STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL
December 16, 1972
Dr. Donald Barnhart
State Superintendent, Public Instruction
Pierre, South Dakota 57501
OFFICIAL OPINION NO. 72-67
Financial panic at Douglas Independent School District #3
Dear Dr. Barnhart:
You have advised that because of certain activities on the part of the Federal Government that the Douglas Independent School District No.3 is in such financial difficulties that it has determined as of December 21, 1972, to cease operating a school. Because of the newspaper publicity surrounding the proposed closing of this school, a recount of such difficulties seems superfluous.
In connection with this proposed action, you have submitted the following questions:
1. When a school district reaches its debt limit, what state agency takes over the school's fiscal responsibilities?
2. If at a later date the district is able to finance itself, will the district at that time be returned to is original status?
3. when the local debt limit is reacher, are board of education members relieved of personal liability during the period of time when another agency has assumed fiscal responsibilities?
4. Certified school personnel are in the process of negotiations and contract renewal. Can any commitment be made to these individuals for the 1973-74 school year?
5. Financial commitments will remain on the books of the district on February 15, 1973. Should the district plan to notify vendors of the transfer of fiscal responsibility or is such transfer of responsibilities automatic?
I believe it is safe to say that because of the territory that makes up the Douglas Independent School District, the fiscal fate of such school district depends entirely upon the Federal Government funding the 874 program, or financially assisting such school district by other federal programs. Only the fatuous and foolhardy could have reason to believe that there is sufficient property, taxable for school purposes to support any type of school system in the territorial boundaries of the Douglas Independent School District. The local school board should have remembered in the operation of the school district that the fate of its educational program depended solely on the continuance of federal support at the level anticipated by such school board, and planned its school curricula with this possibility in mind. This, of course, is "water over the dam."
Many people believe that when a school district becomes so financially overburdened that it cannot continue to operate schools, that Sec. 1 of Article VIII thrusts some responsibility upon the state to continue such educational system. This is not true, at least: at this time.
Sec. 1 of Article VIII of our Constitution was motivated by the fourth proviso of Sec. 4 of the Enabling Act. However, a similar provision had been interpreted in 1885 prior to the adoption of our Constitution in Robinson v. Schenk, 102 Ind. 307, 1 NE 698 where the highest court of that state had held that when the Legislature created school districts and gave such districts the power to tax for educational purposes, that the Legislature made proper provisions for the management of school affairs by local officers, and provided a method whereby such local district could finance itself, the Legislature had "provided by law for a general and uniform system of common schools."
We can appreciate that at the present time there is pending in Federal District Court of South Dakota a challenge on the constitutionality of supporting local school districts by local school taxation. The same problem is also pending in the United States Supreme Court. However, until the definitive answer is made in the Supreme Court of the United States, and a decision in the United States District Court for the State of South Dakota, our Legislature, it must be presumed, has fulfilled its constitutional duty.
The Legislature, as you know, has not: designated any local or state agency to assume the fiscal responsibilities of any school district in the event such school district becomes financially embarrassed. Our Constitution mandates that no state funds may be expended unless there is an appropriation for such purpose. There is no appropriation now existing which authorizes the expenditure of state moneys to keep a financially defunct school district in existence.
County funds may not be expended in the absence of an appropriation for such purpose in the annual budget. Counties are a separate and distinct entity from a school district. I doubt if any county, in the absence of a change of the law, could properly enact an emergency budget to assist the Douglas Independent School District. The same is true of municipal funds, or funds of other school districts.
Under the existing law question No.1 must be answered, there is no state agency that is authorized to take over the school fiscal responsibilities of the Douglas Independent School District.
QUESTION 2: SDCL Ch. 13-23 sets forth the statutes relative to the establishment of discontinuance of school. The school board of an independent school district has authority to establish and discontinue high schools and the exclusive power to establish and discontinue elementary schools (except as limited by law, SDCL 13-23-1). A favorable vote of the electors may cause a district to discontinue a high school (SDCL 13-23-2, et. seq.) SDCL 13-23-7 specifically provides that the electors cannot discontinue any school during the period from the start of a school term and the end of such school term.
In an opinion reported in 1961-62 AGR 19, where it was assumed that the school district in question was a common school district, where the facts showed the district lost both of its teachers, and could not employ qualified substitutes, my predecessor held that in such circumstances, even though in a school term, the school board on its own initiative and without approval of the electors, could close the school, but it would have to assign the pupils to another school district of the parents' choice unless the school district was operating bus service. What effect this opinion has on the predicament the Douglas Independent School District finds itself is problematical.
However, the school board should be made aware of the provisions of SDCL 13-18-4 which makes it a misdemeanor "for any person to issue, sign, or authorize the issuance of a warrant in excess of the legal warrant issuing capacity." (SDCL 13-16-22 sets this capacity) If you have been properly advised as to the financial condition of the Douglas Independent School District, it appears proper to comment that unless the teaching staff will continue to teach, without receiving salary warrants, the school, for all practical purposes, will become inoperative because of a lack of money.
As I have told you, there is no state agency to come to the rescue of the school district. If funds become available to pay warrants, certainly the school should be reactivated and made operational.
QUESTION 3: Although this question is moot, the school board should be reminded of their criminal responsibilities arising from SDCL 13-18-4.
QUESTION 4: It appears to me that it would be most foolhardy for the school board of this insolvent school district to enter into any negotiacions relative to contract renewal and negotiations until its fiscal problem is solved. In the absence of operating funds, and no chance to authorize the issuance of warrants without running the risk of committing a misdemeanor-a public crime-the school board should make no commitment for anything in the future.
QUESTION 5. As there is no transfer of fiscal responsibility, there appears no reason to answer this question.
Respectfully submitted,
Gordon Mydland
Attorney General
