September 19, 1986

The Honorable Robert R. Weber 
State Representative 
c/o Legislative Research Council 
State Capitol 
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 86-38

Deficit levies in school district reorganization

Dear Rep. Weber:

You have requested my official opinion concerning the following facts:

FACTS: 

On February 20, 1968, the Grant County Board of Education officially attached the Osceola #1 School District to the Wilmot School District effective July 1, 1968.  On April 2, 1969, the Roberts County Board of Education adjusted the assets and liabilities of the Osceola #1 School District so that that district had liabilities of $55,229.07 more than assets.  The Roberts County board also proposed a fifteen-year payment plan for that sum.  The Osceola district had assets totaling $4,815.18 when attached to the Wilmot district.  The Roberts County board adjusted the liabilities of Osceola so that Osceola would pay for a share of the assets of the Wilmot district.  On February 17, 1968, Chapter 42 of the 1968 Session Laws was signed by the governor which repealed SDCL 13-6-79.  This section of the law permitted the adjustment of assets and liabilities.

Based upon those facts, you have asked the following question:

QUESTION: 

Did the Roberts County Board of Education violate the law by imposing a fifteen year tax on the rural property owners in the Osceola #1 School District when such board adjusted the assets and liabilities of the Osceola  district one year after the Legislature repealed the law permitting such adjustment?

In reviewing the rather tortured history of school district reorganization in South Dakota, I find that under SDCL 13-6-79, as originally enacted, a situation could arise in which, provided the matter was addressed in the master plan approved by the voters, an order could be issued that would artificially increase the liabilities in a dissolved district in reorganization to a point where the liabilities thus increased exceeded the assets of the dissolved district.  In that situation a tax levy could be imposed on the property in the dissolved common district until such time as the amount was paid off. According to the Code Commission's note appearing in the current South Dakota Code volume 5, SDCL 13-6-79 was 'repealed by omission from Session Law 1968, Chap. 42, §  1.' Whether that was the intention of the Legislature or not it is true that the previously identified session law does not directly empower anyone to increase the liabilities of a dissolved district in this manner. Whatever the case, the only reference in the law which took effect February 17, 1968, and existing law to this mechanism is as follows:

If the board of county commissioners shall find that a school district, totally dissolved by reorganization, has an excess of total liabilities over its total assets, such board of county commissioners may authorize a tax levy against the property located within the boundary of such former school  district necessary to discharge the balance of liabilities.  

SDCL 13-6-81.

In a 1973 case entitled Christians v. Grant County Board of Education, 207 N.W.2d 213 (S.D. 1973), the South Dakota Supreme Court held that the section did not authorize the extension of bonded indebtedness from an existing district to a former common school district because such a levy would violate Art. XI, §  8 of the South Dakota Constitution.  The holding in that case is quite narrow, restricted as it is to the question of attempting to spread bonded indebtedness on the existing district to the dissolved district.

The 'Notice of Order for Adjustment of Assets and Liabilities,' a copy of which you provided, is the document that imposed the net liability of $55,229.07 upon the property of the dissolved Osceola district.  A review of that document reveals that the amount is based upon the 'share of assets' credited to the Osceola District as a result of the reorganization.  I also note that you provided a copy of a subsequent adjustment issued October 14, 1970, that reduced the liability of the Osceola District to $40,042.00 resulting in a payment of $2,669 per year.

Absent some proof that this amount represented bonded indebtedness of the Wilmot School District, I cannot at this time say that SDCL 13-6-81 and its predecessors did not allow the county commissioners to 'find' that the liabilities exceeded the assets.

Assuming for the purposes of discussion that upon repeal of the 

SDCL 13-6-79 in 1968 the county board was without authority to impose the 'deficit levy' on the property of the dissolved Osceola District, I believe that the Legislature subsequently cured any such defect.  SDCL 13-6-1.1 provides: 

All proceedings had for the reorganization of school district prior to July 1, 1977, are hereby declared legal and valid, notwithstanding any irregularity or defect, other than a constitutional defect, in the reorganization or creation of such school districts provided, however, that the validation shall not apply to acts and proceedings which were, on July 1, 1977, in dispute and pending as litigation in courts of competent jurisdiction pursuant to the provisions of this chapter.  Such validation shall not apply to any decision, order or directive when the time for appeal had not expired on July 1, 1977, provided an appeal is perfected.  [Emphasis supplied.]

Based upon the statute set out above, assuming that the order was not constitutionally deficient as an attempt to spread the existing bonded indebtedness, since it does not appear that the matter was in dispute on July 1, 1977, it would be my opinion that the curative act taken by the Legislature precludes any judicial correction of this situation at this time.

Accordingly, my answer to your question is that even if the Roberts County Board of Education did not have the authority to impose the fifteen year tax on  the real property owners, the subsequent curative act of the Legislature ratifies that action and insulates it from attack unless, as noted, the problem is constitutionally based.

Respectfully submitted,

Mark V. Meierhenry
Attorney General