March 5, 1975
Mr. Eldon Stoehr
Auditor General
State Capitol Building
Pierre, South Dakota 57501
OFFICIAL OPINION NO. 75-44
Year end cash balances of school districts
Dear Mr. Stoehr:
You have requested an opinion from this office based on the following factual situation:
On February 25, 1974 Circuit Court Judge James R. Adams, First Judicial Circuit ruled that in the case of Blumer et al v. School Board of Beresford Independent School District No. 68 that surplus cash held by that district was excessive and in violation of SDCL 13-11-2 (1967). In conclusion Judge Adams states:
Neither the record in this case nor matters within the range of judicial notice enables this court to decide what specific carryover, if any, would be proper in the General Fund. However, it is clear that the amount carried over by this board this year is too great. The adoption of a budget which could result in a general fund balance at the end of this year in excess of $35,000.00 is declared unlawful; a mill levy reasonably required to fund such a sum will be affirmed. Any levy in excess of that is declared null and void as being in violation of SDCL (1967) 13-11-2.
There being a balance in the Capital Outlay Fund greater than the anticipated expenditures from that fund this year, the entire levy for such purpose is unlawful and declared void. The September 10th resolution is abortive. It does not amount to an effective "Resolution of Intent."
Effective July 1, 1973, SDCL 13-11-12 was amended stating that school budgets would "be prepared according to the budget standards prescribed by the auditor general." Within the standards I prescribe there is a formula for determining the amount of carryover funds that would be reasonable.
Based on this factual situation, your question is:
Would the Blumer decision affect school districts cash balances allowed by the guidelines I have prescribed under SDCL 13-11-2 as amended in 1973?
In the Blumer decision, Judge Adams said in part:
All agree that any tax levied by an agency such as this school board must be levied in close compliance with the grant of taxing power by the legislature to the agency.
Under the present statute, SDCL 13-11-2, the law now provides:
The school board shall cause a proposed budget for the next fiscal year to be prepared according to the budgeting standards prescribed by the auditor general for consideration at the regular meeting in the month of May. The proposed budget shall be published in the designated official newspaper not later than July fifteenth together with a notice of hearing on the budget, which hearing shall be held before August first. Before September first every school board shall approve a budget for the anticipated obligations of each fund for the school fiscal year. By resolution the school board shall adopt a levy in dollars sufficient to meet the school budget for all the funds. Any changes in the proposed budget incorporated into the final budget shall be published in the minutes of the first meeting of the board after the final adoption of the budget.
At the time, the Blumer case was decided, the language of SDCL 13-11-2 being considered by the court read as follows:
The school board shall cause a proposed budget for the next fiscal year to be prepared for consideration at the regular meeting in the month of May. Before September first every school board shall approve a budget for the anticipated obligations of each fund for the school year. By resolution the school board shall adopt a levy in dollars sufficient to meet the school budget for all the funds.
It is clear that when the Legislature changes a law, the decisions of the court based on the former law are modified to the extent that the new law is different. This of course presumes that the new law is constitutional and that the decision of the court on the former law did not involve the courts interpretation of constitutional issues relating to the former statute. Gibbs v. Bergh, 51 S.D. 432, 214 N.W. 838 (1927). It is well settled that the function of passing laws is for the Legislature, not for the court. McFarland v. Keenan, 77 S.D. 39, 84 N.W. 2d 884 (1957). Schmitt v. Nord, 71 S.D. 575, 27 N.W. 2d 910, appeal dismissed 68 S. Ct. 1018, 334 U.S. 809, 92 L. Ed. 1741 (1947).
In the Blumer decision the court places heavy emphasis on the provision of SDCL 13-11-2 which provides that the school board shall adopt a levy sufficient to meet the school budget. When large carryovers exist, the court found it to be contrary to law to continue to levy a tax in excess of that required for operation of the school. The fact that the new SDCL 13-11-2 passed in 1974 gives you the authority to set budgeting standards for proposed budgets does not clearly make the Blumer case inapplicable. Much of the critical language in SDCL 13-11-2 which the Blumer court relied on still remains. In my opinion the Blumer decision does limit the budgeting standards you can set. For this reason I would suggest that House Bill No. 708 be considered to clarify the legislative standards authorized for school budget "carryovers." The authority of the Auditor General to set a comparable standard pursuant to SDCL 13-11-2 would not in my view be clearly free from the limiting effects of the Blumer decision.
Respectfully submitted,
WILLIAM J. JANKLOW
ATTORNEY GENERAL
WJJ:DOC:rw
