May 21, 2014, Introduced by Senators KAHN and PAPPAGEORGE and referred to the Committee on Appropriations.
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) With the objective of assuring the provision of
assistance and collaboration before state intervention under this
section or section 1220, 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 may 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.
(2) A school district that requests assistance under
subsection (1) shall provide a copy of the notice and request to
the superintendent of public instruction and to the superintendent
of the intermediate school district in which the school district is
located. A public school academy that requests assistance under
subsection (1) shall provide a copy of the notice and request to
its authorizing body.
(3) After receiving a request for assistance under subsection
(1), 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 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. To assure greater
coordination and effective partnerships, when administering this
subsection for a school district, the department and the department
of treasury shall consult with the superintendent of the school
district and the intermediate superintendent of the intermediate
school district in which the school district is located, and the
intermediate school district may provide assistance that
complements and supports the state assistance provided under this
section. To assure greater coordination and effective partnerships,
when administering this subsection for a public school academy, the
department and the department of treasury shall consult with the
authorizing body of the public school academy, and the authorizing
body may provide assistance that complements and supports the state
assistance provided under this section.
(4) The superintendent of public instruction or the state
treasurer may require a school district, intermediate school
district, or public school academy to submit periodic financial
status reports under subsection (5) if the superintendent of public
instruction or the state treasurer determines that potential
financial stress may exist within the school district, intermediate
school district, or public school academy, that an operating
deficit may arise within the school district, intermediate school
district, or public school academy during the current school fiscal
year or the following 2 school fiscal years, or that the 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, based
upon 1 or more of the following:
(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.
(c) Financial data or other information provided to a state
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 a school district and residents of a 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.
(5) For a school district, not less than 14 days before
determining that potential financial stress may exist in the school
district, the superintendent of public instruction or the state
treasurer shall notify the school district and the intermediate
school district in which the school is located of a potential
determination under subsection (4). For an intermediate school
district, not less than 14 days before determining that potential
financial stress may exist in the intermediate school district, the
superintendent of public instruction or the state treasurer shall
notify the intermediate school district of a potential
determination under subsection (4). For a public school academy,
the superintendent of public instruction or the state treasurer
shall notify the authorizing body of the public school academy of a
potential determination under subsection (4). If the superintendent
of public instruction or the state treasurer determines that
potential financial stress may exist in a school district,
intermediate school district, or public school academy under
subsection (4), after making this notification, the superintendent
of public instruction or the state treasurer may require the school
district, intermediate school district, or public school academy to
submit a periodic financial status report on a periodic basis
determined by the superintendent of public instruction or the state
treasurer under subsection (6) if 1 or more of the following are
applicable:
(a) The school district, intermediate school district, or
public school academy failed to make a required payment to the
Michigan public school employees' retirement system under the
public school employees retirement act of 1979, 1980 PA 300, MCL
38.1301 to 38.1437.
(b) The school district, intermediate school district, or
public school academy failed to make a required payment to the
Michigan unemployment insurance agency.
(c) The school district, intermediate school district, or
public school academy failed to timely transmit to the department
of treasury a required payment of tax withheld from payments to
employees of the school district, intermediate school district, or
public school academy.
(d) Information submitted by a vendor of the school district,
intermediate school district, or public school academy indicates
that the school district, intermediate school district, or public
school academy has failed to make timely payments to the vendor as
required under a contract between the vendor and the school
district, intermediate school district, or public school academy.
(e) The school district or intermediate school district has
expended tax revenue for an unauthorized purpose or the school
district or intermediate school district has transferred or
deposited tax revenue in an unauthorized manner.
(f) The school district or intermediate school district has
failed to distribute tax revenue as required by law or to make
timely refunds of tax revenues as required by law.
(g) The school district, intermediate school district, or
public school academy has failed to pay employees of the school
district, intermediate school district, or public school academy
within the time period required by law.
(h) The school district, intermediate school district, or
public school academy has failed to comply with a material
requirement in the uniform budgeting and accounting act, 1968 PA 2,
MCL 141.421 to 141.440a, and the material violation was noted in an
audit or audited financial statement of the school district,
intermediate school district, or public school academy.
(i) The general fund balance of the school district,
intermediate school district, or public school academy has declined
by 5% or more over 3 consecutive school fiscal years.
(j) An unanticipated reduction in payments to the school
district, intermediate school district, or public school academy
under the state school aid act of 1979 or in local tax revenue
payable to the school district or intermediate school district
occurs and is not accounted for in the budget adopted by the school
district, intermediate school district, or public school academy.
(k) For a school district or public school academy, pupil
enrollment in the school district or public school academy has
declined by 10% or more in a single school fiscal year or by 20% or
more over 3 consecutive school fiscal years and the school district
or public school academy failed to reduce expenditures in a manner
proportionate to the decline in enrollment.
(l) For a school district, a request for a determination under
this subsection is submitted to the superintendent of public
instruction or the state treasurer by the board of the school
district or the superintendent of the intermediate school district.
(m) For a public school academy, a request for a determination
under this subsection is submitted to the superintendent of public
instruction or the state treasurer by the board of the public
school academy or the authorizing body of the public school
academy.
(n) For a school district, based upon the factors described in
this subsection and subsection (4) or information provided by an
intermediate school district, the superintendent of public
instruction or the state treasurer determines that a deficit is
likely to arise for the school district in the current or next
school fiscal year and the school district has not taken action
necessary to prevent the deficit from arising.
(o) For a public school academy, based upon the factors
described in this subsection and subsection (4) or information
provided by the authorizing body of the public school academy, the
superintendent of public instruction or the state treasurer
determines that a deficit is likely to arise for the public school
academy in the current or next fiscal year and the public school
academy has not taken action necessary to prevent the deficit from
arising.
(p) For a school district, the school district has applied for
a loan under the emergency municipal loan act, 1980 PA 243, MCL
141.931 to 141.942.
(6) If a school district, intermediate school district, or
public school academy is required to submit periodic financial
status reports under subsection (5), the school district,
intermediate school district, or public school academy shall 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 the department and the center for educational
performance and information created in section 94a of the state
school aid act of 1979, MCL 388.1694a. The report shall include
financial data and other information that the department of
treasury, after consultation with the department, organizations
representing public school administrators and business officials,
and the center for educational performance and information,
determines can assist the state in developing an early warning
system of financial stress or operating deficits in school
districts, intermediate school districts, and public school
academies. Financial data or other information that may be required
by the department of treasury to be reported on a periodic
financial status report may include, but is not limited to, some or
all of the following:
(a) Pupil counts for pupils in membership in a school district
or public school academy for the current fiscal year and the 2
prior fiscal years as determined under the state school aid act of
1979, and projected pupil counts for pupils in membership in the
school district or public school academy for the next 3 fiscal
years.
(b) Projected cash flow for the school district, intermediate
school district, or public school academy for the remainder of the
current school fiscal year and projected cash flow for the next 3
school fiscal years.
(c) For a school district or public school academy, a cash
flow borrowing ratio for the current school fiscal year, the prior
2 school fiscal years, and a projected cash flow borrowing ratio
for the next 3 school fiscal years. As used in this subdivision,
"cash flow borrowing ratio" means the quotient of the sum of the
total amount of any tax anticipation notes issued by the school
district or public school academy in the fiscal year and the total
amount of state school aid anticipation notes issued by the school
district or public school academy in the fiscal year divided by the
school district's or public school academy's total general fund
revenue for the fiscal year.
(d) An operating reserve ratio for the current fiscal year,
the prior 2 fiscal years, and a projected operating reserve ratio
for the next 3 fiscal years. As used in this subdivision,
"operating reserve ratio" means the quotient of the school
district's, intermediate school district's, or public school
academy's general fund balance divided by its total general fund
expenditures for a fiscal year.
(e) An operating margin ratio for the current fiscal year, the
prior 2 fiscal years, and a projected operating margin ratio for
the next 3 fiscal years. As used in this subdivision, "operating
margin ratio" means the quotient of the difference between the
total general fund revenue and total general fund expenditures for
a fiscal year divided by the total general fund revenue for the
fiscal year.
(f) A fund balance change ratio for the current fiscal year,
the prior 2 fiscal years, and a projected fund balance change ratio
for the next 3 fiscal years. As used in this subdivision, "fund
balance change ratio" means the quotient of the prior fiscal year
general fund balance and the current fiscal year general fund
balance divided by prior fiscal year general fund balance.
(7) For a school district required to submit periodic
financial status reports under subsection (6), the school district
shall transmit a copy of the periodic financial status report to
the members of the board of the school district and the
superintendent of the intermediate school district in which the
school district is located before transmitting the periodic
financial status report to the state treasurer. For a public school
academy required to submit periodic financial status reports under
subsection (6), the public school academy shall transmit a copy of
the periodic financial status report to the members of the board of
the public school academy and to the authorizing body of the public
school academy before transmitting the periodic financial status
report to the state treasurer. For an intermediate school district
required to submit periodic financial status reports under
subsection (6), the intermediate school district shall transmit a
copy of the periodic financial status report to the members of the
board of the intermediate school district before transmitting the
periodic financial status report to the state treasurer.
(8) A school district, intermediate school district, or public
school academy required to submit periodic financial status reports
under this section shall do all of the following:
(a) Provide the department of treasury or the department with
other financial data or information relating to the financial
condition of the school district, intermediate school district, or
public school academy as requested by the department of treasury or
the department.
(b) Allow the department of treasury or the department to
examine all financial records and books of account of the school
district, intermediate school district, or public school academy.
(c) Promptly and fully provide the assistance and information
necessary and properly requested by the department of treasury or
the department in the effectuation of the department of treasury's
or the department's duties under this section.
(9) 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 or is notified by the superintendent of public
instruction or other public school official that information
included on a periodic financial status report indicates that
financial stress exists within the school district, intermediate
school district, or public school academy, that an operating
deficit has occurred, or that an operating deficit 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 that the school district, intermediate
school district, or public school academy lacks the capacity to
address without state assistance, 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. Before requiring a school district to submit an
enhanced deficit elimination plan under section 1220, the state
treasurer shall first notify the superintendent of public
instruction, the board of the school district, and the
superintendent of the intermediate school district in which the
school district is located. Before requiring a public school
academy to submit an enhanced deficit elimination plan under
section 1220, the state treasurer shall first notify the
superintendent of public instruction, the board of the public
school academy, and the authorizing body of the public school
academy. Before requiring an intermediate school district to submit
an enhanced deficit elimination plan under section 1220, the state
treasurer shall first notify the superintendent of public
instruction and the board of the intermediate school district. The
failure of an officer of a school district, intermediate school
district, or public school academy to prepare and submit a periodic
financial status report as provided under this section constitutes
malfeasance and is grounds for removal of the officer from office.
(10) A school district, intermediate school district, or
public school academy is not required to submit periodic financial
status reports under this section if the school district,
intermediate school district, or public school academy is required
to submit a deficit elimination plan or an enhanced deficit
elimination plan under section 1220 or, for a school district or
intermediate school district, if a financial emergency has been
declared for the school district or intermediate school district
under the local financial stability and choice act, 2012 PA 436,
MCL 141.1541 to 141.1575, or a successor statute. 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 reports under this section for at least 4 years
after the date of issuance of the loan.
(11) 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,
after consultation with the superintendent of public instruction,
determines that the periodic financial status reports submitted by
a school district, intermediate school district, or public school
academy indicate that potential financial stress does not exist
within the school district, intermediate school district, or public
school academy; that an operating 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
following 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 abilities to provide public educational
services in a manner that complies with this act, the state school
aid act of 1979, and applicable rules promulgated by the
department.
(12) If the state treasurer makes a determination under
subsection (11) 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. The
superintendent of public instruction may notify the state treasurer
that the superintendent of public instruction has determined that
conditions under subsection (11) apply to a school district,
intermediate school district, or public school academy.
(13) For a school district, the intermediate school district
in which the school district is located may advise the state
treasurer regarding the development and implementation of periodic
financial reports for the school district under this section. For a
public school academy, the authorizing body of the public school
academy may advise the state treasurer regarding the development
and implementation of periodic financial reports for the public
school academy under this section.
(14) The superintendent of public instruction and the state
treasurer shall convene a joint workgroup to assist the department
and department of treasury in developing recommendations for the
creation of an information system or processes that will provide
earlier access to financial information and other data that will
allow school districts, intermediate school districts, and public
school academies to address budgetary and other financial
difficulties earlier. The recommendations for the creation of an
information system or processes should address all of the
following:
(a) Creating an information system or processes that use or
otherwise expand upon existing data collection processes and
requirements and provide more timely access and analysis of data at
the state level while also facilitating local and regional
collaboration.
(b) Allowing the uploading of school budget and current year-
to-date financial information on a periodic basis using the
financial information database maintained by the center for
educational performance and information created in section 94a of
the state school aid act of 1979, MCL 388.1694a.
(c) Permitting the upload of year-to-date expenditure data on
at least a quarterly basis.
(d) Providing the department and the department of treasury
with access to data available through the information system or
processes.
(e) Reducing or consolidating, or both, reporting requirements
under current law and regulations.
(f) Estimating the cost of the information system or
processes.
(15) The workgroup convened by the superintendent of public
instruction and the state treasurer under subsection (14) shall
include representatives of the department, the department of
treasury, the department of technology, management, and budget, the
center for educational performance and information created in
section 94a of the state school aid act of 1979, MCL 388.1694a,
school districts, intermediate school districts, public school
academies, authorizing bodies, school business officials, and
certified public accountants. The workgroup shall complete its work
by September 30, 2015. The superintendent of public instruction and
state treasurer shall submit joint recommendations by December 31,
2015 to the governor, the senate and house standing committees on
education, and the senate and house appropriations subcommittees on
school aid.
(16) In addition to the recommendations under subsection (14),
the workgroup convened by the superintendent of public instruction
and the state treasurer under subsection (14) shall make
recommendations on recommended changes in state law relating to
periodic financial status reports under this section and deficit
elimination reports and enhanced deficit elimination plans under
section 1220, including, but not limited to, new data analysis
tools, and recommendations on changes to warning signs, data needs,
and proper timing of reporting in a manner that reduces
administrative bureaucracy.
(17) As used in this section, "authorizing body" means an
authorizing body for a public school academy under this act.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 97th Legislature are
enacted into law:
(a) Senate Bill No.954
.
(b) Senate Bill No.951
.
(c) Senate Bill No.952
.