CHICAGO -- Outgoing South Dakota Gov. Walter Miller last week introduced his final state budget, a $646 million package that includes about $36 million of new property tax relief.

The proposed budget would also reverse about $28 million in budget cuts that were enacted this fall when a court decision banning video lottery games dried up a significant state revenue source. The South Dakota Supreme Court ruled last summer that the video lottery games were unconstitutional, but last month state voters passed a constitutional amendment authorizing the games.

The outcome of Miller's proposals is unclear, however, since he will leave office before the legislature meets for its upcoming budget session. South Dakota's fiscal year 1996 begins on July 1, 1995. Republican William Jankow will be sworn in as governor Jan. 7, and the legislature starts debate three days later.

"This budget could be declared dead on arrival, which is the legislature's prerogative," said Miller, also a Republican. "But more than offering a budget simply because the law requires it, I present this budget to provide you a realistic and responsible plan to work from."

The biggest share of Miller's $646 million budget -- $244 million -- would be allocated to schools and local governments. The departing governor said the money would allow schools to shave the cost of elementary and secondary education by 10% and allow what he called "serious and responsible" consideration of local property tax caps.

Miller also proposed allocating $177 million to health, human services, and social services; $107 million to higher education; $35 million to state government operations; $32 million to corrections; and $11 million to agriculture and natural resources. And he earmarked $36.5 million to be used for property tax reduction across the state.

The governor suggested several new revenue sources, including fee increases for "individuals, industries and interests that are regulated by state government."

Miller proposed that the state make the Department of Tourism self-supporting by passing a $1 per night tax on hotels and motels. He said the state should raise its take from video lottery proceeds to 42% from the current 37%.

Video lottery has proved an important source of funds in South Dakota. The games were unplugged in June and reactivated in November. During the six-month hiatus, the state drained $17 million from its $28 million reserve fund to cover revenue shortfalls. And lawmakers, meeting in a special September session to balance the budget, cut about $28 million from state programs.

Under Miller's budget proposal, most state departments will see their budgets restored to the same level they enjoyed before video lottery was halted.

And with the resumption of video lottery, Miller resurrected the state's personal property tax relief program and the elderly tax relief program for fiscal year 1996, and funded them retroactively for fiscal year 1995. Lawmakers axed both programs during the round of budget cutting that followed the lotery decision. Funding the programs for two years will cost $32.9 million.

South Dakota does not issue general obligation debt.

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