An Act Regarding the Reserve Funds of Certain School Organizational Structures was signed by Governor Mills on March 12, 2020 and will become effective on June 16, 2020.
The contents of the new legislation are summarized below and may be of interest to leaders of some School Administrative Unit (SAU)s. Administrators may wish to consult with legal counsel regarding the procedures for establishing reserve funds for their school organizational structure.
School Administrative Units included in this act are School Administrative Districts (SADs), Regional School Units (RSUs), Community School Districts (CSDs), and Career and Technical Education (CTE) Regions.
Previously, School Administrative Units were able to establish a reserve fund for school construction projects and for financing the acquisition or reconstruction of a specific or type of capital improvement. This new legislation provides additional flexibility to create reserve funds for any of the following: regular education, special education, career and technical education, other instruction such as summer school and extracurricular activities, student and staff support, system administration, school administration, transportation and buses, facilities maintenance, debt service and other commitments; and all other expenditures including school lunch. The request for the reserve fund must be included in the district budget and have a description of the purpose for the reserve fund. The governing board is the trustee of the reserve fund, and in the cases of SADs, RSUs and CSDs, the fund must be deposited or invested by the treasurer as directed by the governing board.
Previously, Boards of Directors of any of these SAUs were able to expend money from reserve funds only if they were authorized to do so by a vote at a district budget meeting and an article for the purpose for the reserve fund had been in the warrant calling the meeting. However, this legislation now also provides the Boards of Directors with the ability to expend funds when the expenditure is required by law or in an emergency where the cost of a district vote is prohibitive. The governing board of the SAUs may expend the funds after providing public notice of a regular or special meeting, at which a vote to expend funds from the reserve fund will be taken. A public hearing must be held prior to the vote to expend funds from the reserve fund, and the vote must be recorded in the meeting minutes.
Step 1 – Reserve fund proposed in the budget for specific purpose is approved
Step 2 – Reserve fund set aside in SAD, RSU, CSD organizations
Step 3 – To expend the funds in the budget year, provide notice and:
- Hold a district meeting, OR
- Hold a regular or special meeting of the governing board with a public hearing, vote, and recorded vote.
For CTE regions, the cooperative board may expend the reserve fund if permitted by any indebtedness secured by the reserve fund and if approved in the region budget. A separate article for that purpose must be included in the budget proposal.
Please reference PL 2019 Chapter 588 for additional information.
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