South Dakota Bureau of Finance and Management Commissioner Jim Terwilliger speaks to reporters in his Capitol office on Dec. 2, 2025, in Pierre. Terwilliger is a member of the state’s School Finance Accountability Board. (Photo by Seth Tupper/South Dakota Searchlight)

A school accountability board on Monday rejected a legislative committee’s earlier decision to waive penalties for schools that had too much cash saved up, prolonging a standoff that board members don’t yet know how to resolve.

In November, the South Dakota School Finance Accountability Board recommended partial waivers for the Frederick Area and Miller school districts, both with fiscal penalties of 10% of the districts’ excess cash balances. The balances are limited by state law.

But lawmakers on the Legislature’s budget committee rejected the recommendations earlier this month. Instead, the committee suggested the board issue a full waiver to the school districts.

The 10% fiscal penalty for Frederick would be a $9,265 reduction in general state aid for the 2026 fiscal year. Miller’s penalty would be a $7,474 reduction.

State budget chief urges close look at schools with excess cash as property tax complaints continue

Board member and Bureau of Finance and Management Commissioner Jim Terwilliger said he understands where the legislative committee “is coming from,” but he’s “sticking to my principles.”

“We as a board recommended these,” Terwilliger said, adding that the board could have implemented the full penalty but chose a more “lenient” penalty.

Terwilliger and other board members were unsure how to resolve their disagreement with the legislative committee, because an applicable administrative rule and law aren’t “super clear,” Terwilliger said. A representative with the state Department of Education said its legal department will review the situation.

Terwilliger, at the board’s November meeting, urged a closer look at cash balances in some school districts as the state considers property tax relief. Schools are the leading recipients of property tax revenue.

Board members approved lawmakers’ suggestion to conduct a financial review of the Agar-Blunt-Onida School District. The district does not receiving any state funding, because it has enough local and other funding. That means a financial penalty cannot be imposed.

Lawmakers suggested the review partly because the school district has appeared before the accountability board four times in five years.