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SDPB Radio Coverage of the South Dakota Legislature. See all coverage and find links to audio and video streams live from the Capitol at www.sdpb.org/statehouse

Leaders Explain Plan To Cap K-12 Reserve Funds

Kealey Bultena
Lt. Gov. Matt Michels addresses a joint session of lawmakers ahead of Governor Dennis Daugaard's State of the State Address / January 12, 2016

Leaders in Pierre are laying out the governor’s new plan for dispensing state tax dollars to schools. This week’s discussion includes details about proposed caps to school districts’ reserve funds. 

South Dakota school districts are allowed to keep reserve funds. They’re basically savings accounts for general fund dollars. Part of Governor Dennis Daugaard’s plan to alter the funding formula for K-12 schools includes limiting the amount of money schools can squirrel away.

Tony Venhuizen with the governor’s office says school districts used to have caps on reserve funds. He says it started during Governor Bill Janklow’s tenure, and the caps were repealed in 2011.

“What we’ve seen since that time is that general funds reserves in school districts have gone back up quite a bit, and there was a feeling in the [Blue Ribbon] task force – and I’ve heard this from many of you, also – that we want to be sure that the dollars that we put into education are going to benefit the students that are here today,” Venhuizen says. “And although a reserve is an appropriate and prudent management tool at some level, once it gets too high we really need to be expecting districts to expend those dollars.”

Venhuizen says earlier reserve caps were a flat percentage for all districts. He says the governor’s plan includes three separate levels for districts of different sizes.
“The rationale for having a tiered system like that is that a small district with a small budget, 25 percent of their budget might not really be all that much money and one significant event could lead them to blow through their reserves, and so as you are a smaller enterprise you have larger risk and need to put more dollars into insuring yourself against that,” Venhuizen says.

The proposal allows small schools with 200 students or fewer to keep reserves at 40 percent of the general fund budget. Medium-sized districts with up to 600 students can reserve 30 percent of their money, and the largest schools can keep 25 percent of their general fund dollars in reserves.

A cap on reserves is just one element of the governor’s plan to put more money into education. The proposal also includes raising the sales tax to benefit teacher pay and shifting funding from a dollar amount per student to a student-to-teacher ratio.