INDIANAPOLIS – Gov. Mitch Daniels made a rare appearance before a special legislative committee Tuesday to field questions about his latest budget proposal and announced June 11 as the start date of the special session.

“Let’s get on with it,” he said.

Lawmakers failed to pass a two-year state spending plan in April and now must do so before the current budget expires June 30.

Recent Statehouse discussions predicted a special session starting June 15, but Daniels said he hopes giving legislators an extra few days to work will avoid passing the budget at the last minute before a midnight deadline at the end of the month.

The daily cost of a special session is about $15,000.

Daniels and key fiscal staffers provided his full budget proposal Tuesday after a brief outline Monday night in a televised address.

Overall, the budget spends $27.5 billion in state general-fund dollars, including dipping into the reserves. After including federal stimulus dollars, the biennial budget ending in June 2011 will spend $28.5 billion.

Daniels makes K-12 education a priority, with a 4 percent increase over the biennium – or a 2 percent average increase for schools each year.

But Rep. Terry Goodin, D-Crothersville, said the administration was deceiving the public with the number because the majority of the increase comes from federal stimulus dollars that go away in two years. Goodin said extra federal dollars have never been included in school-funding formulas before, and “it is very deceiving and wrong.”

Both Daniels and State Budget Director Chris Ruhl didn’t try to hide where the money was coming from – saying only $50 million of the total $497 million in new education money comes from state taxes.

Ruhl also said the school-funding formula Daniels submitted – which distributes the money based on enrollment and other demographic factors – ranges from a 10 percent cut in funding for schools in Gary to a 13 percent increase in funding for a district in Hamilton County.

The difference is Gary is losing 30 percent of its enrollment while Hamilton Southeastern is adding thousands of new students.

“If you are losing 5 (percent) to 10 percent of your student population, you don’t need as many teachers and administrators,” Daniels said.

His proposal promises more money for each student in every district, but not more money overall for every district. A more comparative analysis of the formula is expected to be released today.

Another portion of the proposed budget bolstered by stimulus money is public colleges and universities.

Daniels proposed a 4 percent operating cut for higher education in state dollars but would use federal dollars to fill the gap. That money, however, would be directed to building repair and rehabilitation, which means it is still essentially a 4 percent cut in operating funds.

Overall, $213 million in federal dollars would go for repair and rehabilitation with $137 million more going to 10 new university construction projects around the state. Ruhl said this allows one-time money to be spent on one-time expenditures.

In addition, the budget authorizes a $17 million parking garage at Indiana University-Purdue University Fort Wayne and a $98 million student fitness center at Purdue’s West Lafayette campus to be paid for by private dollars.

Daniels said he added capital projects to his budget proposal after taking into consideration concerns lawmakers had about creating jobs.

Another concession he made was eliminating two prison expansions.

But several Democrats questioned his biggest compromise – Daniels’ willingness to spend $300 million in state reserves after fighting against it for months.

Rep. Scott Pelath, D-Michigan City, said it’s troubling that Daniels is now willing to live with a $1 billion surplus instead of the $1.3 billion he wanted just weeks ago.

Daniels said the difference is that legislators are now working off a realistic revenue forecast and he no longer needs to hold onto the surplus to cover excess spending.

But he was clear that is as far as he is willing to go.

“One billion dollars means one billion dollars. This is not a starting point for negotiations,” Daniels said.

There was little reaction from school lobbyists and other special interests watching the process Tuesday because the full budget documents were still circulating.

The committee will take public testimony on the proposal Thursday.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, said he wants each caucus on the bipartisan committee to present an evaluation of the governor’s budget proposal with suggestions for improvement next week.

“I feel like you’ve gone more than halfway to meet us,” he told Daniels.

nkelly@jg.net