Committee backs amendment to allow up to $500,000 from dissolved Edmore school to local political subdivision; final vote postponed

The Senate Finance and Taxation Committee discussed Senate Bill 2158, a measure that would permit a dissolving school district to transfer up to $500,000 of unobligated cash balances to a political subdivision located wholly or partly inside the dissolving district. Committee members heard attorney general staff, the Edmore superintendent, education groups and a county reorganization committee member before voting to accept an amendment clarifying the bill’s language; the committee postponed a final vote to a later date.

The bill was presented to the committee as a corrective measure to resolve a drafting conflict in current law and to reflect the intent of prior legislation, Senator Scheibley said. "We believe 21 58 completes all those hurdles to get this plan done," he said, noting the school year fiscal year ends June 30 and urging an emergency clause to effect a dissolution this year.

The attorney general’s office urged a change in wording from a mandatory directive to discretionary language. "When you put a 'shall' in, it's a directive," Lisonbee Hicks, assistant attorney general and general counsel to the State Board of Public School Education, told the committee. Hicks said the amendment also narrows recipients so any political subdivision receiving funds must be "located either wholly or partially within the geographic boundaries of the dissolving school district," to ensure the funds benefit the local community.

Committee members and witnesses explained how unobligated balances are currently handled under the North Dakota Century Code. Committee discussion cited sections 15.1-1228 and 15.1-1229 as governing the set-aside and distribution process: a $10,000 holdback for obligations such as unemployment and workers’ compensation, an amount reserved for potential outstanding liabilities, and then distribution of remaining funds according to statute. "The money follows the kids," the attorney general’s representative said, describing the common practice of dividing balances proportionally based on which districts absorb former students.

Frank Schill, superintendent of the Edmore Public School District, testified about the local situation that prompted the bill. He said Edmore had been considering dissolution or reorganization since about 2013, held public meetings ("probably about a 100 people, 75 to 100 patrons at that meeting"), and that the district had generated additional revenue from asset sales ("probably $300,000, $400,000," he said). Schill said roughly $225,000 is being held for unemployment liabilities for three to five years and that even if $500,000 is transferred to the city to run a community center, taxpayers would still receive an estimated tax refund roughly equal to the prior year's taxes (Schill characterized that as "roughly about that $600,000 mark").

Supporters told the committee they back local control and the ability for communities to preserve school buildings as community assets. Mike Hileman, executive director of North Dakota Small Organized Schools, said the measure lets local elected boards "give some of those dollars" to a political subdivision "attached to that district so that something like a school could become a community center." Amy Copas, executive director of the North Dakota Council of Educational Leaders, described a South Dakota example where repurposing a closed school into local businesses and community uses sustained a small town.

Opponents raised concerns about unrestricted use of taxpayer funds. Joseph El Bata of Adams, a member of the Walsh County reorganization committee testifying in opposition, said the bill provides no required limits on how a political subdivision could use the money and argued the funds were intended for children’s education. "Funds that have been given...are taxpayer dollars...not to be given to a political subdivision," he said, and suggested a smaller ceiling or a narrower use requirement such as specifying the money must be used for maintenance of a school building after closure.

After discussion, Vice Chair Rummel moved to accept the attorney general's amendment changing "shall" to "may" and clarifying the recipient-subdivision geographies; the motion was seconded. The clerk called the roll on the amendment, and the committee recorded affirmative votes for the amendment from multiple members and approved it. Committee members then agreed not to take final action that day and to reconvene at 9 a.m. Wednesday for further deliberation.

The committee hearing included questions from members seeking detail about the origin of the $500,000 figure (witnesses said it emerged from local discussions in Ramsey County and Edmore), how unobligated balances have been distributed historically, and how the local dissolution plan provides for a committee to manage a transferred facility (Schill said the dissolution plan names two city council members, two school board members and the mayor to a local committee).

Next steps: Senate Bill 2158, as amended by the attorney general’s suggested language, will be revisited by the Senate Finance and Taxation Committee at a scheduled continuation; the committee did not take a final vote on the underlying bill during this hearing.