HB-4325, As Passed Senate, June 18, 2015

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 4325

A bill to amend 1976 PA 451, entitled

"The revised school code,"

(MCL 380.1 to 380.1852) by adding section 1219.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1219. (1) Except as otherwise provided in subsection (2),

before July 7 of each school fiscal year, each school district and

public school academy shall transmit to CEPI the budgetary

assumptions used when adopting its annual budget pursuant to the

uniform budgeting and accounting act, 1968 PA 2, MCL 141.421 to

141.440a. However, a school district or public school academy that

had a positive general fund balance of at least 5% of total general

fund revenues for each of 2 most recently completed school fiscal

years is not required to transmit the budgetary assumptions under

this subsection. After receipt by CEPI, CEPI shall compile and

transmit the budgetary assumptions to the department of treasury.

The submission of the budgetary assumptions under this subsection

shall be in the form prescribed by CEPI and shall include at least

all of the following information:

(a) The projected foundation allowance for the school district

or public school academy used by its governing body when adopting

the budget for the school district or public school academy for the

current school fiscal year.

(b) The projected membership of the school district or public

school academy used when adopting the budget of the school district

or public school academy for the current school fiscal year.

district or public school academy for the immediately preceding

school fiscal year, calculated by dividing total general fund

operating expenditures for the school district or public school

academy during that school fiscal year by the membership for the

school district or public school academy reported by the department

in the most recent state aid financial status report for the month

of May.

(d) The projected expenditures per pupil for the school

district or public school academy for the current school fiscal

year, calculated by dividing the total general fund operating

expenditures authorized by the governing body of the school

district or the public school academy when adopting the budget for

the current school fiscal year by the projected membership of the

school district or public school academy used when adopting the

budget of the school district or public school academy for the

current school fiscal year.

(2) If an authorizing body submits a budgetary assumption

report required under subsection (1) on behalf of each public

school academy authorized by that authorizing body that would

otherwise be required to submit budgetary assumptions under

subsection (1), then those public school academies are not required

to submit the budgetary assumption report required under subsection

(1).

(3) If, based on the factors enumerated in this subsection,

the state treasurer determines that the potential for fiscal stress

exists within a school district, intermediate school district, or

public school academy; that an operating deficit may arise within a

school district, intermediate school district, or public school

academy during the current school fiscal year or the following 2

school fiscal years; or that a school district, intermediate school

district, or public school academy may be unable to meet its

financial obligations while also satisfying the school district's,

intermediate school district's, or public school academy's

obligations or abilities to provide public educational services in

a manner that complies with this act, the state school aid act of

1979, and applicable rules, then the state treasurer may declare

that the potential for fiscal stress exists for the school

district, intermediate school district, or public school academy.

This determination shall be based on consideration of the following

factors:

(a) Financial data or other information submitted by the

school district, intermediate school district, or public school

academy to a state department or agency.

(b) Financial data or other information included within an

audited financial statement of the school district, intermediate

school district, or public school academy.

department, agency, or authority in connection with a request to

issue bonds, notes, or other debt obligations, including, but not

limited to, information relating to a request for a loan under the

emergency municipal loan act, 1980 PA 243, MCL 141.931 to 141.942.

(d) Financial data or other information included within a

recommended budget, budget, or general appropriations act of the

school district, intermediate school district, or public school

academy.

(e) Financial data or other information provided to a state

department, agency, or authority by an officer, employee,

contractor, or agent of the school district, intermediate school

district, or public school academy.

(f) For a school district, data relating to pupil enrollment,

including, but not limited to, residents of other school districts

enrolled in the school district and residents of the school

district enrolled in another school district or in a public school

not operated by the school district.

(g) For a school district, financial data or other information

provided to the department or department of treasury by the

intermediate school district in which the school district is

located.

(h) For a public school academy, financial data or other

information provided to the department or department of treasury by

the authorizing body of the public school academy.

(4) If the state treasurer declares under subsection (3) that

the potential for fiscal stress exists for a school district,

intermediate school district, or public school academy, then not

less than 14 days after the declaration the state treasurer shall

do all of the following:

(a) Notify the governing body of the school district,

intermediate school district, or public school academy that the

state treasurer has declared that the potential for fiscal stress

exists for the school district, intermediate school district, or

public school academy.

(b) For a school district or public school academy, notify the

governing body of the school district or public school academy that

it may establish a contract under subsection (5) with an

intermediate school district to perform an administrative review of

the financial status of the school district or public school

academy.

(5) Subject to subsection (16), if the state treasurer

declares under subsection (3) that the potential for fiscal stress

exists for a school district or public school academy, the

governing body of the school district or public school academy may

choose to establish a contract with an intermediate school district

to perform an administrative review of the financial status of the

school district or public school academy. An intermediate school

district that is working with a school district or public school

academy to establish a contract under this subsection shall consult

with the department of treasury on the development of the contract.

A school district or public school academy must enter into this

contract within 60 days after receiving notification of the

declaration from the state treasurer under subsection (4). A

contract under this subsection between an intermediate school

district and a school district or public school academy shall

provide for all of the following:

(a) Within 90 days after entering into the contract, the

intermediate school district shall complete an administrative

review and issue recommendations to the school district or public

school academy concerning those steps the school district or public

school academy should consider taking to avoid a deficit.

(b) After completion of the administrative review, the

intermediate school district shall present the recommendations

under subdivision (a) at the next scheduled public meeting of the

governing body of the school district or public school academy.

recommendations to the department and the department of treasury.

(d) Subject to subsection (6), the intermediate school

district's administrative review under subdivision (a) shall

include, but is not limited to, all of the following:

(i) An examination of financial practices, including at least

an examination of the school district's or public school academy's

compliance with the uniform budgeting and accounting act, 1968 PA

2, MCL 141.421 to 141.440a, budget to actual expense report

monitoring, and budget amendment practices after budget adoption.

(ii) An examination of staffing and a comparison of staffing

to other school districts and public school academies, as

applicable.

(iii) An examination of wages and a comparison of wages to

other school districts and public school academies in the area, as

applicable.

(iv) An examination of benefit costs as a percentage of wages

and a comparison of benefit costs as a percentage of wages to other

school districts and public school academies in the area, as

applicable.

(v) A school building student capacity utilization review.

(vi) An examination of non-instructional costs by function and

a comparison of those costs to other school districts and public

school academies, as applicable.

(vii) A review of enrollment projection methods and history.

(viii) An examination of deferred maintenance and capital

investment needs. Capital investment needs include technology

equipment and technology infrastructure needs.

(ix) An examination of substitute costs, workers compensation

costs, unemployment compensation costs and forecasts, and a review

of other insurance programs.

(x) An examination of pupil transportation costs and routing.

(xi) An examination of the current and future costs of

existing bargaining agreements.

(e) The school district or public school academy shall give

the intermediate school district or its contracted agents access to

any and all financial data or information relating to the financial

condition of the school district or public school academy as

requested by the intermediate school district.

(f) The school district or public school academy shall allow

the intermediate school district or its contracted agents to

examine all financial records and books of account of the school

district or public school academy.

(g) The school district or public school academy shall

promptly and fully provide the assistance and information necessary

and properly requested by the intermediate school district or its

contracted agent in the effectuation of the intermediate school

district's duties under this subsection, including, but not limited

to, complying with a request that the school district or public

school academy provide a facility condition assessment or a

physical asset inventory if either of these has not been completed

in the immediately preceding 24 months.

(h) The school district or public school academy shall allow

the intermediate school district to work in a consortium with

another intermediate school district or multiple intermediate

school districts in the effectuation of the intermediate school

district's duties under this subsection.

(i) The school district or public school academy shall allow

the intermediate school district to use a contractor or contractors

to assist in the review on a cost recovery basis as determined by

the intermediate school district.

(j) Either the intermediate school district or the school

district or public school academy may rescind the contract, as

follows:

(i) The intermediate school district may rescind the contract

House Bill NO. 4325 as amended June 18, 2015

if the school district or public school academy is not complying

with 1 or more of the recommendations issued to the school district

or public school academy under subdivision (a).

(ii) The school district or public school academy may rescind

the contract for any reason.

(6) The parties to a contract under subsection (5) may request

the department of treasury to waive 1 or more of the requirements

for items to be included in the intermediate school district's

administrative review under subsection (5)(d). If the department of

treasury grants a waiver under this subsection, then the

intermediate school district's administrative review under

subsection (5)(d) is not required to include the waived item or

items.

(7) If a school district or public school academy establishes

a contract with an intermediate school district under subsection

(5), the intermediate school district shall submit quarterly

reports to the department of treasury on the status of the

implementation of the recommendations issued to the school district

or intermediate school district by the intermediate school district

under subsection (5)(a).

(8) Subject to subsection (9), the state treasurer <<may>>

require a school district, intermediate school district, or public

school academy to submit periodic financial status reports under

this section if all of the following occur:

(a) The state treasurer has declared under subsection (3) that

the potential for fiscal stress exists for the school district,

intermediate school district, or public school academy.

(b) More than 60 days have passed since the school district,

intermediate school district, or public school academy was notified

of the declaration as required under subsection (4)(a).

school district or public school academy has not established a

contract with an intermediate school district in the time and

manner required under subsection (5), has rescinded a contract with

an intermediate school district under subsection (5)(j), or has had

its contract with an intermediate school district under subsection

(5) rescinded by the intermediate school district under subsection

(5)(j).

(d) The school district, intermediate school district, or

public school academy has not had a positive general fund balance

of at least 5% of total general fund revenues for each of the 2

most recently completed school fiscal years.

(e) The school district, intermediate school district, or

public school academy has had a declining general fund balance in 1

or both of the 2 most recently completed school fiscal years.

(f) The school district, intermediate school district, or

public school academy is not required to submit a deficit

elimination plan or an enhanced deficit elimination plan under

section 1220.

(g) The school district has applied for a loan under the

emergency municipal loan act, 1980 PA 243, MCL 141.931 to 141.942.

(9) If a school district or public school academy enters into

a contract with an intermediate school district as described under

subsection (5), the state treasurer shall not require the school

district or public school academy to submit periodic financial

status reports under this section until at least 730 days after the

governing body of the school district or public school academy was

notified of the declaration of the state treasurer under subsection

(4)(a). However, the state treasurer may require the school

district or public school academy to submit periodic financial

status reports under this section if the state treasurer determines

that the school district or public school academy has not

implemented any of the recommendations within 365 days after the

governing body of the school district or public school academy was

notified of the declaration of the state treasurer under subsection

(4)(a).

(10) If a school district, intermediate school district, or

public school academy is required to submit periodic financial

reports under this section, the school district, intermediate

school district, or public school academy shall do all of the

following:

(a) Submit a periodic financial status report in the form and

manner and on the periodic basis prescribed by the department of

treasury, after approval by the governing body of the school

district or public school academy.

(b) Transmit a copy of each periodic financial status report

required under this section to the members of its governing body.

data or information relating to the financial conditions of the

school district, intermediate school district, or public school

academy as requested by the department of treasury.

(d) Allow the department of treasury to examine financial

records and books of account of the school district, intermediate

school district, or public school academy.

(e) Promptly and fully provide the assistance and information

necessary and properly requested by the department of treasury in

the exercise of the department of treasury's duties under this

section.

(11) If a school district, intermediate school district, or

public school academy fails to submit a periodic financial status

report required under this section, or if the state treasurer

determines that information included on a periodic financial status

report indicates that fiscal stress exists within the school

district, intermediate school district, or public school academy,

or that a deficit has occurred or is projected to occur within the

school district, intermediate school district, or public school

academy within the current school fiscal year or the next school

fiscal year and that the school district, intermediate school

district, or public school academy lacks the capacity to address

the deficit without state assistance, then the state treasurer may

require the school district, intermediate school district, or

public school academy to submit an enhanced deficit elimination

plan under section 1220.

(12) If a school district is required to submit periodic

financial status reports under this section and a loan is issued to

the school district under the emergency loan act, 1980 PA 243, MCL

141.931 to 141.942, the state treasurer shall require the school

district to submit periodic financial status reports under this

section for not more than 4 years after the date of issuance of the

loan.

(13) A school district, intermediate school district, or

public school academy is no longer required to submit periodic

financial status reports under this section if the state treasurer

determines that the periodic financial status reports submitted by

the school district, intermediate school district, or public school

academy indicate that potential fiscal stress does not exist within

the school district, intermediate school district, or public school

academy; that a deficit is not projected to arise within the school

district, intermediate school district, or public school academy

within the current school fiscal year or the next 2 school fiscal

years; and that the school district, intermediate school district,

or public school academy will be able to meet its financial

obligations while also satisfying the school district's,

intermediate school district's, or public school academy's

obligations or ability to provide public educational services in a

manner that complies with this act, the state school aid act, and

applicable rules.

(14) If the state treasurer makes a determination under

subsection (13) that the conditions under that subsection apply to

a school district, intermediate school district, or public school

academy, the state treasurer shall notify the school district,

intermediate school district, or public school academy within 14

days after making that determination.

(15) CEPI shall make available to the public on its website

all of the periodic financial status reports submitted to the state

treasurer under this section. The state treasurer shall transmit to

CEPI any documents needed by CEPI to comply with this subsection.

(16) If the state treasurer declares under subsection (3) that

the potential for fiscal stress exists for a public school academy,

then, in addition to the option under subsection (5) for the public

school academy to establish a contract with an intermediate school

district to perform an administrative review under subsection (5),

the governing body of the public school academy may establish a

contract with its authorizing body for the authorizing body to

perform an administrative review of the financial status of the

public school academy. If a public school academy and its

authorizing body establish a contract for the authorizing body to

perform an administrative review under this subsection, then all of

the following apply:

(a) The authorizing body shall perform all of the same

functions with respect to the public school academy as an

intermediate school district performs for an administrative review

under subsection (5).

(b) The contract and administrative review shall include all

of the same items as a contract and administrative review under

subsection (5).

with respect to the contract and the administrative review as an

intermediate school district has for a contract and administrative

review under subsection (5), including, but not limited to, the

duty to consult with the department of treasury when working to

establish the contract.

(d) The department of treasury shall perform the same role and

shall treat the contract and administrative review, and the public

school academy, in the same manner as if it were an contract and

administrative review under subsection (5).

(e) All of the provisions under this section that apply to a

contract and administrative review under subsection (5) also apply

to the contract and administrative review under this subsection.

(17) As used in this section:

(a) "Authorizing body" means an authorizing body for a public

school academy under this act.

(b) "CEPI" means the center for educational performance and

information created in section 94a of the state school aid act of

1979, MCL 388.1694a.

of the uniform budgeting and accounting act, 1968 PA 2, MCL

141.435, or under section 102(1) of the state school aid act of

1979, MCL 388.1702. Deficit also includes 1 or both of the

following circumstances for a school district, intermediate school

district, or public school academy:

(i) The total general fund balance of the school district,

intermediate school district, or public school academy is negative

or is projected to be negative at the end of the current school

fiscal year.

(ii) One or more of the funds of the school district,

intermediate school district, or public school academy other than

the general fund have a negative balance or projected negative

balance that is greater than the total general fund balance.

(d) "Financial emergency" means that 1 or more of the

conditions described in section 5(3)(a) to (m) of the local

financial stability and choice act, 2012 PA 436, MCL 141.1545,

exist or are likely to occur within a school district, intermediate

school district, or public school academy in the current or next

school fiscal year and threaten the ability of the school district,

intermediate school district, or public school academy to provide

necessary governmental services essential to public health, safety,

and welfare.

(e) "Fiscal stress" means 1 or both of the following:

(i) That a school district, intermediate school district, or

public school academy is unable to meet its short-term or long-term

financial obligations as those obligations arise.

(ii) That 1 or more of the conditions described in section

4(1)(a) to (i), (k) to (q), or (s) of the local financial stability

and choice act, 2012 PA 436, MCL 141.1544, exist or are likely to

occur within a school district, intermediate school district, or

public school academy.

(f) "Governing body" means, for a school district, the school

board of the school district and, for a public school academy, the

board of directors of the public school academy.

(g) "Membership" means that term as defined in section 6 of

the state school aid act of 1979, MCL 388.1606.

(h) "Pupil" means that term as defined in section 6 of the

state school aid act of 1979, MCL 388.1606.

Enacting section 1. This amendatory act does not take effect

unless all of the following bills of the 98th Legislature are