HB-4325, As Passed House, April 23, 2015

SUBSTITUTE FOR

HOUSE BILL NO. 4325

(as amended April 23, 2015)

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 8% 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

House Bill No. 4325 as amended April 23, 2015

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.

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 a school district, intermediate school district, or

public school academy, or the authorizing body of a public school

academy, determines that conditions of fiscal stress, a deficit, or

conditions indicating a potential financial emergency have arisen

or may arise for the school district, intermediate school district,

or public school academy, that school district, intermediate school

district, public school academy, or authorizing body shall notify

the superintendent of public instruction and request technical

assistance from this state in addressing the fiscal stress,

deficit, or potential financial emergency. The superintendent of

public instruction shall notify the state treasurer of any request

for technical assistance under this subsection.

(4) A school district that requests assistance under

subsection (3) shall provide a copy of the notice and request to

the superintendent of the intermediate school district in which the

school district is located. A public school academy that requests

assistance under subsection (3) shall provide a copy of the notice

and request to its authorizing body.

(5) Within 45 days after receiving a request for assistance

under subsection (3), the department shall consult with the

department of treasury regarding the provision of technical

assistance to the school district, intermediate school district, or

public school academy. Subject to available resources, the

department and the department of treasury shall review the

financial condition and the budget of the school district,

intermediate school district, or public school academy, and, after

House Bill No. 4325 as amended April 23, 2015

consultation with the school district, intermediate school

district, or public school academy, provide technical assistance,

including, but not limited to, data analysis tools, with the

objective of assisting the school district, intermediate school

district, or public school academy in avoiding conditions of fiscal

stress, a deficit, or a potential financial emergency before

further state intervention.

(6) A school district or public school academy is not required

to submit periodic financial status reports under this section

unless the state treasurer first makes the determination required

by this subsection based upon 1 or more of the factors described in

subdivisions (A) to (G). [Subject to subsection (9), the] state treasurer

may require a school

district or public school academy to submit periodic financial

status reports under this section if the state treasurer determines

that potential financial stress may exist within the school

district or public school academy, that a deficit is projected to

arise within the school district or public school academy during

the current school fiscal year or the next 2 school fiscal years,

or that the school district or public school academy may be unable

to meet its financial obligations while also satisfying its

obligations or ability to provide public educational services in a

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

applicable rules based upon 1 or more of the following:

(a) The school district or public school academy has failed to

pay a required obligation once or more in a school fiscal year.

(b) The school district or public school academy has expended

or distributed tax revenue in a manner prohibited by law.

enrollment has declined by 5% or more in a single school fiscal

year or by 15% or more over a period of 3 or more fiscal years and

the school district or public school academy failed to reduce

expenditures in a manner that addressed the enrollment decline.

(d) The school district's or public school academy's

expenditures per pupil have increased by 5% or more in the most

recent school fiscal year as compared to the immediately preceding

school fiscal year. As used in this subdivision, "expenditures per

pupil" means the quotient of dividing the total general fund

operating expenditures for a school fiscal year by the final

audited number of pupils in membership for the state fiscal year in

which that school fiscal year ended.

(e) The school district's or public school academy's actual

enrollment for a school fiscal year was 96% or less of the

enrollment used in the school district's or public school academy's

budgetary assumptions reported under subsection (1) or (2) for the

school fiscal year and the school district or public school academy

failed to adopt an amended budget reflecting the actual enrollment

for the school fiscal year by November 15 of the school fiscal

year.

(f) The school district's or public school academy's actual

foundation allowance for a school fiscal year was 98% or less of

the school district's or public school academy's budgetary

assumptions reported under subsection (1) or (2) for the school

fiscal year and the school district or public school academy failed

to adopt an amended budget reflecting the actual foundation

allowance for the school fiscal year by November 15 of the school

fiscal year.

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

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

(7) If a school district or public school academy is required

to submit periodic financial reports under subsection (6), the

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 consultation with CEPI, 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

for approval.

data or information relating to the financial conditions of the

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 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.

(8) If a school district or public school academy fails to

House Bill No. 4325 as amended April 23, 2015

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

financial stress exists within the school district or public school

academy that a deficit has occurred, or that a deficit is projected

to occur within the school district or public school academy within

the current school fiscal year or the next school fiscal year that

the school district or public school academy lacks the capacity to

address without state assistance, the state treasurer may require

the school district or public school academy to submit an enhanced

deficit elimination plan under section 1220.

(9) A school district or public school academy is not required

to submit periodic financial status reports under this section if

[either of the following applies:

(a) The school district or public school academy had a positive general fund balance of at least 8% of total general fund revenues for each of 2 most recently completed school fiscal years.

(b) The] school district or public school academy is required to submit

a deficit elimination plan or an enhanced deficit elimination plan

under section 1220, or if a financial emergency has been declared

for the school district under the local financial stability and

choice act, 2012 PA 436, MCL 141.1541 to 141.1575.

[(10)]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 at least 4

years after the date of issuance of the loan.

[(11)] A 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

House Bill No. 4325 as amended April 23, 2015

financial status reports submitted by the school district or public

school academy indicate that potential financial stress does not

exist within the school district or public school academy; that a

deficit is not projected to arise within the school district or

public school academy within the current school fiscal year or the

next 2 school fiscal years; and that the school district or public

school academy will be able to meet its financial obligations while

also satisfying the 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.

[(12)] If the state treasurer makes a determination under

subsection [(11)] that the conditions under that subsection apply to

a school district or public school academy, the state treasurer

shall notify the school district or public school academy.

[(13)] CEPI shall make available to the public on its website

all of the budgetary assumptions it receives under this section and

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.

[(14)] 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 (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) "Foundation allowance" means, for a school district, the

foundation allowance for the school district as calculated under

section 20 of the state school aid act of 1979, MCL 388.1620, and,

for a public school academy, the per-pupil allocation for the

public school academy as calculated under section 20(6) of the

state school aid act of 1979, MCL 388.1620.

(g) "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.

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

the state school aid act of 1979, MCL 388.1606.

(i) "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 takes effect 90 days

after the date it is enacted into law.

Enacting section 2. This amendatory act does not take effect

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

enacted into law:

(a) House Bill No. 4327.

(b) House Bill No. 4328.