October 8, 1986

Maurice Christiansen, C.P.A. 
Auditor General 
Department of Legislative Audit 
435 South Chapelle 
Pierre, South Dakota 57501

Official Opinion No. 86-41

Federal credit unions as possible depositories for public funds for school districts, municipalities and counties

Dear Mr. Christiansen:

You have requested an official opinion from this Office in regard to the  following factual situation:

FACTS: 

Banks and savings and loan associations have been designated as the legal depositories for school district funds (see SDCL 13-16-15 and 15.1), counties (SDCL 7-20-1 and 1.1), and municipalities (SDCL 9-22-6 and 6.1).  The 1986 Legislature revised SDCL 4-6A-1 and 4-6A-3 to include federal credit unions as legal public depositories.

Based on the above facts, you have asked the following question:

QUESTION: 

Can school districts, counties and municipalities designate a federal credit union as an official depository for their funds?

Public deposits are defined in SDCL 4-6A-1 in pertinent part as: 

[A]ll general, special and other funds held or administered by this state or any political subdivision thereof, including counties, municipalities, townships and school districts, or by any officer, commission, board, bureau, or agency of the state or political subdivision or any tribal government funds, and which public deposit is insured, in whole or in part, by deposit  insurance.  . . .

In 1986 the Legislature added subdivision (10) to SDCL 4-6A-1 defines the federal credit union depository as 'a federally chartered credit union which is located in this state and which receives or holds public deposits, and segregates eligible collateral for public deposits as described in §  4-6A- 3.'  This statute serves merely to define federal credit unions and to provide a cross-reference to SDCL 4-6A-3, which provides that federal credit union depositories 'shall at all times maintain, segregated from its other assets, eligible collateral having a value at least equal to its maximum liability under this chapter.'

SDCL ch. 13-16 dealing with education provides in SDCL 13-16-15 that 'the school board of every school district shall be resolution duly adopted at any annual, regular, or special meeting designate any bank or banks within the state as depositories for the funds or any part or parts of the fund of the district.'  In 1974, the South Dakota Legislature added SDCL 13-16-15.1 to this chapter, which provides in pertinent part that domestic savings and loan associations whether chartered by the state or by the United States are official depositories for school district funds.  Chapter 13, therefore, specifically provides that school districts may invest their public funds in banks within the state and in savings and loan institutions.  There is no mention in this chapter of federal credit unions as authorized depositories for  school district funds.  The specific statutes delineating the official depositories therefore control the question and override any inference based on SDCL 4-6A-1 and 4-6A-3 that federal credit unions have been authorized as depositories for school district funds.

ANSWER:

The answer to your stated question regarding school district funds, therefore, is no, they may not be deposited in federal credit unions.

Counties also lack the statutory authority to designate a federal credit union as an official depository for their public funds.  SDCL 7-20-1 and 7-20-1.1 designate respectively, state or national banks within the county and domestic savings and loan associations as official depositories for county funds.

The South Dakota Legislature has also specifically delineated the official depositories in which municipalities may deposit public funds within their control.  SDCL 9-22-6 and 9-22-6.1 specifically designate banks within the state of South Dakota and savings and loan associations as the official depositories for municipalities. As federal credit unions are not included in the statutes setting forth the official depositories for counties, municipalities, and school districts, it is therefore my opinion that there is  not sufficient statutory authorization to allow these political entities to designate a federal credit union as their official depository.

Respectfully submitted,

Mark V. Meierhenry
Attorney General