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PIERRE | A public school district would lose some state aid if its lowest monthly general fund cash balance was larger than South Dakota law allows, state officials said Monday.

South Dakota Department of Education officials explained the new requirements to members of the state School Finance Accountability Board during a teleconference. The provisions were part of the 2016 teacher compensation package. The purpose of the cash balance provisions is to discourage school districts from stockpiling money that comes from taxpayers.

State aid is a combination of payments from two sources: state government’s general fund and the general education levy that is part of a school district’s local property taxes.

The state and county systems operate on different budget years and therefore the state aid amount flows on a different schedule than the property taxes are collected.

The portion of the 2016 law that takes effect July 1 this year says the lowest monthly general fund cash balance in any state fiscal year can’t be more than: 40 percent of the general fund base for a school district with fall enrollment of 200 students or less; 30 percent for a school district with fall enrollment of more than 200 students but less than 600; and 25 percent for a school district with fall enrollment of 600 students or more.

The law says the education secretary shall use the lesser of the school district's fall enrollment for the current school year or the fall enrollment from the previous two years. The penalty is a reduction in the district's state aid by the same amount as the excess.

There are many moving parts. The Legislature’s Joint Committee on Appropriations will make decisions in December or January after the School Finance Accountability Board submits recommendations.

Some school districts in South Dakota don’t receive state aid, said Susan Woodmansey, an administrator in the department’s Division of Finance of Management.

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Woodmansey said several school administrators have already told her they would accept state aid penalties rather than bring their general fund balances into compliance. Last year the School Finance Accountability Board determined 14 school districts needed remedial actions to bring salaries in line with the 2016 law.

The appropriations committee agreed but several legislators complained. The 2016 law required appropriators approve the board’s decisions. The Legislature subsequently changed the law this year to give greater flexibility to appropriators.

HB 1166 would let appropriators inject an additional step and suggest the board consider changes. The board then would have 30 days to decide and resubmit. Appropriators in turn could approve, amend or deny any waiver from the board.

Rep. Taffy Howard, R-Rapid City, was prime sponsor of HB 1166. She had 37 House co-sponsors. The measure had 16 Senate co-sponsors led by Sen. Justin Cronin, R-Gettysburg. Howard and Cronin serve on the appropriations panel.

Gov. Dennis Daugaard hadn’t announced a decision as of Monday afternoon whether HB 1166 would become law.

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