Reserve fund timeline extension bill cut short
A bill that would have extended the timeline for a district to spend down their reserves spent its last day in the legislature on Thursday (3/2).
House Appropriations committee members voted 6-2 against Senate Bill 92, which changes the year a school district is required to bring general fund reserves down to a certain percentage from 2018 to 2020.
ASBSD supported the bill, which had previously passed the Senate, noting its simple request was for flexibility for districts.
“All it asks for is a little bit of flexibility,” Executive Director Wade Pogany said. “It doesn’t change the caps. It doesn’t kick the can down the road.”
“It’s asking for flexibility for a reason.”
That reason is the small – possibly no – increase in funding schools may receive for next year.
“We are now facing a very, very difficult situation as far as schools are concerned,” Sen. Jim Bolin said, adding that schools “are facing very lean appropriations.”
“I don’t think it’s a wise a move at this time to require school districts to spend down these reserves.”
The fund balance caps are based on enrollment tiers and calculated by using the district’s lowest monthly fund balance of the 12 month period, with districts with less than 200 students at 40 percent, those with 200 to 600 students at 30 percent and districts with more than 600 students at 25 percent.
Proponents of the bill claimed it was making changes to the formula too soon from its implementation.
“It’s too soon to know what’s going on,” S.D. Department of Education CFO Tami Darnall testified. “I can’t make any correlation between the changes in the funding formula and fund balance.”
In addition, Darnall said schools worried about not meeting the prescribed fund balance cap have the opportunity to apply for a waiver from the School Finance Accountability board. The rules for which, however, remain just in draft form.
“We’re making a decision without all the information there,” Rep. Dan Ahlers said.
Rep. John Lake said the decision not to extend the timeline could result in reckless spending.
“You’re putting them in a spot…where their choice is to either spend those (reserve) dollars or take a reduction in state aid,” Rep. Lake said. “We’re putting them in a position to not spend (dollars) wisely.”
A position not all agreed would result in poor spending habits.
“I can’t imagine (schools) being reckless spenders,” Rep. Hugh Bartels said.
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