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AN ACT

RELATING TO PUBLIC SCHOOL FINANCE; MAKING CASH BALANCE CREDITS

PROPORTIONAL TO THE SIZE OF THE EXCESS CASH BALANCE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 22-8-41 NMSA 1978 (being Laws 1967,

Chapter 16, Section 99, as amended) is amended to read:

"22-8-41. RESTRICTION ON OPERATIONAL FUNDS--EMERGENCY

ACCOUNTS--CASH BALANCES.--

A. A school district shall not expend money from

its operational fund for the acquisition of a building site or

for the construction of a new structure, unless the school

district has bonded itself to practical capacity or the

secretary determines and certifies to the legislative finance

committee that the expending of money from the operational

fund for this purpose is necessary for an adequate public

educational program and will not unduly hamper the school

district's current operations.

B. A school district or charter school may budget

out of cash balances carried forward from the previous fiscal

year an amount not to exceed five percent of its proposed

operational fund expenditures for the ensuing fiscal year as

an emergency account. Money in the emergency account shall be

used only for unforeseen expenditures incurred after the

annual budget was approved and shall not be expended without

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the prior written approval of the secretary.

C. In addition to the emergency account, school

districts or charter schools may also budget operational fund

cash balances carried forward from the previous fiscal year

for operational expenditures, exclusive of salaries and

payroll, upon specific prior approval of the secretary. The

secretary shall notify the legislative finance committee in

writing of the secretary's approval of such proposed

expenditures. For fiscal years 2004 and 2005, with the

approval of the secretary, a school district or charter school

may budget so much of its operational cash balance as is

needed for nonrecurring expenditures, including capital

outlay.

D. Beginning with fiscal year 2007, prior to

approval of a school district's or charter school's budget,

the secretary shall verify that the reductions from the state

equalization guarantee distribution have been taken pursuant

to this section.

E. The allowable limit for a school district's or

charter school's ending operational cash balance is:

(1) if the current year program cost is less

than five million dollars ($5,000,000), eighteen percent of

the budgeted expenditures;

(2) if the current year program cost is five

million dollars ($5,000,000) or more but less than ten million

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dollars ($10,000,000), twelve percent of the budgeted

expenditures;

(3) if the current year program cost is ten

million dollars ($10,000,000) or more but less than twenty-

five million dollars ($25,000,000), ten percent of the

budgeted expenditures;

(4) if the current year program cost is

twenty-five million dollars ($25,000,000) or more but less

than two hundred million dollars ($200,000,000), eight percent

of the budgeted expenditures; and

(5) if the current year program cost is two

hundred million dollars ($200,000,000) or more, five percent

of the budgeted expenditures.

F. Except as otherwise provided in this section,

for the 2006 and subsequent fiscal years, the secretary shall

reduce the state equalization guarantee distribution,

calculated pursuant to Section 22-8-25 NMSA 1978, to each

school district or charter school by an amount equal to the

school district's or charter school's excess cash balance. As

used in this section, "excess cash balance" means the

difference between a school district's or a charter school's

actual operational cash balance and the allowable limit

calculated pursuant to Subsection E of this section. However:

(1) for a school district or charter school

with a current year program cost that exceeds two hundred

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million dollars ($200,000,000), if the excess cash balance is

greater than twenty percent of the allowable, unrestricted,

unreserved operational cash balance and the emergency reserve,

the reduction pursuant to this subsection shall equal twenty

percent of the allowable, unrestricted, unreserved operational

cash balance and the emergency reserve; and

(2) for other school districts and charter

schools, if the excess cash balance is greater than eighteen

percent of the allowable, unrestricted, unreserved operational

cash balance and the emergency reserve, the reduction pursuant

to this subsection shall equal eighteen percent of the

allowable unrestricted, unreserved operational cash balance

and the emergency reserve.

G. In developing budgets, school districts and

charter schools shall not budget current year cash balances

without the approval of the secretary.

H. A school district or charter school whose

enrollment growth exceeds one percent from the prior year and

whose facility master plan includes the addition of a new

school within two years may request from the secretary a

waiver of up to fifty percent of the reduction otherwise

required by Subsection F of this section.

I. Upon application by a school district, the

secretary may waive all or a portion of the reduction

otherwise required by Subsection F of this section if the

secretary finds that the school district's excess balance is

needed to provide the local match required under the Public

School Capital Outlay Act or to recoup an amount paid as the

district's share pursuant to Section 22-24-5.7 NMSA 1978.

J. Notwithstanding the provisions of Subsection F

of this section, for fiscal year 2004, the reduction from the

state equalization guarantee distribution shall be the greater

of the amount calculated pursuant to that subsection or ten

dollars ($10.00) per MEM.

K. For the purposes of this section, "operational

cash balance" means the allowable, unrestricted, unreserved

operational cash balance and the emergency reserve.

L. For the purposes of this section, "allowable,

unrestricted, unreserved operational cash balance and the

emergency reserve" means the proportional share not

attributable to revenue derived from the school district

property tax, forest reserve funds and impact aid for which

the state takes credit in determining a school district's or

charter school's state equalization guarantee distribution."

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