There will be cuts. It’s a question of where and how deep.

Faced with a looming state budget deficit that could range from $150 million to $200 million, the 2010 South Dakota Legislature is likely to wrangle over whether to target spending cuts at specific programs and services or make them uniformly throughout state government.

“I personally think that’s going to be the big debate in the 2010 session: the debate between across-the-board cuts and specific program cuts,” Senate Republican leader Dave Knudson of Sioux Falls said. “You can put me in the across-the-board category. I am very skeptical that you can find specific programs to cut substantially enough to find the kind of dollars we’re going to have to save.”

The exact amount of those needed savings still isn’t clear. Gov. Mike Rounds said last month in meetings with business leaders throughout the state that the faltering state sales tax and other key revenue sources were likely to reduce the state revenue stream by $90 million to $100 million by the time the session convenes in January.

Added to additional Medicaid costs of $50 million, the deficit could reach $140 million to $150 million. Rounds has since updated that estimated budget hole to $170 million, or more.

Others think it could be higher. They include former Republican state Rep. Ron Williamson of Sioux Falls, president of the Great Plains Public Policy Institute, a nonprofit group that advocates more fiscal responsibility at the state level.

Williamson is a former Citibank South Dakota president who served as chief of staff to former Gov. Bill Janklow in 1980, when the governor imposed a 5-percent spending cut across state agencies under his control.

Janklow made the cut because of declining state sales tax revenues and a troubled economy that led to uncertainty about future revenues.

“It might not have been this bad, but it was pretty rough back then,” Williamson said. “We did it across the board, every agency and department. It was difficult, but the point was that everybody should have to give a little bit.”

When the sales-tax shortfall for the previous quarter turned out to be only about half of what had been projected, Janklow refused to rescind or modify the 5 percent cut, saying “there’s still a lot of negatives out there.”

Janklow was known for his tough fiscal policies, including the across-the-board cuts and a later reduction in state employees. Almost immediately upon returning to the governor’s chair for his third time in 1995 — after eight years out of office — Janklow railed against the increase in state employees, categorized as full-time equivalent positions, or FTEs.

And soon after, he began a department-by-department series of cuts that eliminated hundreds of FTEs that over two budget cycles reduced the total by about 1,000. The count has climbed considerably since those Janklow years, and state spending exceeded state revenues in recent budget cycles.

Critics blame Rounds for that. Senate Democratic leader Scott Heidepriem of Sioux Falls said the governor’s office has failed to slow the growth of state government, which has increased an average of 5.5 percent under Rounds. Meanwhile, local governments are limited to 3 percent growth or the inflation rate, whichever is less.

Rounds didn’t respond to questions for this story. His press secretary, Joe Kafka, did say that Rounds “won’t response to campaign statements,” other than to correct the record.

Heidepriem and Knudson are both running for governor next year.

Rounds argues that the budget has been burdened in recent years by increased state obligations for its share of Medicaid costs, health care and nursing home costs for the poor. Education costs also have continued to rise, he said.

The governor also points out that while the state Legislature cut general-fund spending by $4 million in 2004, lawmakers increased his proposed general fund budget by $4 million in 2005, by $2.3 million in 2006, by $10 million in 2007, by 11.7 million in 2008 and by $12.4 million in 2009.

When asked if the governor would be considering across-the-board cuts in the upcoming budget, Kafka won’t reveal specifics of the budget Rounds will outline to state lawmakers Dec. 8.

The painful budget shortfall facing the state today will likely make across-the-board cuts a necessity, Knudson said. Eliminating a few programs or closing certain offices wouldn’t raise the money needed to face the budget deficit, and it might deny or diminish important services, he said.

“I just don’t think South Dakota has very many programs that aren’t useful to our citizens,” Knudson said. “The advantage of across-the-board cuts is that you can get substantial dollars easily, and everybody shares the pain.”

Heidepriem agrees that across-the-board cuts seem to be the only way to close the budget gap. K-12 education funding would have to be exempt from the cuts under existing law that mandates an annual increase of the smallest of 3 percent or the rate of inflation, he said. Education funding shouldn’t be cut — and probably can’t be without jeopardizing some federal stimulus dollars, he said.

The state will also have to assure that cuts in other areas wouldn’t affect the state’s use of the stimulus dollars, he said.

Beyond that, a certain percentage reduction across state government is the logical way to address the shortfall, Heidepriem said. Then agency heads would decide whether cuts required the elimination or jobs or programs, he said.

“If it’s 5 percent, you go to the department heads and say, ‘You have to deliver the same level of services with 95 percent of last year’s resources,” Heidepriem said.

If something like that had been done years ago, the state wouldn’t have the budget problems it has today, even considering the national recession, former Janklow staffer Williamson said.

He fears that the governor might be underestimating the looming deficit. It could be as high as $300 million by the next budget year, Williamson said.

Whatever the number turns out to be, it won’t be addressed by proposals similar to what Rounds made last year, to cut certain arts or archaeology or  child-development programs, Williamson said.

“It can’t be small, particular programs. It has to be relatively broad-based, and everybody has to participate,” he said. “And very candidly, that includes higher education and all.”

Contact Kevin Woster at 394-8413 or kevin.woster@rapidcityjournal.com.