PIERRE — Senate Democratic leader Scott Heidepriem’s plan to impose a 3 percent cap on the annual growth of spending and employment in state government didn’t survive past its first hearing Thursday.

The Senate Appropriations Committee scrapped the plan on a 5-1 vote. The committee is one of the Legislature’s two panels whose members oversee the state budget.

Heidepriem, who is seeking the Democratic nomination for governor, said the Legislature increased the general-fund portion of the state budget by an average of 5.5 percent annually since 1995.

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He said that rate of growth is unsustainable. “Government by its nature is organic. It grows. It wants to,” he said.

Heidepriem acknowledged the Legislature would need to engage in “a difficult conversation” to hold spending within 3 percent. “It is going to be hard,” he said.

The state budget has three categories of revenue. They include: general funds, from broad sources such as sales taxes; federal funds, which in most instances can be legally used only for the purposes designated by Congress; and other funds, from state fees and taxes dedicated to specific purposes, such as motor-fuel taxes for highways and sportsmen’s license fees for the Wildlife Division.

Imposing the 3 percent cap on general funds would lead government officials and legislators to seek more money through the other-funds portion of the budget, Sen. Corey Brown, R-Gettysburg, said. He predicted “rapid and enormous increases” in fees if the cap took effect.

“At the end of the day those dollars are coming out of the pockets of the same South Dakotans,” Brown said.

Heidepriem agreed with Brown’s point but said the Legislature would need to decide whether to allow those fee increases.

Brown asked Heidepriem what would happen in years when general-fund revenue naturally grew more than 3 percent. Heidepriem said the money could be placed into reserves or rebated to taxpayers.

Sen. Jim Hundstad, D-Bath, said county governments and school districts have lived for more than a decade under 3 percent limits of various types. Hundstad voted for Heidepriem’s legislation, Senate Bill 144, but said he’d prefer lifting the county and school caps instead.

No one testified in support of Heidepriem’s legislation. The only person to testify against it was Liza Sizer, chief budget analyst for the state Bureau of Finance and Management.

Sizer said state government has federally-required duties such as Medicaid which must be met regardless of financial conditions. The 3 percent cap would leave less for other priorities such as school funding, she said.

Sen. Al Novstrup, R-Aberdeen, said he doesn’t like artificial caps for state government, school districts and counties.

“This is what I call an auto-pilot or cruise-control bill,” Novstrup said.