If the Lead/Deadwood School District received Deadwood gaming proceeds in January 2003 for the 2002 calendar year, but did not qualify for state school aid during 2002 and only qualified for partial aid in January-June 2003, could the Department of Education and Cultural Affairs offset the entire gaming payment against the partial 2003 aid? How far across fiscal or calendar years could that offset reach?

Plain-English summary

In 2002 and the first half of 2003, the Lead/Deadwood School District in Lawrence County had been ineligible for South Dakota's general school aid formula in SDCL chapter 13-13. Then, in January 2003, the District became eligible for $12,282 in partial state aid for the second half of fiscal year 2003. In that same month, the District also received $51,683.14 in gaming proceeds from the South Dakota Gaming Commission Fund under SDCL 42-7B-48.1(3), which is the share of Deadwood gaming revenues distributed to Lawrence County school districts. The gaming payment was for calendar year 2002. The Department of Education and Cultural Affairs then said it would offset the gaming money dollar-for-dollar against the partial 2003 state aid. The District's lawyer, Lester Nies, asked AG Larry Long whether that was right, since the gaming proceeds were earned in a year the District had no state aid to offset against.

AG Long said yes, the offset was valid, and it was not limited by fiscal-year boundaries. SDCL 42-7B-48.2 said: "Notwithstanding any other provision of state law, payments received by a school district in accordance with subdivision 42-7B-48.1(3), shall reduce on a dollar for dollar basis any general state aid otherwise payable to the school district." The AG focused on "any general state aid otherwise payable." The Legislature could easily have written "in the year payments are received" or "in the fiscal year of the payment," but it did not. The plain words gave no temporal cap. So the District's gaming money in 2003 could be used to offset any future state aid the District became eligible for, until the gaming proceeds were completely offset.

The opinion's secondary move was to rebut an "absurd result" argument. The South Dakota Supreme Court had used the absurd-result canon in State v. Davis (1999) to avoid a strange reading of the DUI enhancement statutes. The AG concluded that no analogous absurdity arose here. The Lead/Deadwood District still received the gaming money. Other districts (which did not get gaming) got proportionally more state aid because Lawrence County districts had their state aid offset. That was equalization, not absurdity. If the Legislature wanted Lawrence County districts to also receive full state aid on top of gaming proceeds, it could amend the statute at the next session.

The first question therefore got a yes, and the second question, about the time period over which offsets could occur, got an answer of "no boundary" - offsets continued until the gaming proceeds were fully absorbed.

Currency note

This opinion was issued in 2003. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. SDCL 42-7B-48.1 and 42-7B-48.2 have been amended since 2003, including changes to the distribution priority and the calculation of the offset, and the South Dakota school aid formula in SDCL ch. 13-13 has been significantly restructured.

What the opinion meant at the time

For the Lead/Deadwood School District in 2003 and the years immediately following, the opinion meant a budgetary reality: gaming money was net new revenue compared to most South Dakota districts, but the District could not also count on full state aid. The two pots were linked by SDCL 42-7B-48.2, and the link was permanent until the offset ran out. A district that received a large lump-sum gaming distribution would see its state aid suppressed for as long as the dollar-for-dollar offset reached.

For other Lawrence County school districts receiving SDCL 42-7B-48.1(3) distributions, the same rule applied. The opinion's reasoning was district-neutral within the gaming-share statute.

For school districts elsewhere in the state, the opinion was indirectly good news. Because Lawrence County districts' state aid was being offset, more of the state aid pool was available for non-gaming districts. The opinion explicitly framed this as legislative equalization.

For school district business managers anywhere in South Dakota, the opinion underscored that statutory text about state aid offsets had to be read literally, including the timing implications. A "dollar-for-dollar" offset with no fiscal-year cap meant that a one-time windfall could affect aid eligibility for multiple subsequent years.

For practitioners advising school district clients, the opinion offered a clean illustration of the "any other provision of state law" supremacy phrasing. SDCL 42-7B-48.2 opened with "notwithstanding any other provision of state law," signaling that this offset overrode contrary language elsewhere. That kind of phrasing was meaningful when reconciling statutes that might otherwise conflict.

Common questions

Q: Could the District have refused the gaming money to keep its full state aid eligibility?
A: The opinion did not address refusal mechanics. The statute distributed gaming proceeds to qualifying school districts as a matter of allocation, and there was no obvious opt-out provision. As a practical matter, the gaming proceeds were larger than the state aid forgone, so refusal would have been irrational.

Q: Did the District get to keep the gaming money even though its state aid was zero?
A: Yes. The gaming distribution under SDCL 42-7B-48.1(3) was independent of state aid eligibility. The state aid offset under SDCL 42-7B-48.2 only kicked in when there was state aid to offset against. The District kept the gaming money; it just lost subsequent state aid until the offset ran.

Q: How did the AG justify reading "any state aid" so expansively?
A: By comparison to what the Legislature could have written. The statute could have said "state aid otherwise payable during the fiscal year in which the gaming proceeds were received" or "during the calendar year in which the gaming proceeds were received." The Legislature did not include any such temporal limit. The AG treated that omission as deliberate.

Q: What was the absurd-result argument the District tried?
A: The District suggested that offsetting calendar-year 2002 gaming proceeds against fiscal-year 2003 state aid was nonsensical because the District had not had state aid in 2002 to offset against. The AG rejected the argument by noting that the offset was not strictly tied to the year the gaming money was earned, and that the broader policy made sense (gaming districts net out at similar per-pupil resources as non-gaming districts).

Q: Could the Legislature change the result?
A: Yes, and the opinion explicitly invited a legislative fix if the policy result was wrong. The opinion was a textual reading of the existing statute, not a policy endorsement.

Background and statutory framework

Deadwood gaming proceeds in 2003 followed a statutory distribution priority laid out in SDCL 42-7B-48.1. Money first paid expenses of the Gaming Commission. Then the City of Deadwood received up to $6.8 million per year. Then $100,000 went to the State Historical Preservation Grant and Loan Fund. Then the remainder went to Lawrence County school districts under SDCL 42-7B-48.1(3).

SDCL 42-7B-48.2 was the offset mechanism, designed to prevent Lawrence County districts from receiving a windfall on top of full state aid. The statute's text was short and used the "notwithstanding any other provision" framing: gaming receipts reduce any general state aid otherwise payable, dollar-for-dollar.

The State's general school aid system in SDCL chapter 13-13 produced an annual entitlement for each district based on enrollment, local effort, and similar factors. Districts could be ineligible in any given period if their local tax base produced more revenue than the formula's per-pupil floor required.

The Supreme Court's interpretive canons came into play because the District argued for an implicit time limit on the offset. The AG cited Moss v. Guttormson, 1996 S.D. 76, 551 N.W.2d 14, Dahn v. Trownsell, 1998 S.D. 36, 576 N.W.2d 535, State v. Cameron, 1999 S.D. 70, 596 N.W.2d 49, and U.S. West Communications Inc. v. Public Utilities Commission, 505 N.W.2d 115 (S.D. 1993), for the rule that statutes are read in their plain meaning and that specific terms prevail over general terms.

State v. Davis, 1999 S.D. 98, 598 N.W.2d 535, was the absurd-result counterweight the AG addressed. Davis had construed SDCL chapter 32-23 DUI enhancement statutes to count prior DUI convictions regardless of state, after noting that ambiguity could exist where the literal meaning produced an absurd or unreasonable result. The AG concluded that the same standard, applied to SDCL 42-7B-48.2, did not produce an absurdity. The dollar-for-dollar, year-blind offset matched the legislative purpose of equalizing per-district resources rather than producing a strange outcome.

The opinion's conclusion was that the offset could continue indefinitely until the gaming proceeds were fully absorbed. A one-time large gaming distribution could affect a district's state aid in multiple subsequent fiscal years.

Citations and references

Statutes:
- SDCL ch. 13-13 (general state aid)
- SDCL § 42-7B-48.1 (Deadwood gaming proceeds distribution)
- SDCL § 42-7B-48.1(3) (school district share)
- SDCL § 42-7B-48.2 (dollar-for-dollar offset)
- SDCL ch. 32-23 (DUI enhancement)

Cases:
- State v. Cameron, 1999 S.D. 70, 596 N.W.2d 49
- Dahn v. Trownsell, 1998 S.D. 36, 576 N.W.2d 535
- Moss v. Guttormson, 1996 S.D. 76, 551 N.W.2d 14
- U.S. West Communications Inc. v. Public Utilities Commission, 505 N.W.2d 115 (S.D. 1993)
- State v. Davis, 1999 S.D. 98, 598 N.W.2d 535

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinions.aspx
• Original PDF: https://atg.sd.gov/OfficialOpinions/Official%20Opinion%2003-03.pdf

Original opinion text

June 26, 2003

Lester Nies
Attorney at Law
P.O. Box 759
Spearfish, SD 57783-0759

OFFICIAL OPINION NO. 03-03
Lead/Deadwood School District No. 40-1

Dear Mr. Nies:

You have requested an Official Opinion regarding the following factual situation:

FACTS:

The Lead/Deadwood School District No. 40-1 (District) did not qualify for general state aid under the South Dakota School Aid formula under SDCL 13-13 (State aid) during its July 1, 2001, to June 30, 2002, fiscal year, nor did it qualify for State aid for the first half of fiscal year 2003 (July, 2002 to December, 2002). However, the District qualified for State aid for the second half of fiscal year 2003 (January, 2003 to June, 2003) in the amount of $12,282. In January, 2003, the District received a disbursement of funds from the South Dakota Gaming Commission Fund under SDCL 42-7B-48.1(3) in the amount of $51,683.14. Upon information provided to the District, these gaming funds were generated by the gaming establishments of Deadwood during the calendar year 2002. Also in January, 2003, the South Dakota Department of Education and Cultural Affairs notified the District that it would offset these 2002 gaming funds the District received against the second half of fiscal year 2003 school aid under SDCL 42-7B-48.2 because the gaming fund check was issued to the District in calendar year 2003. The District accounts for its funds on a modified accrual basis. SDCL 42-7B-48.2 is silent with regard to the year when gaming payments are deposited or the year when general state aid is received by the school district.

Based on these facts, you have asked the following questions:

QUESTIONS:

1. Does SDCL 42-7B-48.2 authorize the South Dakota Department of Education and Cultural Affairs to offset the gaming payment from the South Dakota Gaming Commission Fund earned during calendar year 2002 but paid to the District in calendar year 2003 against the District's fiscal year 2003 State aid, when the District was ineligible for State aid during the entire calendar year 2002?

2. What is the time period for which General State aid to schools under SDCL 13-13 should be offset against gaming payments from the South Dakota Gaming Commission?

IN RE QUESTIONS:

SDCL 42-7B-48.2 provides as follows:

Notwithstanding any other provision of state law, payments received by a school district in accordance with subdivision 42-7B-48.1 (3), shall reduce on a dollar for dollar basis any general state aid otherwise payable to the school district.

In interpreting this or any other statute, the South Dakota Supreme Court has long applied certain rules of statutory construction. The purpose of statutory construction is to discover the true intention of the law which is to be ascertained primarily from the language expressed in the statute. The intent of a statute is determined from what the legislature said, rather than what the courts think it should have said, and the court must confine itself to the language used. Words and phrases in a statute must be given their plain meaning and effect. When the language in a statute is clear, certain, and unambiguous, there is no reason for construction, and the court's only function is to declare the meaning of the statute as expressed. State v. Cameron, 1999 S.D. 70, ¶ 17, 596 N.W.2d 49, 53 (citing Dahn v. Trownsell, 1998 S.D. 36, ¶ 14, 576 N.W.2d 535, 539 (also citing Moss v. Guttormson, 1996 S.D. 76, ¶ 10, 551 N.W.2d 14, 17)). Further, statutes must be construed according to their intent, the intent being determined from the statute as a whole, as well as enactments relating to the same subject. But in construing statutes together it is presumed that the legislature did not intend an absurd or unreasonable result. When the question is which of two enactments the legislature intended to apply to a particular situation, terms of a statute relating to a particular subject will prevail over the general terms of another statute. Id. (citing U.S. West Communications Inc. v. Public Utilities Commission, 505 N.W.2d 115, 122-23 (S.D. 1993)).

A particular illustration of the principle of avoiding an absurd result is State v. Davis, 1999 S.D. 98, ¶¶ 7-8, 598 N.W.2d 535, 537-38. In that case, the Court interpreted certain statutes in SDCL 32-23 in such a way that a fourth offense DUI would result whether the prior offenses came from South Dakota or from any other state. Id. Among other things, the Court noted that ambiguity is a condition of construction, and may exist where the literal meaning of a statute leads to an absurd or unreasonable conclusion.

Your request for an opinion centers mostly on accounting periods, and asks which year the Department of Education and Cultural Affairs should use to offset the gambling proceeds. SDCL 42-7B-48.1 requires that gambling proceeds be distributed to the school district after proceeds paid to the City of Deadwood equal $6,800,000 for each year, after payment of expenses of the gaming commission, and after the payment of $100,000 to the State Historical Preservation Grant and Loan Fund. It will be noted that SDCL 42-7B-48.1 requires that proceeds be distributed on a yearly basis. This has been done in accordance with a calendar year. Moreover, SDCL 42-7B-48.2 requires reduction on a dollar-for-dollar basis of general state aid otherwise payable to the District when payments are made of the gambling proceeds.

While SDCL 42-7B-48.1 calls for proceeds to be divided on a yearly basis, SDCL 42-7B-48.2 does not restrict the time period in which State aid can be reduced on a dollar-for-dollar basis. It says only that when the District receives any funds from the gambling proceeds, those funds shall reduce on a dollar-for-dollar basis any general State aid otherwise payable to the District. The legislature did not state that the State aid otherwise payable to the District during the school fiscal year, or during the calendar year, should be reduced. Rather, any general State aid otherwise payable to the school district shall be reduced on a dollar-for-dollar basis. Any State aid includes State aid payable in any fiscal year, in accordance with the plain words of the statute. It would have been quite simple to add the phrase "during the fiscal in which the payments are received" or "during the calendar year in which the payments are received." Since the legislature did not choose to limit the statute in this fashion, the District's general State aid may be reduced until such time as the gambling revenues have been completely offset. This is the clear, literal meaning of the statute.

This is not an absurd or unreasonable result. Unlike the situation in Davis, there is no time where other districts would be treated differently, nor is there a situation where the geographic location of the District or its patrons would be determinative of how this statute is applied. Rather, the statute tends to equalize the State aid or dollars available to this District as opposed to districts outside Lawrence County. The legislature apparently believed that while certain gambling moneys should go to Lawrence County School Districts, the districts should not be given a windfall of gambling moneys plus continued State aid. Offsetting the moneys in the fashion set forth in this Opinion will provide additional State aid to other school districts that do not get gambling revenues. At the same time, the District will continue to receive the gambling moneys, even if it is ineligible for State aid. If the legislature had intended that the state aid offset by gambling revenues would nonetheless go to the District if it could not be offset by state aid in the current fiscal or calendar year, it would have said so. Likewise, if this was the intent, the matter can be addressed at the next legislative session.

Therefore, the answer to your first question is "yes," and the answer to your second question is that general state aid to schools may be offset by gambling proceeds, even if the gambling proceeds and state aid are received in different fiscal or calendar years.

Respectfully submitted,

LAWRENCE E. LONG
ATTORNEY GENERAL

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