PIERRE (AP) – Retiring Gov. Dennis Daugaard proposed spending increases Tuesday for education, state employees and Medicaid providers in his final budget proposal as governor.

The Republican recommended a nearly $1.7 billion general fund budget for the upcoming 2020 budget year during his last budget proposal and farewell address to the South Dakota Legislature. The budget lays the groundwork for GOP Gov.-elect Kristi Noem, who will formulate her own proposal to be debated in the upcoming legislative session.

Daugaard's proposal for the 2020 budget year that starts July 1 envisions roughly $53 million in spending hikes, including 2.3 percent increases for education, Medicaid providers and state workers.

"We've been fortunate in South Dakota to have many governors and many legislators of both parties who kept our finances on track for years, and I hope we never take that for granted," said Daugaard, who noted the state's fully funded retirement system and AAA credit rating. "As I leave you, our state's finances are the envy of the nation."

Noem said there may be a few changes from Daugaard's plan for K-12, Medicaid providers and state employees, but she didn't anticipate a major shift from his proposal. Noem said she'll be working on her budget plan over the rest of December.

Noem will be sworn in to office Jan. 5. The Legislature will reshape the current budget and approve the next one during the session that begins in January.

"This governor has always prioritized fiscal responsibility, and he's built a strong foundation here of doing that again in this budget," Noem said ahead of the speech.

Daugaard expects state collections for the current budget year, which started July 1, will be down slightly compared to lawmakers' projections. He's also projecting lower state expenses than previously anticipated.

While some revenue sources aren't performing as expected, overall ongoing state collections for the first four months of the current budget year are about $3 million, or 0.5 percent, higher than lawmakers previously anticipated.

Daugaard is proposing emergency expenses for the current state budget year including $7.4 million to expand the Jameson Annex at the South Dakota State Penitentiary, roughly $3.9 million for a National Guard Readiness Center and $2.3 million for a litigation fund.

Daugaard's plan for next budget year calls for spending nearly $1.75 billion in federal funds, over $1.4 billion in other state money and about $1.7 billion in general funds, totaling over $4.8 billion.

Daugaard's proposal got a mixed review from Democrats. Democratic Party Executive Director Sam Parkinson said in a statement that Democrats can support funding hikes for public schools, state employees and community support providers, but he said the budget plan is "most notable for what's not there," including a lack of new funding for early childhood education and needs-based scholarships.

The governor's proposed increase for Medicaid providers is a positive step, but falls short of the change needed to sustain the state's long-term care infrastructure, said Mark B. Deak, executive director of the South Dakota Health Care Association, which represents nursing, assisted living and senior living centers.

"During the upcoming legislative session, we will work arduously with Gov.-elect Noem and the legislature to demand a budget that adequately funds the long-term care," Deak said in a statement.

Eric Ollila, executive director of the South Dakota State Employees Organization, said the proposed 2.3 percent increase for state workers is favorable. But he said public employees are rejecting a "radical" proposal to require them to pay premiums for the South Dakota State Employee Health Plan. Daugaard said the premiums would be $20 for a high-deductible plan and $40 for a low-deductible plan.

During his speech, Daugaard looked back on difficult times during his two terms – Missouri River flooding and massive state spending cuts to eliminate a budget deficit early in his first term – and noted some victories. They included raising the state's teacher pay from the last in the nation, winning a victory at the U.S. Supreme Court allowing states to force online shoppers to pay sales tax and prioritizing the maintenance and repair of highways, bridges and state buildings.

Daugaard credited his staff and family and invoked his parents, who were both born deaf. He said his father died with very little, but he worked hard, took care of himself and paid his bills. He was self-reliant, persistent and frugal, Daugaard said.

"South Dakota is a special place because there are many, many people who carry those same values with them and set that same example in their lives every day," Daugaard said. "That's why I love South Dakota, and that's why it's been my great honor to be your governor, and that is why I know that our best days are still yet to come. Thank you so much."