S.F. 2047 Section 1. Section 257.2, Code 2009, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 13. “Unexpended fund balance” means a 3 school district’s unreserved and undesignated fund balances. 4 Sec. 2. Section 257.30, subsection 1, Code Supplement 2009, 5 is amended to read as follows: 6 1. A school budget review committee is established in 7 the department of education and consists of the director 8 of the department of education in an ex officio, nonvoting 9 capacity , the director of the department of management, and 10 three four members who are knowledgeable in the areas of 11 Iowa school finance or public finance issues appointed by 12 the governor to represent the public. At least one of the 13 public members shall possess a master’s or doctoral degree in 14 which areas of school finance, economics, or statistics are 15 an integral component, or shall have equivalent experience in 16 an executive administrative or senior research position in 17 the education or public administration field. The members 18 appointed by the governor shall serve staggered three-year 19 terms beginning and ending as provided in section 69.19 and are 20 subject to senate confirmation as provided in section 2.32. 21 The committee shall meet and hold hearings each year and shall 22 continue in session until it has reviewed budgets of school 23 districts, as provided in section 257.31. The committee may 24 call in school board members and employees as necessary for 25 the hearings. The committee’s scheduled hearing agendas and 26 the minutes of such hearings shall be posted on the department 27 of education’s internet website site . Legislators shall be 28 notified of hearings concerning school districts in their 29 legislative districts. 30 Sec. 3. Section 257.31, subsection 5, unnumbered paragraph 31 1, Code Supplement 2009, is amended to read as follows: 32 If a district has unusual circumstances, creating an unusual 33 need for additional funds, including but not limited to the 34 following circumstances enumerated in paragraphs “a” through 35 -1- LSB 5835SV (7) 83 ak/sc 1/ 5

S.F. 2047 “n” , the committee may grant supplemental aid to the district 1 from any funds appropriated to the department of education 2 for the use of the school budget review committee for the 3 purposes of this subsection , and such . The school budget 4 review committee shall review a school district’s unexpended 5 fund balance prior to any decision regarding unusual finance 6 circumstances. Such aid shall be miscellaneous income and 7 shall not be included in district cost , or . In addition 8 to or as an alternative to granting supplemental aid the 9 committee may establish a modified allowable growth for the 10 district by increasing its allowable growth , or both: . The 11 school budget review committee shall review a school district’s 12 unspent balance prior to any decision to increase modified 13 allowable growth under this subsection. 14 Sec. 4. Section 257.31, subsection 7, paragraph a, 15 unnumbered paragraph 1, Code Supplement 2009, is amended to 16 read as follows: 17 The committee may authorize a district to spend a reasonable 18 and specified amount from its unexpended cash fund balance for 19 the following purposes: 20 Sec. 5. Section 257.31, subsection 7, paragraph b, Code 21 Supplement 2009, is amended to read as follows: 22 b. Other expenditures, including but not limited to 23 expenditures for salaries or recurring costs, are not 24 authorized under this subsection. Expenditures authorized 25 under this subsection shall not be included in allowable 26 growth or district cost, and the portion of the unexpended 27 cash fund balance which is authorized to be spent shall be 28 regarded as if it were miscellaneous income. Any part of 29 the amount not actually spent for the authorized purpose 30 shall revert to its former status as part of the unexpended 31 cash fund balance. 32 Sec. 6. Section 257.31, subsection 14, paragraph b, 33 subparagraph (3), Code Supplement 2009, is amended to read as 34 follows: 35 -2- LSB 5835SV (7) 83 ak/sc 2/ 5

S.F. 2047 (3) A school district is only eligible to receive 1 supplemental aid payments during the budget year if the school 2 district certifies to the school budget review committee 3 that for the year following the budget year it will notify 4 the school budget review committee to instruct the director 5 of the department of management to increase the district’s 6 allowable growth and will fund the allowable growth increase 7 either by using moneys from its unexpended cash fund balance 8 to reduce the district’s property tax levy or by using cash 9 reserve moneys to equal the amount of the deficit that would 10 have been property taxes and any part of the state aid portion 11 of the deficit not received as supplemental aid under this 12 subsection. The director of the department of management shall 13 make the necessary adjustments to the school district’s budget 14 to provide the modified allowable growth and shall make the 15 supplemental aid payments. 16 Sec. 7. Section 298.10, Code Supplement 2009, is amended by 17 adding the following new subsection: 18 NEW SUBSECTION . 1A. For fiscal years beginning on or after 19 July 1, 2009, if the school budget review committee determines 20 that a school district’s unexpended fund balance is in excess 21 of the amount necessary for operations, the school budget 22 review committee shall direct the school district to use the 23 unexpended fund balance in lieu of levying property taxes and 24 shall direct the department of management to do one of the 25 following: 26 a. For the fiscal period beginning July 1, 2009, and ending 27 June 30, 2012, limit the school district’s cash reserve levy 28 to a level that is not excessive as determined by the school 29 budget review committee. 30 b. For fiscal years beginning on or after July 1, 2012, 31 limit the school district’s cash reserve levy to a level that 32 is not excessive as determined by the school budget review 33 committee and does not exceed the cash reserve limitation in 34 subsection 2. 35 -3- LSB 5835SV (7) 83 ak/sc 3/ 5

S.F. 2047 Sec. 8. Section 298.10, subsection 2, Code Supplement 2009, 1 is amended to read as follows: 2 2. For fiscal years beginning on or after July 1, 2012, the 3 cash reserve levy for a budget year shall not exceed twenty 4 percent of the general fund expenditures for the year previous 5 to the base year minus the general fund unexpended fund 6 balance , as defined in section 257.2, for the year previous to 7 the base year. 8 Sec. 9. EMERGENCY RULES. The department of education 9 may adopt emergency rules under section 17A.4, subsection 3, 10 and section 17A.5, subsection 2, paragraph “b” , to implement 11 the provisions of this Act, and the rules shall be effective 12 immediately upon filing unless a later date is specified in the 13 rules. Any rules adopted in accordance with this section shall 14 also be published as a notice of intended action as provided 15 in section 17A.4. 16 Sec. 10. EFFECTIVE UPON ENACTMENT. This Act, being deemed 17 of immediate importance, takes effect upon enactment. 18 EXPLANATION 19 This bill may require that a school district spend down its 20 unexpended fund balance to a level determined by the school 21 budget review committee before levying additional property 22 taxes to raise funds. 23 The bill defines “unexpended fund balance” in Code section 24 257.2. References to “unexpended cash balance” are changed to 25 “unexpended fund balance” in Code chapter 257. 26 The number of members on the school budget review committee 27 (SBRC) who are knowledgeable in the areas of Iowa school 28 finance or public finance issues is increased from three to 29 four and the director of the department of education is made an 30 ex officio, nonvoting member in Code section 257.30. 31 The bill amends Code sections 257.31 and 298.10 to provide 32 that the SBRC shall review a school district’s unexpended fund 33 balance upon a school district’s request for supplemental 34 aid due to an unusual financial circumstance. If the SBRC 35 -4- LSB 5835SV (7) 83 ak/sc 4/ 5

S.F. 2047 determines the school district’s unexpended fund balance is 1 excessive, the school district is required to use those funds 2 prior to levying additional property taxes and the SBRC must 3 direct the department of management (DOM) to limit a school 4 district’s cash reserve levy to a level that is not excessive 5 as determined by the SBRC during the fiscal period from July 6 1, 2009, to June 30, 2012. For fiscal years beginning on or 7 after July 1, 2012, the DOM shall limit the school district’s 8 cash reserve levy to a level that is not excessive and does 9 not exceed the limitation in Code section 298.10(2). The bill 10 provides that the SBRC shall also review a school district’s 11 unspent balance before increasing its modified allowable 12 growth. 13 The department of education may adopt emergency rules 14 related to the provisions of the bill. 15 The bill is effective upon enactment. 16 -5- LSB 5835SV (7) 83 ak/sc 5/ 5