Citing tough financial times and the need to give school boards more flexibility, members of the South Dakota Senate voted 27-8 Monday to repeal limits and penalties on school district general fund balances.

The proposal, officially filed as SB 200, is part of Gov. Dennis Daugaard’s legislative agenda. The effort stems from his campaign pledge to return local control to school districts.

Sen. Cooper Garnos, R-Presho, pitched the bill to the full Senate. He told lawmakers that fund balances have fallen and financial penalties issue have dwindled – two facts he said suggest that the fund balance caps have outlived their usefulness. Sen. Garnos also argued that the tough financial times dictate that school boards need more authority to manage district budgets.

Sen. Phyllis Heineman, R-Sioux Falls, was one of the few lawmakers who voiced opposition to the measure. After wrongly characterizing fund balances and reserve accounts, she asked lawmakers to
“continue the scrutiny” on school finances by maintaining the state-established limits.

The measure now moves on to the House.

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Backed by the weight of the governor’s office, a proposal to eliminate restrictions on school district general fund balances won unanimous approval Thursday from members of Senate Education.

The committee sent SB 200 to the floor on 6-0 vote. The legislation repeals sections of state law that define fund balances, establish fund balance caps and set-up sanctions for districts with balances that rise above state-defined limits.

Gov. Dennis Daugaard first pledged at the ASBSD and SASD Convention in August to initiate legislation to repeal fund balance caps. He later made the idea part of his K-12 platform. On Thursday, the governor dispatched senior advisor Tony Venhuizen to rally support for the legislation.

“Gov. Daugaard believes very firmly in the notion of local control,” Venhuizen said. “We need to give schools the flexibility to manage themselves.”

Legislators put up little resistance. In a period of time reserved for committee comment, lawmakers remarked simply that the bill is “the right thing to do.”

ASBSD supports the legislation.

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Members of Senate Education made short work of Senate Bill 8 Tuesday morning, approving the measure unanimously. Triggered by the issuance of GASB 54 in 2009, the bill eliminates the term “unreserved fund balance” from state law and replaces it with language consistent with the new governmental accounting standard.

Fund balances are expected to be a hot topic this legislative session. Gov. Dennis Daugaard is expected to introduce legislation to eliminate the caps placed on school fund balances.

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