November 24, 1976

Mr. Eldon Stoehr, Auditor General
Department of Legislative Audit
State Capitol
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 76-110

Source of contributions of school districts to state retirement system

Dear Mr. Stoehr:

You have requested an opinion based on the following factual situation:

FACTS:

Audit reports filed in the office of the business manager of Lead­-Deadwood Independent School District No. 106 indicate the school district has requested and received an additional one-half mill tax levy from FY 72 through FY 76 for school district retirement pur­poses under the apparent authority of SDCL 13-10-6. Moneys col­lected from this levy are deposited into the school district General Fund and used to match employee contributions to the State Retire­ment System. Information received from the State Retirement System indicates the school district entered the State Retirement System July 1, 1968.

The question you ask is:

QUESTION:

In that Lead-Deadwood Independent School District No. 106 does not maintain its own fund for the payment of pensions to retired employees of the school district (the school district choosing in­stead to participate in the State Retirement System), is the addi­tional one-half mill tax levy authorized by SDCL 13-10-6 permissi­ble?

SDCL 13-10-6 provides:

For the purpose of continuing a fund for the payment of pensions to retired employees of school districts which shall have established such system, such districts may levy an annual tax not exceeding one-half of one mill upon the assessed property valuation of such school district for the current year. Such levy shall not be included in determining the tax levy limitation of such district provided by law. Moneys collected from such tax shall be kept by the business manager in a special pension fund and shall not be used for any other purpose except upon discontinuance of such pension system by the district, in which case any unexpended balance shall be transferred to the general fund.

However, several other statutes are also relevant and must be read in pari materia for purposes of answering your question.

SDCL 13-10-4 states:

Subject to the provisions of §§ 3-12-65 and 3-12-66, any school board shall have the power to enter into a retirement pension agree­ment with its employees for their benefit and to pay any part or all of the necessary premiums therefor.

SDCL 3-12-71 provides:

The member shall make a contribution and the employer shall make an equal contribution at the following rates:

(1) Class A members five per cent of compensation;

(2) Class B members six per cent of compensation.

The employer shall cause to be deducted on each payroll of a member for each payroll period, the contribution payable by the member as provided in this section.

Therefore, political subdivisions, including school districts, have several op­tions. First, they may continue to operate their own plan if created prior to July 1, 1974. Second, they may elect, pursuant to SDCL 3-12-65, to join the state system at any time.

If a school district chooses to maintain its own retirement system, it ob­viously may levy a special levy not exceeding one-half mill pursuant to SDCL 13-10-6.

On the other hand, if a school district elects to become part of the state retirement system, SDCL 3-12-71 requires the employer (school district) to match the contribution of the individual members (teachers). Chapter 3-12 does not, however, specify the manner by which a political subdivision's contributions are to be funded. Therefore, in my opinion, the specific pro­vision of SDCL 13-10-6 is applicable.

It is my opinion that the special levy of SDCL 13-10-6 may be utilized by a school district participating in the state retirement system. To otherwise in­terpret the law would create an inconsistency as well as a limitation on a school district which I do not believe the Legislature intended. The intent of the provision in § 13-10-6 requiring a special pension fund was, of course, to insure that said funds would be segregated and used exclusively to meet obligations under the pension plan. That intent is certainly not defeated or circumvented if the school district's contributions are deposited in the retirement fund established pursuant to SDCL 3-12. Furthermore, the special levy is merely permissive, and, thus, a school district participating in the state system can decide if a special levy, as opposed to a general fund ex­penditure, is necessary to fund the retirement plan.

Clarification of this matter should perhaps be the subject of legislation in 1977 since not only school districts but other political subdivisions may be faced with the same situation.

The answer to your question is YES.

Respectfully submitted,

WILLIAM J. JANKLOW
ATTORNEY GENERAL

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