INDIANAPOLIS (AP) — Indiana Gov. Mitch Daniels says public schools will face an “extraordinarily difficult” state budget next year unless the national economy shows significant improvement.

K-12 education in Indiana already has faced $300 million in reduced state funding this year as the state has cut spending in the face of lower tax revenues.

But Daniels on Monday said Indiana has only “nicked” school funding instead of “gouging” it like other states. He said the state’s priorities will be to maintain fiscal solvency and its AAA credit rating over the next 10 months before lawmakers start writing a new state budget.

Daniels says he also expects the federal government to bail out states who’ve borrowed money for unemployment benefits because he regards it as a national problem.