September 8, 2016, Introduced by Rep. Poleski and referred to the Committee on Financial Liability Reform.
A bill to amend 1976 PA 451, entitled
"The revised school code,"
by amending section 1220 (MCL 380.1220), as added by 2015 PA 111.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1220. (1) A school district, intermediate school
district, or public school academy shall not adopt or operate under
a deficit budget, and a school district, intermediate school
district, or public school academy shall not incur an operating
deficit in a fund during a school fiscal year. If a school
district, intermediate school district, or public school academy
has an existing deficit fund balance, incurs a deficit fund balance
in the most recently completed school fiscal year, or adopts a
current year budget that projects a deficit fund balance, all of
the following apply:
(a) The school district, intermediate school district, or
public school academy shall notify the superintendent of public
instruction and the state treasurer immediately upon the occurrence
of the circumstance. A school district shall provide a copy of the
notice under this subdivision to the intermediate superintendent of
the intermediate school district in which the school district is
located. A public school academy shall provide a copy of the notice
under this subdivision to the authorizing body of the public school
academy.
(b) Within 30 days after making notification under subdivision
(a), the school district, intermediate school district, or public
school academy shall submit to the superintendent of public
instruction in the form and manner prescribed by the department an
amended budget for the current school fiscal year and a deficit
elimination plan approved by the board of the school district,
intermediate school district, or public school academy, with a copy
to the state treasurer. A school district shall transmit a copy of
the amended budget and the deficit elimination plan to the
intermediate superintendent of the intermediate school district in
which the school district is located. A public school academy shall
transmit a copy of the amended budget and the deficit elimination
plan to its authorizing body.
(c) The department may withhold and release some or all of the
money payable to the school district, intermediate school district,
or public school academy as provided under section 102(1) of the
state school aid act of 1979, MCL 388.1702.
(d) The superintendent of public instruction may require a
deficit elimination plan to include an academic plan for the school
district, intermediate school district, or public school academy.
(e) After the superintendent of public instruction approves a
school district's, intermediate school district's, or public school
academy's deficit elimination plan, the school district,
intermediate school district, or public school academy shall post
the deficit elimination plan on the school district's, intermediate
school district's, or public school academy's website.
(2) In addition to the measures under subsection (1), if the
board of a school district or intermediate school district adopts a
budget for a school fiscal year that projects a deficit fund
balance, all of the following apply:
(a) Subject to subdivision (b), until either the
superintendent of public instruction or the state treasurer
determines that the school district or intermediate school district
is no longer in deficit and that all members of the board have
completed the training under subdivision (d), the board shall not
have the power or responsibility to approve or adopt a budget. For
a school district, that power and responsibility instead shall be
exercised by the superintendent of the school district and, for an
intermediate school district, that power and responsibility instead
shall be exercised by the intermediate superintendent of the
intermediate school district.
(b) A board that would otherwise be subject to subdivision (a)
may continue to exercise the power and responsibility to approve or
adopt a budget if the board approves a resolution retaining that
power and responsibility by an affirmative vote of at least 2/3 of
the members serving on the board.
(c) For a superintendent or intermediate superintendent who
adopts a budget while exercising the budgeting power and
responsibility of a board under subdivision (a), the board may not
terminate his or her employment for at least 2 years or until his
or her contract expires, whichever is later. In addition, for the
chief financial officer serving at the time that a superintendent
or intermediate superintendent exercises the power and
responsibilities under subdivision (a), the board may not terminate
his or her employment for at least 2 years or until his or her
contract expires, whichever is later.
(d) The board shall ensure that all of its members complete a
course of school board training that covers at least school board
governance, public school financing, fiscal responsibility, and
ethics.
(3) (2)
The following reporting
requirements apply for the
purposes of this section and section 1219:
(a) Not later than March 1 of each year, the department shall
prepare a report of deficits incurred or projected by school
districts, intermediate school districts, and public school
academies in the immediately preceding fiscal year and the progress
made in reducing those deficits and submit the report to the
standing committees of the legislature responsible for K-12
education legislation, the appropriations subcommittees of the
legislature responsible for K-12 school aid appropriations, the
house and senate fiscal agencies, the state treasurer, and the
state budget director. The department also shall submit quarterly
interim reports concerning the progress made by school districts,
intermediate school districts, and public school academies in
reducing those deficits to the standing committees of the
legislature responsible for K-12 education legislation, the
appropriations subcommittees of the legislature responsible for K-
12 school aid appropriations, the house and senate fiscal agencies,
the state treasurer, and the state budget director. On a quarterly
basis, the superintendent of public instruction shall publicly
present those reports to the appropriations subcommittees of the
legislature responsible for K-12 school aid appropriations.
(b) Not later than March 1 of each year, the state treasurer
shall prepare a report of school districts, intermediate school
districts, and public school academies that were required under
section 1219 to submit periodic financial status reports in the
immediately preceding state fiscal year or required under this
section to submit an enhanced deficit elimination plan in the
immediately preceding state fiscal year, and the progress made in
adhering to that plan, and submit the report to the standing
committees of the legislature responsible for K-12 education
legislation, the appropriations subcommittees of the legislature
responsible for K-12 state school aid appropriations, the house and
senate fiscal agencies, the department, and the state budget
director. The state treasurer also shall submit quarterly interim
reports concerning school districts, intermediate school districts,
and public school academies that are subject to periodic financial
status reports or are under an enhanced deficit elimination plan to
the standing committees of the legislature responsible for K-12
education legislation, the appropriations subcommittees of the
legislature responsible for K-12 state school aid appropriations,
the house and senate fiscal agencies, the department, and the state
budget director. On a quarterly basis, the state treasurer shall
publicly present those quarterly interim reports to the
appropriations subcommittees of the legislature responsible for K-
12 state school aid appropriations.
(4) (3)
A school district, intermediate
school district, or
public school academy required to submit a deficit elimination plan
under this section shall submit to the superintendent of public
instruction and the state treasurer a monthly monitoring report on
revenue and expenditures in a form and manner prescribed by the
department and shall post these reports on its website. A school
district shall transmit a copy of each report under this subsection
to the intermediate superintendent of the intermediate school
district in which the school district is located. A public school
academy shall transmit a copy of each report under this section to
the authorizing body of the public school academy. A school
district may contract with its intermediate school district or
another entity to provide the monthly monitoring report.
(5) (4)
If a school district, intermediate
school district, or
public school academy is required to submit a deficit elimination
plan under this section, and the deficit elimination plan is
approved by the department, the superintendent of public
instruction may continue allotment and payment of funds as provided
under section 102 of the state school aid act of 1979, MCL
388.1702. When approving a deficit elimination plan, the
superintendent of public instruction shall establish the period of
time within which a school district, intermediate school district,
or public school academy must eliminate its deficit and may set
special conditions that the school district, intermediate school
district, or public school academy must meet while the deficit
elimination plan is in effect. After the department approves a
school district's, intermediate school district's, or public school
academy's deficit elimination plan under this subsection, the
school district, intermediate school district, or public school
academy shall post the deficit elimination plan on the school
district's, intermediate school district's, or public school
academy's website. The requirements of this section relating to a
deficit elimination plan do not apply to a school district,
intermediate school district, or public school academy if the
school district, intermediate school district, or public school
academy is required to submit an enhanced deficit elimination plan
under
subsection (5).(6).
(6) (5)
If, based upon information included
in a periodic
financial status report required under section 1219, a deficit
elimination plan required under this section, or a request by the
superintendent of public instruction, the state treasurer
determines that a school district, intermediate school district, or
public school academy is subject to rapidly deteriorating financial
circumstances, persistently declining enrollment, or other
indicators of financial stress likely to result in recurring
operating deficits or recurring financial stress within the school
district, intermediate school district, or public school academy,
the state treasurer may require the school district, intermediate
school district, or public school academy to submit an enhanced
deficit elimination plan in the form and manner determined by the
department of treasury. If the deficit for a school district,
intermediate school district, or public school academy that is
subject to a deficit elimination plan has not been completely
eliminated within 5 years after it submitted its initial deficit
elimination plan, the state treasurer shall require the school
district, intermediate school district, or public school academy to
submit an enhanced deficit elimination plan under this subsection.
An enhanced deficit elimination plan shall provide for the
resolution of the deteriorating financial circumstances,
persistently declining enrollment, or other indicators of recurring
operating deficits or recurring financial stress and is subject to
approval by the state treasurer. As a condition of approving the
enhanced deficit elimination plan, the state treasurer may require
a school district, intermediate school district, or public school
academy required to submit an enhanced deficit elimination plan
under this section to enter into a financial recovery agreement
with the state treasurer. A financial recovery agreement may
provide for, but is not limited to, all of the following:
(a) Assistance and guidance from the department of treasury
and other state departments and agencies.
(b) A financial and operating plan for the school district,
intermediate school district, or public school academy.
(c) The appointment of a local auditor or inspector, or both.
(d) Remedial measures or other action under this act necessary
to address the financial circumstances of the school district,
intermediate school district, or public school academy.
(e) The required retention by the school district,
intermediate school district, or public school academy of a
consultant or 1 or more other experts for the purpose of assisting
the school district, intermediate school district, or public school
academy to achieve the goals and objectives of the financial
recovery agreement.
(7) (6)
Before a school district,
intermediate school
district, or public school academy submits an enhanced deficit
elimination
plan to the state treasurer under subsection (5), (6),
the board of the school district or intermediate school district or
board of directors of the public school academy shall approve the
plan. If a school district, intermediate school district, or public
school academy is required to submit an enhanced deficit
elimination
plan under subsection (5), (6),
some or all of the
money payable to the school district, intermediate school district,
or public school academy under the state school aid act of 1979 may
be withheld by the state treasurer and released as provided under
section 102(3) of the state school aid act of 1979, MCL 388.1702.
When approving an enhanced deficit elimination plan, the state
treasurer may establish the period of time within which a school
district, intermediate school district, or public school academy
must eliminate its deficit and may set special conditions that the
school district, intermediate school district, or public school
academy must meet while the enhanced deficit elimination plan is in
effect.
(8) (7)
To assure greater coordination and
effective
partnerships in the development and implementation of an enhanced
deficit
elimination plan under subsection (5), (6), when
administering
subsections (5), (6), and (9), (6),
(7), and (10),
the department of treasury shall consult with all of the following:
(a) The department.
(b) The school district, intermediate school district, or
public school academy required to submit an enhanced deficit
elimination
plan under subsection (5).(6).
(c) For a school district required to submit an enhanced
deficit
elimination plan under subsection (5), (6), the
intermediate superintendent of the intermediate school district in
which the school district is located.
(d) For a public school academy required to submit an enhanced
deficit
elimination plan under subsection (5), (6), the authorizing
body of the public school academy.
(9) (8)
After the state treasurer approves
an enhanced deficit
elimination plan for a school district, intermediate school
district, or public school academy, the school district,
intermediate school district, or public school academy shall post
the enhanced deficit elimination plan on the school district's,
intermediate school district's, or public school academy's website.
(10) (9)
If a school district, intermediate
school district,
or public school academy is required to submit an enhanced deficit
elimination
plan under subsection (5), (6),
the school district,
intermediate school district, or public school academy shall submit
to the superintendent of public instruction and the state treasurer
an enhanced monthly monitoring report on revenue, expenditures,
cash flow, debt, other liabilities, assets, budget amendments,
pupil membership, and other data relating to the finances of the
school district, intermediate school district, or public school
academy in a form and manner prescribed by the department of
treasury and shall post these reports on its website.
(11) (10)
As used in this section:
(a) "Authorizing body" means an authorizing body for a public
school academy under this act.
(b) "Deficit" means that term as defined in section 1219.
(c)
(b) "Deficit elimination plan" means a plan
required under
this section for the elimination of a deficit that sets forth
actions to be taken to eliminate the deficit within the time period
prescribed by the department.
(d) (c)
"Deficit fund balance"
means that term as defined in
the "Michigan Public School Accounting Manual" published by the
department.
(e) (d)
"Enhanced deficit elimination
plan" means measures
required by the state treasurer under this section to address the
financial conditions within a school district, intermediate school
district, or public school academy and resolve any deficit within
the time period prescribed by the state treasurer.
Enacting section 1. This amendatory act takes effect 90 days
after the date it is enacted into law.