PIERRE - Legislative leaders say the $3.55 billion state government budget Gov. Mike Rounds has proposed for next year is a good starting point.

Scott Heidepriem of Sioux Falls, Senate Democratic leader, said after the governor's budget speech Tuesday that he hopes more money can be allotted for K-12 schools.

"I didn't hear anything too dramatic. My impression is that it's a continuation of the status quo from the governor," Heidepriem said.

Heidepriem said the state could send schools more money by taking it from a $427 million education trust fund. "We do not have to increase taxes to do this," he said.

"We believe the resources are available to make those strategic investments in our children," Heidepriem said. "It's a process of give and take, and I'm sure that the Legislature will change quite a number of the items that he presented."

Rounds has placed great emphasis on support of the state university system but has not done likewise with K-12 schools, the Democratic lawmaker said.

House Republican Leader Larry Rhoden of Union Center said a 2.5 percent increase in education aid Rounds requested may be all the state can afford, but he also hopes extra money can be found for schools.

The state economy has been soft, and the governor's budget fits comfortably within that revenue framework, Rhoden said. Should revenues improve in the next several weeks, it may be possible to provide schools with even more money, he said.

Senate Republican Leader Dave Knudson of Sioux Falls believes revenue collections will pick up because receipts were low in the first three months of last year but later increased to meet projections.

Knudson said he is not as conservative as the GOP governor in projecting future revenues.

"I'm probably a little more bullish than he is," Knudson said.

"The governor is very cautious on revenue growth for the 2009 fiscal year. I think that's appropriate. It's always dangerous to be overly optimistic."

The final budget is passed in late February, based on updated revenue estimates.

Knudson said the Legislature in recent years always has added more money for school districts than the governor proposed, and he hopes that happens again.

State law requires the Legislature to provide minimum annual increases to schools of either the rate of inflation or 3 percent, whichever is less.

The governor said it would cost $2.2 million beyond his budget proposal to give schools a 3 percent increase next year instead of the proposed 2.5 percent.

House Democratic Leader Dale Hargens, a farmer from Miller, said he understands why the governor is cautious, based on recent revenue receipts. But Hargens said he thinks tax collections will recover in the next few months because farmers had one of their best years in terms of crop production and prices.

He also said holiday shopping seems to be strong.

In addition to schools, the governor proposed 2.5 percent increases in state payments to medical providers and 2.5 percent pay raises for state employees. Hargens said he hopes all three can be increased to 3 percent, which would require spending an extra $4.8 million.

"I don't think that's undoable. That's not a large amount of money," he said.

As he's done in the past, Rounds noted that many school districts still have large reserve accounts. But Hargens said the state measures those accounts on June 30, when they are probably at their highest level of the year.

The Democrat said some of the increased state aid in recent years has been one-time money, which schools are reluctant to build into ongoing budget obligations in the form of pay raises to teachers.