spend $600,000. My suggestion is perhaps that might be good money to spend on filling the hole in the opportunity scholarship funding because of the increase in the number of students who qualified for the opportunity scholarship this last year. You know that's good and bad. It's fantastic that our young people are qualifying and making the grade for the opportunity scholarship. But the challenge is to continue to find the funding that will be necessary in the next couple of years to meet the commitment that this body has made. So, this year, for the one-time money, I believe it's there.

There's also in the '06 budget for this coming year an additional one-half million that you will have available from the Dakota Cement Trust Fund that we would also recommend goes into your educational interests. The total you have available is $4.1 million. You do have some responsibilities there. You have committed to a scholarship plan. Once you've funded the scholarship plan, the remaining dollars are available at your discretion to use in any one-time endeavor or if you want to start a new ongoing plan, it's up to you as well. But this year you will have $4.1 million to work with on a one-time basis.

Let me give you an example. This will not show up any place within the state's budget as additional help for local schools. But I want to share it with you because I think it's a good thing. We put together an initiative which has just been implemented during this school year. It's set up so that the state will do a process which will allow for the administrative activities to qualify for Medicaid-for getting Medicaid services for young people that are in the school districts today. Right now, while the Medicaid part of the costs for some students is picked up, the administrative costs to administrator the program have always been picked up at the local level with general funds. Now those general funds are, in many cases, local taxpayer dollars or local taxpayer dollars and state aid money. To date,
69 districts already this year are participating, which is basically the funding for 70 percent of the K-12 students in our state. The result of this initiative will save local school districts $5 million a year in general fund money. It's there because now they'll have federal dollars to replace the general fund dollars freeing that up for other purposes across the state. It won't show up on any budget book, it won't show up any place, but it's simply a good thing working because of the cooperative spirit that I find within our Department of Education and numerous school districts around the state. It means more dollars available for education for our young people.

There are 168 school districts in South Dakota. Forty-two of those school districts will receive the basic $4,205 per student in their basic education formula. But 126 school districts will receive more. That's 75 percent of our school districts will get more than the basic $4,205 per student. Eighty-four school districts will receive between $4,205 and $5,046. And 42 school districts, the smallest school districts, those with less than 200 students in them, will receive $5,046 per student this year through the state aid to education formula.

Let me review our priorities for just a second. All three of these areas of priorities-taking care of people that have no place else to go, protecting society from those who would do us harm, and educating our children because they are our future-the mandatory increases for those three programs is $29 million. The discretionary portion of those increases is $12.5 million, $8.9 of which is for educating our students-bringing the total to $41.5 million for those three areas of government. But the total budget increase at the state level is $37.3 million. In these three areas, we are spending 111 percent of what the total increase in the budget is. That means that the decrease is coming from someplace else.

Let me explain, and in green I have highlighted the rest of state government. Let me show you what I mean by the rest of state government. All the rest of the state government departments-Military and Veterans Affairs, other elected officials, including the legislature, Environment and Natural Resources, Agriculture, Revenue, Tourism and State Development, Game, Fish and Parks, the Department of Labor, Transportation, and executive management within state government-the total of all those increases totals $880,000 and that includes salary policy in those numbers. Now this represents only 2 percent of our total budget increase.

Can I go back-just go back to that slide one time, please. There are a couple of items that you may find of interest. Military and Veterans Affairs is a small department, but we have an increase of $402,000. Let me just point out the major part of that cost is in two areas-the cost of providing for the increases in utilities for our armories, maintenance and repair, and seven FTEs for nurses for the veterans that are living in our veterans home. Under the Department of Agriculture, we've included money for prairie dog control. So with that, let's move on.

You've seen this picture before. This is a representation of where the taxpayers of South Dakota spend their hard earned tax dollars that they entrust to us. I believe we are doing the right thing with the money and we're being responsible stewards of those tax dollars.

This year, 51 cents of every dollar that we collect at the state level will go back into education. Now, that compares with 52 cents last year. So out of every dollar collected last year, we put 52 cents into education. This budget year, 51 cents would go into education.

But social services, human services programs, including Medicaid, the state hospital, and temporary assistance to needy families will change from 30 cents of every dollar last year to 31 cents of every dollar this year.

Protecting the public, which includes the Department of Corrections, the operations of our court systems, the Highway Patrol, and the Attorney General's office will use 11 cents of every dollar in state government.

The rest of state government-thirteen departments, four bureaus, the legislature, and the governor-will use a grand total of 7 cents this year rather than 8 cents last year. This points out a couple things. First of all, I think state government is being responsible and being a steward of the tax dollars entrusted to it to do the programs the people of this state expect. Second of all, let us be aware that, as the student populations decrease in our K-12 system and the elderly populations who need medical care increase, how do we decide who will get the limited tax dollars available for those two competing interests?

Now let me go to an area which I'm sure will raise eyebrows and for which we have the responsibility for explaining what we're doing. This is the 2006 FTE increases. Let me begin by explaining that an FTE is not a person. An FTE is a full-time equivalent. It means the expenditure of 2,088 hours in doing something. In the past, the legislature has always looked at this as being a way to measure whether or not government is growing. Except that in some cases, government could grow by simply contracting out for services and never counting an FTE but still spending the money-having a contractor do the work instead of an employee. Sometimes that's the right thing to do. Sometimes, it's not. Our challenge has been let's look at what is the most effective way to utilize the tax dollars that are available to us, which saves us more money? Contracting for services or hiring an FTE?-hiring in some cases a person or several people to do the job as an employee as opposed to being a contractor.

This year, the number of FTE requested outside the control of the Governor's Office, is 247.9 FTEs. Under the control of the governor we are requesting 111.3 FTEs. Of the 111.3 FTEs, 60.8 fall under the category of being mandatory. 50.5 are discretionary, but we believe are the correct way to go as opposed to a different alternative and we will explain why. The total number of FTEs would be 359.2 FTE. I'm going to make one point. It looks like a big number, but if you average the increase in FTEs under the control of the governor, we are averaging an increase of less than 9/10 of 1 percent increase in FTEs per year over the last 3 years.

Let's get right into it in terms of the FTEs which are under the governor's control. Where are they and why are we requesting them? I want to spend a little bit of time on this.

The first one, the largest increase, is under the Department of Corrections. There are 43.3 mandatory FTEs and we will actually eliminate 7 FTEs in the rest of the department. The increased unit staff for the new Unit D at the Mike Durfee State Prison and at the Jameson Wing in Sioux Falls, the total number of prisoners that will be there is 400 at Mike Durfee and 192 at the Jameson Wing. The cost there is 43 FTE.

Under Social Services, we have, because we are running a federal program, a requirement for 12 FTE for eligibility caseworkers based upon the number of people that are applying for benefits. There are 3 FTE required for medical services in that department. There are 3 FTE, and this is discretionary, for the recoveries. This saves money. If we add an FTE, we recover more money. So we believe we will save general fund dollars and federal dollars by adding an FTE to do that job. There are 7 FTE for Child Protective Services, Food Stamps, and Child Support. Those are discretionary.

Under Game, Fish and Parks, under the "Other Funds "category, which is paid for by fees and you've all heard the issue of whether or not the Game, Fish and Parks should increase their fees-the department has increased the fees in a proposal as directed by the commission, and part of those fees will go for people in the field and working with landowners throughout South Dakota but primarily in western South Dakota. They are asking for 12.3 FTEs for improving communications and for landowner relations. Those are discretionary-they are not part of the general fund-they will be picked up with "other funds" category or the fees.

In the Department of Agriculture, there are 8 FTEs requested for a second Black Hat crew in the Black Hills. Those are the guys that fight the fires. And then 2 FTE are requested for the animal ID system in the Animal Industry Board. All those FTEs are federally funded but we are requesting permission to use the federal funds. If we use the federal funds, we have to have the FTE authority in order to do that.

Military and Veterans Affairs, as I said earlier, they have an increase but the increase is 7.7 FTE for nurses for the state's Veterans Home and 1 FTE as a maintenance worker. And that is discretionary.

Health care-under the Department of Health, we have 5 FTEs which are discretionary but the reason we are requesting them is that they are in the Department of Corrections. They are health care nurses working for the Department of Health assigned to the Corrections Department, but we're asking for 5 FTEs so we don't have to continue to pay overtime. In doing so, we will save money, as I'll point out here in a little while.

Public safety-we have five additional or new people in the Department of Public Safety. But what it is, it's transferring over Capitol Security from the Bureau of Administration to the Department of Public Safety, and you will see here's an increase in FTEs, you'll see a decrease in FTEs from the Bureau of Administration farther down the line here.
Human Services is requesting 2.5 for nurses in the adolescent unit and that one is a mandatory staffing need.

Also, in Education, we're requesting 2 additional FTE. They are federal in nature-one of which will be for the Reading First Program which we talked about first which is part of a federal plan, and then also 1 additional FTE for Career and Technical Education for the Health Occupations Program-to get young people actively involved in the Health Occupations area of working when they get out of school. That is part of a federal grant, and it will be paid for by federal dollars.
Tourism and State Development-there is 1 FTE requested for the South Dakota Housing Development Authority. That is part of an informational budget-it is a separate part and is not part of the general funds.

The bureaus-Bureau of Finance and Management, Bureau of Administration, Bureau of Information and Technology, and the Bureau of Personnel. The Bureau of Finance and Management will reduce their staff by 1.5 FTE. The Bureau of Administration-we have a 5 FTE reduction but those are the ones that moved to Public Safety. The Bureau of Information and Technology is requesting a 5 FTE increase, 2 in software development and 3 in State Radio. And that's because with the new State Radio system, we're doing the maintenance and the installations across the state as we put in and maintain the radios for local units of government throughout South Dakota. It used to be that they hired that at the local shop. Now it's coming back through the Bureau of Information and Technologies through State Radio.

There's also something else. In the Bureau of Personnel, we have an increase of 2 FTEs. One of those is actually currently a contract agency, and rather than spending the money on the contract, it's more effective for us to simply add the FTE and put them on. They've been there for years as a contract employee through an agency. We'll eliminate the contract and add the FTE and save the tax dollars. And that's in the Worker's Compensation Assistance Plan.

Let me go now to the 2006 FTE increases that are outside the control of the governor. These include 222.5 for the Board of Regents. The Unified Judicial System was 17.7, the Attorney General with 3, the legislature with 1, the State Treasurer with 2, and the Public Utilities Commission with 2. Now the constitutional officers we have reviewed. We support the constitutional officers' request for those FTEs. The Unified Judicial System is a separate branch of government. We respect the autonomy of the different branches of government. We have delivered the request to exactly as the Chief Justice requested. Please don't misunderstand that we do not support it, we do support his request. But it is exactly as directed by the courts to you.

The Board of Regents has requested 222.5 FTE. I support their request. Please let me explain in some detail what this is. And I'm sure you'll have discussions with them as well, but let me explain where these are from.

We have requested the Board of Regents to go out and find other places to receive money to assist in the education of young people going to school at our universities. That means asking for grants, it means finding contracts to do work and to do research. But every time that happens, and they have a contract to do more work or to do research or to bring in someone to work as a graduate student, each time that happens, and if we pay them, we have to have permission to add them as an FTE. Even if they are graduate students working part-time, they become a half of an FTE, or a third of an FTE, or whatever. So part of this is asking permission to do the grants and contracts. It's not coming from the general fund but nonetheless it will look as though they have more employees unless you recognize that it's not more employees. But it does request 146.9 FTEs for them to do grants and contracts as they become eligible for them.

Student enrollment is up. Now what's it up? Right now, we think it's up over the last 5 years-student enrollment is up 10 percent. For awhile it simply filled in the classes that were there. But as we've asked them to bring in more classes, as we've asked them to challenge students more, we're now to the point where we need to add some faculty to take care of that class load. We are asking for 26.5 FTE to pick up the cost of that 10 percent increase in attendance over the last 5 years. That's about 2,710 students in the last 5 years.

Title IX, which is where we look at the women's sports programs and compare them with the men's sports programs. In order to become compliant with Title IX, we have to hire some more coaches and help for the women's programs. That's 19.1 FTE total.

And then also 15.5 FTE for a new plan for adding some Ph.D. programs within the Regental system. This is good economic development. This is providing Ph.D. programs for our young people so the best and the brightest-the ones who go on to pick up a doctorate-don't have to leave our state where they find a new family, where they settle, and where they raise their children and where they eventually establish businesses. We want them here in South Dakota. But for them to do that, in many cases they have to be able to continue their studies here. In order to do that, we have to hire people capable of teaching those types of courses. While I don't want to take away the thunder from the Board of Regents, they have a good proposal. I wanted to make it clear my support for their plan for developing our universities structure and making it even better in the future for our students than what it is today.

When does it make sense to add an FTE? Let me give you some examples. In the Department of Health, by increasing 5 FTE, the department is able to save $109,000 in general funds. Now that doesn't mean, yah we put on 5 FTE and they cost us $150,000, but we're not talking about that. No, this means after we pay for the additional cost of their salaries, we save an additional $109,000. And so if our standard of measurement is where we spend our tax dollars, then we're better off to add the FTE and not add the general funds of $109,000. If we decide the measurement is the number of FTEs you will have to add back in $109,000 additional money into the budget.

The Department of Social Services-by increasing by 4 FTE, the department is able to save $111,000 of general funds. Now we do this by increasing our recoveries from fraud and through the investigation's department there within the department. Actually, the total overall savings will also include, for the federal government, over $300,000 in the Food Stamp program. But the general funds savings-the savings to our taxpayers right here in South Dakota not including their share of the federal budget but our general fund dollars-is a savings of $111,000 by adding those FTEs.

Within the Department of Human Services, by increasing 2.5 FTE, the department is able to save $172,000 of total funds, of which $129,000 comes directly out of general funds, due to the reduced overtime costs for the other nurses at the Human Resources Center.

What we're trying to get at here is that, in some cases, when we talk about FTEs, what I'm asking state government offices to do is to challenge them to look at the savings in dollars and not be afraid to ask for FTE if there's a savings in general funds. If you can cut a contract and thus cut the contracted costs by adding an FTE then show us the difference and let us make up our minds as to which way is best. These are the examples we are using. You will find them elsewhere in state government as well.

In 2005, now we're back, not in the 2006 budget, but in the 2005 budget we are currently in, these are the emergency special appropriations I am recommending to you today.

The Fire Suppression Fund-basically it was a mild year for fires but nonetheless we spent $2.1 million putting out the fires before they got big. We used tankers, small single pilot tankers-they're called single engine air tankers-they look like a spray plane but they're set up like a crop spray plane but they're set up to get in quick and tight and get out right away and dump retardant right on top of the fires before they get big. We also used lightning tracking equipment to find out every place whenever a storm would come across. Wherever the lightning hit, we would go out and look and see if we had a problem there. These aircraft would go in and shut the fires down before they got out of hand. But the cost this year is $2.1 million.

Furthermore, the Bureau of Administration is responsible for what we call the Litigation Fund. This is separate from the PEPL Fund. Normally for our auto liability and our general liability and so forth, the operation of state government, we have the PEPL fund and in that all the different departments pick up a part of their cost and they pay for their part of the insurance costs for the state. It's a self insured plan. When they do that, if they have federal funds, they are allowed to use part of their federal funds to offset that-with one exception. The federal government will not participate in defending or paying damages that are caused by legislative action, the action of the governor, or the action of a vote of the people in an election. That has to be handled purely with general funds. So in order to maintain the federal funds participating in the PEPL fund, we have to identify separately and separately legislate the dollars into this fund. This is the money we use for such items as when we defended the issue Amendment E. This is the money we use when we defend the issue of whether or not the law concerning the section line right-of-ways is appropriate and so forth. But those items are found under the BOA Litigation Fund. That cost is $1.2 million.

School district consolidation incentives cost is $933,000. By statute, when school districts combine, we pay an incentive to them. The school districts in Year 1, Hitchcock-Tulare School District, Groton Area School District, Northwestern Area School District, Faulkton Area School District, Ipswich Public School District, Miller Area School District and the Wolsey-Wessington School District, this is their first year of combination. They have an incentive built in.
Year 2 School-the Sisseton School District is in their second year of consolidation.
Year 3 Schools-Britton-Hecla School District and the Agar, Blunt, Onida School District.

Because they've consolidated, by statute, we've agreed to pay part of their costs in that consolidation plan. That is $933,000.

The State Fair-we lost $653,944-this makes that budget whole again and brings it back to zero for the loss incurred on the State Fair this year.

The Cement Plant Trust earning for education enhancement $633,000-this is the money which is identified on that line item that we talked about earlier. It's available for you to use in whatever way you want for education enhancement. The total of our 2005 emergency special appropriations is $5,618,000.

Fiscal Year 2006 Special Appropriations-pretty straight forward. The Sales Tax on Food Refund Program, which you worked with us on last year and implemented, we have nearly 28,000 families currently participating. We believe that will increase in the next several months. But that's $5 million that we're putting in.
The tax refunds for the elderly and disabled-$1 million.

The Cement Plant Trust earnings for education enhancement, that's the second small box on the right hand side of an earlier screen in which we said this is money you will have available for your discretion in terms of education enhancement, but it's part of the '06 special appropriations-$530,000-bringing our total general appropriations to $6,530,000.

State employee compensation-I am proposing and I've included it in all the numbers you have seen so far in all the different areas, 3 percent salary policy plus 2.5 percent movement to job worth. I'm also proposing this year 0 percent additional money to increase, in terms of the employer cost, the state's cost for health care for state employees. Why? Let me show you. It's because you allowed us the discretion to work through and to put together a plan, and state employees have bought into the plan of reducing the costs of health care for them and their dependents. Sometimes people think that the only way that you take care of health care needs is to simply put more money into it. That's what we end up doing in Medicaid. But the other side of it is to aggressively manage the costs of health care, to be pro-active in dealing with disease, to be pro-active in dealing with health care issues. We've tried to do that. You have allowed us to do that, and I want to thank you for that faith. Last year, we told you that we were going to put together plans that we thought would save us money. Think about this for a second. How many of you have been able to go a year without an increase in your health care costs? At the state level, we are. This has been good for the taxpayers of South Dakota. It means that the cost of providing health care for employees is not going up and it couldn't be done without state employees' assistance.

Here's what's happened. We've implemented programs and design changes that will have saved an estimated $67 million in the last 6 years. That's over $10 million average per year. Of that amount, $16 million have been directly avoided because of disease management programs that state employees have been participating in-actively managing the tough diseases, recognizing when there's a need to pro-actively manage-and in going in and taking an active role in their own health. If you look outside of this building, you will find, during set times of the day, employees are working at improving their health. Rather than taking a coffee break and sitting down, they're walking particular routes around the state Capitol grounds. They have challenges that have been set up for losing weight, for controlling blood pressure and reducing cholesterol. And in doing so, our health care has remained stable.

We've also aggressively pursued management contracts with doctors in the area and we have made it worth the employees' effort to use sparingly the health care and saved the money. The way that we've done it is that today members currently contribute a significant portion of their total plan costs through higher deductibles and copays. So if you don't use an emergency room visit and you wait and go to see the doctor during regular office hours, you save the emergency room charge that we make them pay a significant part of. Going to the doctor then costs us less plus it costs them less. In doing that, the employees today are paying all of the premium for their dependants, they're paying that plus they are paying a total combined for themselves and their dependants 37 percent of the total cost of health care for employees in the state of South Dakota today. And yet at the same time, they've been satisfied with the plan that has been put in front of them because they have participated in making it work. I want to thank you for allowing us that opportunity to manage that plan. The dollars and cents say that it is working.

Government efficiency examples-under correctional health, by reducing temporary nursing contracts, and adding the 5 FTE, the state saves $109,000.

State aircraft-right now instead of putting three people in a Suburban and driving to Sioux Falls and then driving back again for a total of 7 hours, they have to check first to see if there is an aircraft going to Sioux Falls and back. If there is, they take the state aircraft. We're filling the seats in the aircraft more rather than flying down and back with one or two people on board. And in doing so, we have saved 7,703 hours of employee time since January of this year.
We did not open the Rapid City Trustee Unit-as you know we discussed this earlier. This will save, through cost avoidance, rather than having to staff that unit out there with the additional FTE, we are saving 6 FTE and an estimated $180,000 in general funds that we would otherwise have to ask you for.

The Department of Social Services has an initiative in disease management, prescription drugs, outpatient services, and out-of-state providers which will save $1.8 million in general funds and over $5.25 million in total funds this year.
And, finally, let me finish with this part. The budget as we are proposing to you today will spend $1,016.9 million, the federal funds $1,298.3 million, and the other funds $750 million for a grand total in the state of South Dakota's budget of $3.1 billion.

Our continuing goal to reduce the structural deficit-our plan is to reduce from $28.5 million in the '04 budget to $22.5 million in this budget, to $17.1 million in the budget that I have just proposed to you today.

The budget highlights as we see them and as we share them-this is a basic needs budget. We are educating our children and living up to that commitment. We are taking care of people that have no place else to go. We are protecting society from those who would do us harm. We are doing this with no new taxes. We are reducing the property tax levies once again as you have provided for year after year since 1997, and we are continuing to reduce the structural deficit and we have a plan in place to eliminate the deficit in the next 2 years. And the biggest challenge facing you and us are the mandated expenses that we are required to deal with in balancing our state's budget.

I think we're up to it. I want to thank you for giving me this opportunity to share this budget with you today, and I'd like to say thank you to some other people, as well. These are the folks that have put in literally hours since about the first week in August going through department by department budgets, reviewing what's happened and in laying out and saying no in many cases to requests but analyzing what is best for the taxpayer of South Dakota. They're dedicated, they work hard, they put in a heck of a lot of time after hours, and these people I want to recognize them. I think they are here, and if you would please stand as I call your name and I hope I'm not missing anybody: Tami Darnall, Angie Van Scharrel, Chris Petersen, Kari Weisbeck, Kellie Englehart, Shane Mattheis, Terri Iverson, Rodger Leonard who is our comptroller, Dale Bertsch who has sat in on a lot of the meetings with us, and the guy who is responsible for putting this all together and answering directly to me, our director of Finance and Management, Jason Dilges. Would you please stand and be recognized?

And, now, I want to say thank you. I had hoped I would do this whole thing in about an hour and 10 minutes, I suspect I might have gone over. I want to thank you for coming in and giving me your time and attention. I believe that if we work through this process together, recognizing that our goal is to do what is best for the people of South Dakota with the information we have, we will make South Dakota an even better place to live, work, play, and raise a family. Thank you for your attention today.