February 1, 1977

Senator Sheldon R. Songstad 
Post Office Box 47 
Sioux Falls, South Dakota 57101

Official Opinion No. 77-16

Health and Educational Facilities Authority Act (SDCL 1-16A)

Dear Senator Songstad:

You have requested an opinion on the following questions regarding SDCL 1- 16A:

QUESTIONS: 

1.  Can tax exempt bonds be issued for obtaining a capital asset by a qualified institution which will be used for teaching purposes along with some business income? 
    
2.  Can a church related institution acquire a facility under the Act? 
    
3.  Has the Act been tested for constitutionality in South Dakota?

IN RE QUESTION NO. 1:

The legislative findings and purposes for creating the Health and Educational Facilities Authority are found in SDCL 1-16A-1 and provide: 
    
It is hereby determined and declared that for the benefit of the people of the state of South Dakota and the improvement of their health, welfare and living conditions it is essential that the people of this state have access to adequate medical care and health facilities; that it is essential that this and future generations of youth be given the fullest opportunity to learn and to develop their intellectual and mental capacities; that it is essential that health institutions within the state be provided with appropriate additional means to assist in the development and maintenance of public health and public education, respectively; that it is the purpose of this chapter to provide a measure of assistance and alternative methods to enable health institutions and educational institutions in the state to refund or refinance outstanding indebtedness incurred for health facilities or educational facilities and to provide additional facilities and structures which are sorely needed to accomplish the purposes of this chapter, all to the public benefit and good as more fully provided herein; and it is the intent of the Legislature by the passage of this chapter to create a state authority to lend money to health institutions and educational institutions and to authorize the state authority to acquire, construct, reconstruct, repair, alter, improve, extend, own, lease and dispose of properties to the end that the state authority may be able to promote the health and education and welfare of the people of this state and to vest such state authority with all powers to enable such state authority to accomplish such purpose; it is not intended by this chapter that the state authority shall itself be authorized to operate any such health or educational facilities.

Educational institution is defined in subdivision (3) of SDCL 1-16A-2 as: 
    
[A]ny private nonprofit corporation or institution authorized by law to provide or operate educational facilities and to provide a program of education beyond the high school level in the state of South Dakota, and “participating educational institution,” a nonprofit educational institution which, pursuant to the provisions of this chapter, shall undertake the financing and construction or acquisition of educational facilities or shall undertake the refunding or refinancing of outstanding obligations or of a mortgage or of advances or loans as provided in and permitted by this chapter.

In my opinion, a corporation not organized and operated pursuant to SDCL 47-22 to 47-28 (nonprofit corporation law) is ineligible to receive financial assistance from the Authority.  An institution or corporation operating for the purpose of making a distributable profit is not qualified by virtue of the definitions of “educational institution” and “facilities” in SDCL 1-16A-2(3) and (4).

IN RE QUESTION NO. 2:

The answer to your second question is a qualified no. Subdivision (4) of SDCL 1-16A-2 provides in part: 
    
“[F]acilities” shall not include any property used or to be used primarily for sectarian instruction or study or as a place for devotional activities or religious worship or any property which is used or to be used primarily in connection with any part of a program of a school or department of divinity of any religious denomination.

The above definition excludes from the Act facilities used “primarily” for sectarian purposes.  Therefore, the Act does not absolutely prohibit a “church related institution” from acquiring funds for a facility or using that facility secondarily for sectarian purposes.

The above-cited statutes do raise the constitutional issue of whether public funds are being used for sectarian purposes in violation of either article VI, section 3 or article VIII, section 16, of the South Dakota Constitution. The recent case of McDonald v. Yankton Independent School District No. 1, 246 N.W.2d 93, strictly interpreted the Constitution in striking down a statute authorizing the loaning of textbooks to students in nonpublic schools. However, as I have stated in previous opinions, the courts, and not this office, must determine the constitutionality of statutes.  Even then, the courts presume the validity of a statute unless it is plainly and palpably unconstitutional.

IN RE QUESTION NO. 3:

I am not aware of any court challenges of the constitutionality of SDCL 1- 16A or any parts thereof.  Since SDCL 21-24-8 requires that the office of Attorney General be made a party to all actions alleging the constitutionality of a statute, I must assume no such actions have been initiated.

Respectfully submitted,

William J. Janklow
Attorney General

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