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Attorney General Jackley Addresses Misuse of Sequestration to Withhold School District Funds

PIERRE, S.D. (KELO AM) - Attorney General Marty Jackley and nine Western Attorneys General (CWAG) today called on the Federal Government to end the sequestration of funds owed to the states under the federal Mineral Leasing Act (MLA) and other relevant statutes.

“South Dakota’s school districts that have mineral deposits have legal right to these funds and depend on this money as a source of guaranteed revenue,” said Jackley.  “Beyond the financial cost to our citizens and school districts, the federal withholdings call into question the longstanding agreement between the states and the federal government to share in the revenue produced by mineral development within our state boundaries.”

The MLA entitles states to forty-eight percent of all rentals, royalties, and other receipts collected by the federal government for mineral production on federal land within state boundaries.  This money, along with funds received from the federal government for the state’s share of federal leases under the Taylor Grazing Act, is distributed by the State to school districts in the counties where the mineral production is located.  In FY 2012, school districts received approximately $1,328,000 in payments under these laws.  Under sequestration, South Dakota’s MLA payment will be decreased by at least $100,000. 

The Federal Government has taken the position that the royalty payments owed to the states under the MLA are subject to sequestration. According to the Office of Management and Budget (OMB), “sequestration is part of a budget enforcement mechanism that is intended to prevent enactment of mandatory spending and revenue legislation that would increase the federal deficit.”  To the contrary, these monies are for mineral production per agreement, not federal taxing and spending.   As set out by the Attorneys General, “The revenues owed to the mineral-producing states under the MLA are not a gift, a hand-out, or an entitlement but rather are the result of a compromise reached in 1920 that compensation is due to the states for mineral development within their boundaries.” 

CWAG and Jackley have similar concerns about plans to sequester timber sale proceeds.  Local schools are entitled to these funds under the Secure Rural Schools and Community Self-Determination Act.