INDIANAPOLIS (AP) — Republican Gov. Mitch Daniels said he was stunned that his proposal to hold back third-grade students who can’t read well came with such a large price tag that a key lawmaker said it shouldn’t pass this year.

Daniels told reporters Thursday that his proposal to end so-called social promotion shouldn’t cost a cent.

He and state Superintendent Tony Bennett, a fellow Republican, say schools are already getting paid to teach students how to read, so the plan shouldn’t require more cash.

“The fiscal (impact) of that bill is zero dollars and zero cents,” Daniels said.

The nonpartisan Legislative Services Agency disagrees. It estimated the remediation efforts called for in the bill could cost schools up to $49 million.

Daniels said the agency must have misunderstood the bill.

“Maybe they’re overworked,” he said.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, said the General Assembly always abides by the Legislative Service Agency’s estimates and that the state can’t afford to pass expensive legislation this year.

“If we think there’s even a probability of a fiscal impact, I think we need to back up and hold off,” Kenley said.

Bennett said he’s willing to work with Kenley to address the bill’s cost.

Bennett, who has triplets who were held back a year in kindergarten and have since gone on to college, said the proposal would focus efforts on reading and make it a top priority. He said local schools should be able to shift existing resources to provide the instruction called for by the proposal.

Under the bill, youngsters who can’t read at the third-grade level by the time they finish third grade would not move on to fourth grade starting in the 2012-2013 school year. Exemptions could be made for certain students, such as those with disabilities or those who have been held back for two or more years.

The bill requires intensive intervention efforts for those who have been held back, such as providing 90 minutes a day of uninterrupted reading instruction through small groups, extended school days or other programs. That alone could cost more than $23 million, the Legislative Services Agency said.

Bennett suggested schools could provide that 90 minutes during the existing school day by having students skip recess or fine arts classes or by making other arrangements. He said parents, volunteers or community mentors could help teachers working with retained students and that local principals and superintendents could find creative solutions.

Kenley said it sounded like the proposal needed to be thought out more.

“If they’re telling me that there’s so much slack in the school day today that they can do all this because of the free time they have, they need to produce the evidence that that’s so,” Kenley said.

Kenley hasn’t yet decided whether his committee will hold a hearing on the proposal, which Daniels deemed a priority in his State of the State address Tuesday.

Indiana Department of Education data shows nearly a quarter of third-graders fail the reading section of annual statewide tests. With about 80,000 third-graders in state public schools, that means up to 20,000 kids could be retained each year.