April 2009 - Flexibility Bills Signed By The Govenor

DUFF, WHITE & TURNER, L.L.C.
Attorneys And Counselors At Law

FLEXIBILITY BILLS SIGNED BY THE GOVERNOR

The South Carolina General Assembly has responded to the urgent requests of school districts to loosen certain budgetary and personnel restrictions in light of the serious budgetary issues districts are facing. In that regard, the Legislature has passed two joint resolutions, which the governor signed into law on April 7, 2009. Commonly referred to as the flexibility bills, school districts should be aware of the options, as well as the new requirements, contained in these bills.

One flexibility bill originated in the Senate as S.588 and is much shorter and less detailed than the other bill, which originated in the House. S.588 allows school districts to "uniformly negotiate salaries below the school district salary schedule" for non-TERI retired teachers for the 2009-2010 school year. What is meant by "uniformly" is unclear, but it likely means in an objective, systematic manner, rather than on an individual basis. S.588 also extends the deadline for school districts to offer contracts to certified employees from April 15 to May 15, 2009. The bill includes a provision requiring employees to accept those contracts no later than ten (10) days following receipt of the contract.

The other flexibility bill, H.3352, contains those same two basic provisions, but provides that teachers must accept their contracts within ten (10) days of receipt of the contract or by May 25, 2009, whichever date occurs later. This due date inconsistency between the two flexibility bills would likely be resolved in favor of allowing employees to comply with the later due date, thus giving them until May 25, 2009, to sign and return their contracts.

H.3352 contains other flexibility provisions not found in S.588. Most significantly, districts now have the ability to furlough teachers for up to five (5) non-instructional days, provided that district administrators are furloughed for twice the number of days teachers are furloughed. The term "district administrator" is not defined, but should reasonably be given the broader meaning to include all persons employed in administrative positions, not just those assigned to the district office. Additional accommodations in H.3352 include flexibility in the use of lottery funds and the suspension of the EIA local maintenance effort requirement for 2008-09 and 2009-10. Districts also may suspend professional staffing ratios and expenditure regulations and guidelines at the sub-function and service area level, except for four-year-old programs. Districts must ensure that 65 percent of the funds utilized under this provision are expended for instruction, instructional support, and non-instructional pupil services.

H.3352 also "encourages" districts to reduce expenditures. Specific cost-saving measures suggested in the bill include eliminating low enrollment courses, reducing travel, limiting activities that require dues and memberships, reducing transportation costs for extracurricular and academic competitions, and expanding virtual instruction.

Board chairmen and superintendents must certify on a quarterly basis, beginning with the fourth quarter of FY 2008-09, where noninstructional and nonessential programs have been suspended and the specific actions taken in response to the flexibility provisions of H.3352. This written certification must be delivered electronically to the State Superintendent, with electronic copies forwarded to the Chairmen of the Senate Finance, Senate Education, House Ways and Means, and House Education and Public Works Committees. In addition, this certification must be presented publically at a regularly called board meeting and posted on the district website.

H.3352 also imposes two new requirements on school districts, one targeted at allowable expenditures and the other at transparency of expenditures. With regard to allowable expenditures for the 2008-09 and 2009-10 school years, districts must ensure that 65 percent of its per pupil expenditures are utilized within the In$ite categories of instruction, instructional support, and non-instructional pupil services. (In$ite is the financial analysis model used by the State Department of Education to categorize education expenditures.) No part of this 65 percent may be used for business services, debt service, capital outlay, program management, and leadership services, as those categories are defined by In$ite. Districts also must report the actual percentage of their per pupil expenditures utilized for instruction, instructional support, and non-instructional pupil services by August 1, 2010, for their fiscal year ending June 30, 2010.

The transparency provision of H.3352 requires school districts to post and maintain on their websites a "transaction register that includes a complete record of all funds expended over one hundred dollars, from whatever source for whatever purpose." Information that must be included for each expenditure includes the amount, name of the payee, and a statement providing a detailed description of the expenditure. If codes or acronyms are used to identify a payee or expenditure, the register must include complete explanations of such codes or acronyms. The register should not include entries for salaries, wages, or other compensation paid to individual employees, or information by which individual employees can be identified. The transaction register mustbe searchable and updated at least once a month and maintained on the website for five (5) years. For 2009-10, districts also must maintain on their websites copies of each monthly statement for all of their credit cards, including cards issued to officers or employees. Credit card numbers should be redacted, and the statements must be posted on the website not later than 30 days after the first payment of any portion of the balance. These credit card statements also must be maintained on the district website for five (5) years.

The creation and posting of transaction registers and credit card statements must be implemented within 180 days of the effective date of bill, April 7, 2009, which means no later than October 4, 2009. However, the State Comptroller General is charged with the responsibility of distributing a methodology and resources for school districts to comply. School districts should make every effort to follow the methodology created by the Comptroller General and to document their expenses in complying with this provision. By doing so, H.3352 provides that districts can be reimbursed by the Comptroller General for any documented expenses incurred as a result of compliance.

The flexibility bills will not solve the budgetary crisis districts must address, but certainly provide some assistance. Should you have any questions about implementation of the flexibility bills' provisions, please feel free to contact this firm.