Attorney general opinion points out flaws in new school funding methods

The Ennis School Board erred in using adult education and transportation funds to build its new school, according to a draft opinion issued Friday by Montana Attorney General Steve Bullock.

The opinion, which was requested in July by the Madison County Commissioners and Madison County Attorney Chris Christensen, says using funds that were levied without voter approval for project that typically requires voter approval is contrary to the intent of Montana law.

“If the trustees can generate non-voted property taxes for capital investments that would otherwise require voter approval, the legislature’s objective for taxpayer oversight is nullified,” the opinion reads. “I am obligated to determine and give effect to the legislature’s intent.”

The significance of Bullock’s opinion is that in Montana an Attorney General’s opinion is law unless overturned by a district court or if the law relating to the opinion is changed or clarified by the Montana Legislature.

At the heart of the opinion is the question: Can a school district build a school with money from their adult education and transportation funds?

Ennis is nearing completion on a two-year school building project to replace their elementary and junior high schools. School officials have said the project will cost about $8 million, with about half of that money coming from the adult education fund, and another portion coming from transportation funds.

Under Montana law, school boards can raise and lower taxes in their adult education and transportation funds without voter approval. However, the law indicates that money should be used specifically for those programs, Bullock writes.

Over the past several months, the Ennis School District officials have outlined their intent to use the new school building for an expanded adult education program.

In fact, information provided to Bullock and outlined in his opinion detailed the use of the new school building as 49 percent adult education, 36 percent K-8 education and 15 percent transportation.

“In response to inquiries from the Office of Public Instruction, the district superintendent represented that the new school would be used for multiple purposes including adult education and transportation services, and that only a portion of the school would be used for K-8 instruction,” wrote Bullock.

The problem is Montana law already outlines how school boards can generate funds to build schools, he wrote. The general idea is that funds used to build schools require voter approval, such as the building reserve fund and building fund.

“I cannot construe a non-voted levy fund such as adult education to authorize the same types of expenditures as a voter approved fund such as the building reserve fund,” Bullock writes. “I conclude that adult education funding sources were not intended to finance capital investments such as school buildings.”

Similarly, the attorney general concluded that transportation funds may be used to build transportation facilities, but not classrooms.

“While it would be permissible for the trustees to budget for transportation program needs in the flex fund to purchase buses or construct a bus barn … the trustees may not budget for or expend property taxes levied to support the transportation fund for new school construction because that is not the purpose for which transportation funding sources were raised,” wrote Bullock.

Recourse for the inappropriate use of funds can involve an audit, which can be demanded by the school board and/or the county, he wrote.

“Depending on the results of that accounting, it may be appropriate to reimburse the transportation and adult education funds with available cash balances,” Bullock wrote. “Ultimately, however, the trustees (as the term implies) must answer to the taxpayers of the district, particularly where property taxes are in question.”

Bullock also wrote that criminal and civil remedies could be pursued if there is a basis for such actions.

Since the opinion is still a draft, officials involved in the issue were reluctant to comment. Initially, Bullock gave interested parties two weeks to comment on the opinion before issuing a final version.

“I don’t think it’s appropriate to comment on it until we submit our comments to the attorney general for clarification and we will be doing that,” said the school district’s lawyer Elizabeth Kaleva.

On Tuesday, Bullock’s office gave the school district until Jan. 13 to respond to the opinion.

The Montana School Board Association will also be commenting on the opinion, said their executive direct Lance Melton.

School districts receive some state money for their transportation fund and school boards can choose to use that state funding for other needs in their budget outside of the transportation fund, Melton said. The opinion needs to clarify that point.

Also, school districts routinely use transportation money for capital expenditures, he said. So he wants to make sure the opinion would still allow for that as well.

He’s also not sure the attorney general should prohibit the use of adult education funds for capital projects, like a new school.

“I think you can’t operate a program in a vacuum,” Melton said. “There is no adult education program if you don’t have a facility in which to operate it.”

Bullock will take comments on the opinion from a specific set of interested parties, said Jennifer Anders at Bullock’s office in Helena. It’s not open for general public comment.

Once the comment period is passed, Bullock will consider the comments, tweak the opinion if necessary and then issue a final version.

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