BILL NUMBER: S2052
SPONSOR: WEBB
 
TITLE OF BILL:
An act to amend the real property tax law, in relation to school
district unexpended surplus funds
 
PURPOSE:
Relates to school district unexpended surplus funds
 
SUMMARY OF PROVISIONS:
Section 1: Amends subdivision 1 of section 1318 of the real property tax
law to change the threshold for a school district's unexpended surplus
funds to be applied to the proposed tax levy from four percent to six
percent.
Section 2: Establishes the effective date.
 
JUSTIFICATION:
School districts are currently limited to carrying a maximum of four
percent of their budget in to.the following school year. These unex-
pended excess funds, often referred to as a "fund balance," help school
districts deal with unexpected costs, including special education
expenses and emergency capital projects. The funds also allow districts
to address revenue shortfalls, other mid-year funding reductions, or
costly emergency situations such as the current COVID-19 pandemic.
However, the four percent limit often covers less than three weeks of a
school district's expenses. This level of fund balance is well below the
Government Finance Officers Association's recommendation for governments
of no less than two months' worth of operating expenses.
Comparatively, municipal governments throughout the state have no
specific percentage limitation on fund balances, only keep fund balances
within a "reasonable" amount. Based on that requirement, non-school
district municipalities often maintain a fund balance well over six
percent. A six percent limit would allow school districts to carry
approximately a month's worth of expenses and assist them in maintaining
a fiscally responsible budget throughout the school year to better serve
their students. This is especially important given the current fiscal
situation many school districts are facing; the prospect of insufficient
revenues from local property taxes, as well as uncertainty regarding
levels of future state and federal aid.
 
LEGISLATIVE HISTORY:
2021-22: S1935 - Referred to Education
2019-20: 5340 - Referred to Local Government
2017-18: 54724A - Referred to Local Government
 
FISCAL IMPLICATIONS:
None.
 
EFFECTIVE DATE:
This act shall take effect on the one hundred twentieth day after it
shall have become a law.

Statutes affected:
S2052: 1318 real property tax law, 1318(1) real property tax law