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     Section  2.  That § 10-50-52 be amended to read as follows:

     10-50-52.   The first thirty million dollars in revenue collected annually pursuant to this chapter shall be deposited in the general fund. All revenue in excess of thirty million dollars collected annually shall be deposited in the tobacco prevention and reduction trust fund. Five million dollars of the revenue deposited annually in the tobacco prevention and reduction trust fund pursuant to this section shall be used to implement the tobacco prevention and reduction program. Thirty-three percent of any revenue deposited in the tobacco prevention and reduction trust fund in excess of five million dollars shall be transferred to the property tax reduction fund. Thirty-three percent of any revenue deposited in the tobacco prevention and reduction trust fund in excess of five million dollars shall be transferred to the education enhancement trust tobacco tax fund. Thirty-four percent of any revenue deposited in the tobacco prevention and reduction trust fund in excess of five million dollars shall be transferred to the health care trust tobacco tax fund.

     Section  3.  There is hereby created the teacher compensation assistance program within the Department of Education to provide funds to school districts for the purpose of assisting school districts with teacher compensation. The department shall provide four-fifths of the funds for the teacher compensation assistance program to each participating school district. The Board of Education shall promulgate rules, pursuant to chapter 1-26, to create an oversight board appointed by the secretary of education for approval of applications as well as guidelines for district applications based on district instructional goals, teacher performance, market compensation or other specific district requirements as approved by the department. Participation in the program is discretionary. District applications shall be approved by the local board of education. The applications shall be reviewed by the teacher compensation assistance program oversight board and shall be recommended to the Board of Education for final approval.
    
     Section  4.  The secretary of the Department of Education shall establish seven education service agencies to provide services and leadership to school districts on a regional basis. Each education service agency shall serve the school districts in a particular region of the state as determined by the secretary of education, and the secretary shall ensure that every school district is served by an education service agency. Each education service agency may be incorporated in the state of South Dakota as a nonprofit corporation organized under chapters 47-22 to 47-28, inclusive, which is exempt from taxation pursuant to 501(a) of the Internal Revenue Code, 26 U.S.C. Section 501(a),

and may be listed as an exempt organization in Section 501(c) of the Internal Revenue Code, 26 U.S.C. Section 501(c), or an education service agency may be directed by an educational cooperative.

     Section  5.  Education service agencies are hereby authorized and empowered to develop, manage, and provide support services and programs as determined by the needs of the local school districts and as approved by the secretary of education. An education service agency may:

     Section  9.  Upon receiving approval from the Department of Education, each education service agency, with input from both the advisory board and the statewide leadership board, may, as funding permits, contract with other entities to provide services to the school districts it serves.

     Section  10.  Each year, the Department of Education shall conduct an assessment and a performance evaluation of each education service agency and submit its findings in writing to the Legislature.

     Section  11.  The South Dakota Board of Education shall promulgate rules pursuant to chapter 1- 26 establishing the evaluation process and the criteria and performance measures the department will use to evaluate the education service agencies.

     Section  12.  The secretary of the Department of Education shall approve vouchers and the state auditor shall draw warrants to pay expenditures authorized by this Act.

     Section  13.  For the fiscal year beginning on July 1, 2007, there is hereby appropriated from the education enhancement tobacco tax fund the sum of nine million dollars ($9,000,000), or so much thereof as may be necessary, to the Department of Education and shall be distributed as follows: