STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

September 9, 1969

Robert H. Martin
Director, IDEA
State Office Building
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 69-79

Investment of Cement Commission Funds in loans, repayment of which are guaranteed by the Small Business Administration of the United States Government.

Dear Mr. Martin:

You have requested my opinion to answer this question:

"Can the funds of the South Dakota Cement Plant, either current profits or reserve and replacement funds, be invested in loans, the repayment of which is guaranteed by the Small Business Administration of the United States Government?"

The Cement Plant funds consist of several funds. Consideration must be given to the statutory regulation of the investment of such funds in order to answer your question.

The Cement Plant Interest and Sinking Fund appears in SDCL 1967 5-17-21 and 5-17·22 directs such fund be invested in United States Bonds or deposited at interest in any bank in the State of South Dakota.

SDCL 1967 5-17-21 contains the statutory provision for the creation of a Cement Plant fund in the state treasury. 5-17-30 provides that if any surplus moneys accumulate in such Cement Plant fund which are not needed in the necessary operation and maintenance of the Cement Plant, the State Commission may transfer such surplus to the interest and sinking fund. SDCL 1967 5-17-29 authorizes the secretary-treasurer of the Cement Commission to deposit moneys received by him in depositories designated by the State Cement Commission.

The aforementioned funds may either be invested in Government bonds, or deposited with qualified banks. Therefore, neither fund may be used for the purpose of small business loans.

The only remaining fund is the CEMENT PLANT RESERVE AND REPLACEMENT FUND, which is governed by SDCL 1967, Sections 5-17-34 through 5-17-37, inclusive. A reading of these sections convinces me that the investment of such funds is left entirely to the good judgment of the State Board of Finance. Not less than ten per cent of such funds must be invested in short term investments to mature within one year (5-17-37), Such investments may be either United States Government securities and other investments authorized by statutes (5-17-36). In addition, the Legislature has authorized the State Board of Finance to loan moneys to the Board of Regents for the purposes authorized by SDC 1960 Supp. 15.0736, such loans to be secured by revenue bonds issued in pursuance to SDC 1960 Supp. 15.0737. The statute then provides:

"The state board of finance is authorized to make rules and regulations to provide for the making of loans from this fund."

It is my opinion that had the Legislature intended to limit such authority to the previously described loans to the Board of Regents, it would have used language appropriately limiting the lending authority to such loans from such Cement Plant Reserve and Replacement Fund. It is my opinion that these loans can easily be considered proper investments authorized by statutes. See SDCL 1967 4-5-6.

Attention is also called that "all investments of the Cement Plant Reserve and Replacement Fund shall mature on or before July 1, 1984 unless otherwise directed by resolution of the State Cement Plant Commission." Such a loan must be considered an "investment" and subject to this limitation. It is my opinion that the Board of Finance may authorize the use of moneys from the Cement Plant Reserve and Replacement Fund for small business loans, so long as such loans mature prior to July 1, 1984, without approval extending such time by the State Cement Commission, and provided such moneys come from the balance remaining after the making of such mandatory short term investments.

Respectfully submitted,

Gordon Mydland
Attorney General