SB-1193, As Passed House, December 8, 2004

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1193

                                                                             A bill to amend 1979 PA 94, entitled                                              

"The state school aid act of 1979,"                                         

by amending sections 11 and 51a (MCL 388.1611 and 388.1651a), as            

amended by 2004 PA 351.                                                     

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1       Sec. 11.  (1) In addition to all other appropriations under                 

2   this act for that fiscal year, for the fiscal year ending                   

3   September 30, 2004, there is appropriated to the state school aid           

4   fund from the unreserved balance in the general fund an amount              

5   equal to any deficit balance that would otherwise exist in the              

6   state school aid fund at bookclosing for the fiscal year ending             

7   September 30, 2004. For the fiscal year ending September 30,                

8   2005, there is appropriated for the public schools of this state            

9   and certain other state purposes relating to education the sum of           

10  $11,008,700,000.00 $10,909,200,000.00 from the state school aid           

1   fund established by section 11 of article IX of the state                   

2   constitution of 1963 and the sum of  $165,200,000.00

3   $264,700,000.00 from the general fund.  In addition, available              

4   federal funds are appropriated for each of those fiscal years.              

5       (2) The appropriations under this section shall be allocated                

6   as provided in this act.  Money appropriated under this section             

7   from the general fund shall be expended to fund the purposes of             

8   this act before the expenditure of money appropriated under this            

9   section from the state school aid fund.  If the maximum amount              

10  appropriated under this section from the state school aid fund              

11  for a fiscal year exceeds the amount necessary to fully fund                

12  allocations under this act from the state school aid fund, that             

13  excess amount shall not be expended in that state fiscal year and           

14  shall not lapse to the general fund, but instead shall be                   

15  deposited into the school aid stabilization fund created in                 

16  section 11a.                                                                

17      (3) If the maximum amount appropriated under this section                   

18  from the state school aid fund and the school aid stabilization             

19  fund for a fiscal year exceeds the amount available for                     

20  expenditure from the state school aid fund for that fiscal year,            

21  payments under sections 11f, 11g, 11j, 22a, 26a, 31d, 51a(2),               

22  51a(12), 51c, 53a, and 56 shall be made in full.  In addition,              

23  for districts beginning operations after 1994-95 that qualify for           

24  payments under section 22b, payments under section 22b shall be             

25  made so that the qualifying districts receive the lesser of an              

26  amount equal to the 1994-95 foundation allowance of the district            

27  in which the district beginning operations after 1994-95 is                 

1   located or $5,500.00.  The amount of the payment to be made under           

2   section 22b for these qualifying districts shall be as calculated           

3   under section 22a, with the balance of the payment under section            

4   22b being subject to the proration otherwise provided under this            

5   subsection and subsection (4).  Subject to subsection (5), if               

6   proration is necessary after 2002-2003, state payments under each           

7   of the other sections of this act from all state funding sources            

8   shall be prorated in the manner prescribed in subsection (4) as             

9   necessary to reflect the amount available for expenditure from              

10  the state school aid fund for the affected fiscal year.  However,           

11  if the department of treasury determines that proration will be             

12  required under this subsection, or if the department of treasury            

13  determines that further proration is required under this                    

14  subsection after an initial proration has already been made for a           

15  fiscal year, the department of treasury shall notify the state              

16  budget director, and the state budget director shall notify the             

17  legislature at least 30 calendar days or 6 legislative session              

18  days, whichever is more, before the department reduces any                  

19  payments under this act because of the proration.  During the 30            

20  calendar day or 6 legislative session day period after that                 

21  notification by the state budget director, the department shall             

22  not reduce any payments under this act because of proration under           

23  this subsection.  The legislature may prevent proration from                

24  occurring by, within the 30 calendar day or 6 legislative session           

25  day period after that notification by the state budget director,            

26  enacting legislation appropriating additional funds from the                

27  general fund, countercyclical budget and economic stabilization             

1   fund, state school aid fund balance, or another source to fund              

2   the amount of the projected shortfall.                                      

3       (4) Subject to subsection (5), if proration is necessary, the               

4   department shall calculate the proration in district and                    

5   intermediate district payments that is required under subsection            

6   (3) as follows:                                                             

7       (a) The department shall calculate the percentage of total                  

8   state school aid allocated under this act for the affected fiscal           

9   year for each of the following:                                             

10                                                                               (i) Districts.                                                                      

11      (ii) Intermediate districts.                                                 

12      (iii) Entities other than districts or intermediate                          

13  districts.                                                                  

14      (b) The department shall recover a percentage of the                        

15  proration amount required under subsection (3) that is equal to             

16  the percentage calculated under subdivision (a)(i) for districts            

17  by reducing payments to districts.  This reduction shall be made            

18  by calculating an equal dollar amount per pupil as necessary to             

19  recover this percentage of the proration amount and reducing each           

20  district's total state school aid from state sources, other than            

21  payments under sections 11f, 11g, 11j, 22a, 26a, 31d, 51a(2),               

22  51a(12), 51c, and 53a, by that amount.                                      

23      (c) The department shall recover a percentage of the                        

24  proration amount required under subsection (3) that is equal to             

25  the percentage calculated under subdivision (a)(ii) for                      

26  intermediate districts by reducing payments to intermediate                 

27  districts.  This reduction shall be made by reducing the payments           

1   to each intermediate district, other than payments under sections           

2   11f, 11g, 26a, 51a(2), 51a(12), 53a, and 56, on an equal                    

3   percentage basis.                                                           

4       (d) The department shall recover a percentage of the                        

5   proration amount required under subsection (3) that is equal to             

6   the percentage calculated under subdivision (a)(iii) for entities            

7   other than districts and intermediate districts by reducing                 

8   payments to these entities.  This reduction shall be made by                

9   reducing the payments to each of these entities, other than                 

10  payments under sections 11j and 26a, on an equal percentage                 

11  basis.                                                                      

12      (5) Beginning in 2004-2005, if a district has an emergency                  

13  financial manager in place under the local government fiscal                

14  responsibility act, 1990 PA 72, MCL 141.1201 to 141.1291,                   

15  payments to that district are not subject to proration under this           

16  section.                                                                    

17      (6) Except for the allocation under section 26a, any general                

18  fund allocations under this act that are not expended by the end            

19  of the state fiscal year are transferred to the state school aid            

20  fund.  If it is determined at the May 2005 revenue estimating               

21  conference conducted under section 367b of the management and               

22  budget act, 1984 PA 431, MCL 18.1367b, that there is additional             

23  school aid fund revenue beyond that determined at the May 2004              

24  revenue estimating conference, then it is the intent of the                 

25  legislature to enact legislation to fund, to the extent that                

26  revenues are available, the same programs in the same amount that           

27  were funded under section 81 in 2003 PA 236 and the same pupil              

1   membership formula as in effect under 2003 PA 236.                          

2       Sec. 51a.  (1) From the appropriation in section 11, there                  

3   is allocated for 2004-2005 an amount not to exceed                          

4   $905,683,000.00 from state sources and all available federal                

5   funding under sections 611 to 619 of part B of the individuals              

6   with disabilities education act, 20 USC 1411 to 1419, estimated             

7   at $329,850,000.00 plus any carryover federal funds from previous           

8   year appropriations.  The allocations under this subsection are             

9   for the purpose of reimbursing districts and intermediate                   

10  districts for special education programs, services, and special             

11  education personnel as prescribed in article 3 of the revised               

12  school code, MCL 380.1701 to 380.1766; net tuition payments made            

13  by intermediate districts to the Michigan schools for the deaf              

14  and blind; and special education programs and services for pupils           

15  who are eligible for special education programs and services                

16  according to statute or rule.  For meeting the costs of special             

17  education programs and services not reimbursed under this                   

18  article, a district or intermediate district may use money in               

19  general funds or special education funds, not otherwise                     

20  restricted, or contributions from districts to intermediate                 

21  districts, tuition payments, gifts and contributions from                   

22  individuals, or federal funds that may be available for this                

23  purpose, as determined by the intermediate district plan prepared           

24  pursuant to article 3 of the revised school code, MCL 380.1701 to           

25  380.1766.  All federal funds allocated under this section in                

26  excess of those allocated under this section for 2002-2003 may be           

27  distributed in accordance with the flexible funding provisions of           

1   the individuals with disabilities education act, title VI of                

2   Public Law 91-230, including, but not limited to, 34 CFR 300.234            

3   and 300.235.  Notwithstanding section 17b, payments of federal              

4   funds to districts, intermediate districts, and other eligible              

5   entities under this section shall be paid on a schedule                     

6   determined by the department.                                               

7       (2) From the funds allocated under subsection (1), there is                 

8   allocated for 2004-2005 the amount necessary, estimated at                  

9   $168,900,000.00 for 2003-2004, for payments toward reimbursing              

10  districts and intermediate districts for 28.6138% of total                  

11  approved costs of special education, excluding costs reimbursed             

12  under section 53a, and 70.4165% of total approved costs of                  

13  special education transportation.  Allocations under this                   

14  subsection shall be made as follows:                                        

15      (a) The initial amount allocated to a district under this                   

16  subsection toward fulfilling the specified percentages shall be             

17  calculated by multiplying the district's special education pupil            

18  membership, excluding pupils described in subsection (12), times            

19  the sum of the foundation allowance under section 20 of the                 

20  pupil's district of residence plus the amount of the district's             

21  per pupil allocation under section 20j(2), not to exceed                    

22  $6,500.00 adjusted by the dollar amount of the difference between           

23  the basic foundation allowance under section 20 for the current             

24  fiscal year and $5,000.00 minus $200.00, or, for a special                  

25  education pupil in membership in a district that is a public                

26  school academy or university school, times an amount equal to the           

27  amount per membership pupil calculated under section 20(6).  For            

1   an intermediate district, the amount allocated under this                   

2   subdivision toward fulfilling the specified percentages shall be            

3   an amount per special education membership pupil, excluding                 

4   pupils described in subsection (12), and shall be calculated in             

5   the same manner as for a district, using the foundation allowance           

6   under section 20 of the pupil's district of residence, not to               

7   exceed $6,500.00 adjusted by the dollar amount of the difference            

8   between the basic foundation allowance under section 20 for the             

9   current fiscal year and $5,000.00 minus $200.00, and that                   

10  district's per pupil allocation under section 20j(2).                       

11      (b) After the allocations under subdivision (a), districts                  

12  and intermediate districts for which the payments under                     

13  subdivision (a) do not fulfill the specified percentages shall be           

14  paid the amount necessary to achieve the specified percentages              

15  for the district or intermediate district.                                  

16      (3) From the funds allocated under subsection (1), there is                 

17  allocated for 2004-2005 the amount necessary, estimated at                  

18  $2,400,000.00, to make payments to districts and intermediate               

19  districts under this subsection.  If the amount allocated to a              

20  district or intermediate district for a fiscal year under                   

21  subsection (2)(b) is less than the sum of the amounts allocated             

22  to the district or intermediate district for 1996-97 under                  

23  sections 52 and 58, there is allocated to the district or                   

24  intermediate district for the fiscal year an amount equal to that           

25  difference, adjusted by applying the same proration factor that             

26  was used in the distribution of funds under section 52 in 1996-97           

27  as adjusted to the district's or intermediate district's                    

1   necessary costs of special education used in calculations for the           

2   fiscal year.  This adjustment is to reflect reductions in special           

3   education program operations between 1996-97 and subsequent                 

4   fiscal years.  Adjustments for reductions in special education              

5   program operations shall be made in a manner determined by the              

6   department and shall include adjustments for program shifts.                

7       (4) If the department determines that the sum of the amounts                

8   allocated for a fiscal year to a district or intermediate                   

9   district under subsection (2)(a) and (b) is not sufficient to               

10  fulfill the specified percentages in subsection (2), then the               

11  shortfall shall be paid to the district or intermediate district            

12  during the fiscal year beginning on the October 1 following the             

13  determination and payments under subsection (3) shall be adjusted           

14  as necessary.  If the department determines that the sum of the             

15  amounts allocated for a fiscal year to a district or intermediate           

16  district under subsection (2)(a) and (b) exceeds the sum of the             

17  amount necessary to fulfill the specified percentages in                    

18  subsection (2), then the department shall deduct the amount of              

19  the excess from the district's or intermediate district's                   

20  payments under this act for the fiscal year beginning on the                

21  October 1 following the determination and payments under                    

22  subsection (3) shall be adjusted as necessary.  However, if the             

23  amount allocated under subsection (2)(a) in itself exceeds the              

24  amount necessary to fulfill the specified percentages in                    

25  subsection (2), there shall be no deduction under this                      

26  subsection.                                                                 

27      (5) State funds shall be allocated on a total approved cost                 

1   basis.  Federal funds shall be allocated under applicable federal           

2   requirements, except that an amount not to exceed $3,500,000.00             

3   may be allocated by the department for 2004-2005 to districts or            

4   intermediate districts on a competitive grant basis for programs,           

5   equipment, and services that the department determines to be                

6   designed to benefit or improve special education on a statewide             

7   scale.                                                                      

8       (6) From the amount allocated in subsection (1), there is                   

9   allocated an amount not to exceed $2,200,000.00 for 2004-2005 to            

10  reimburse 100% of the net increase in necessary costs incurred by           

11  a district or intermediate district in implementing the revisions           

12  in the administrative rules for special education that became               

13  effective on July 1, 1987.  As used in this subsection, "net                

14  increase in necessary costs" means the necessary additional costs           

15  incurred solely because of new or revised requirements in the               

16  administrative rules minus cost savings permitted in implementing           

17  the revised rules.  Net increase in necessary costs shall be                

18  determined in a manner specified by the department.                         

19      (7) For purposes of this article, all of the following                      

20  apply:                                                                      

21      (a) "Total approved costs of special education" shall be                    

22  determined in a manner specified by the department and may                  

23  include indirect costs, but shall not exceed 115% of approved               

24  direct costs for section 52 and section 53a programs.  The total            

25  approved costs include salary and other compensation for all                

26  approved special education personnel for the program, including             

27  payments for social security and medicare and public school                 

1   employee retirement system contributions.  The total approved               

2   costs do not include salaries or other compensation paid to                 

3   administrative personnel who are not special education personnel            

4   as defined in section 6 of the revised school code, MCL 380.6.              

5   Costs reimbursed by federal funds, other than those federal funds           

6   included in the allocation made under this article, are not                 

7   included.  Special education approved personnel not utilized full           

8   time in the evaluation of students or in the delivery of special            

9   education programs, ancillary, and other related services shall             

10  be reimbursed under this section only for that portion of time              

11  actually spent providing these programs and services, with the              

12  exception of special education programs and services provided to            

13  youth placed in child caring institutions or juvenile detention             

14  programs approved by the department to provide an on-grounds                

15  education program.  Total approved costs of special education do            

16  not include the costs of a joint shared-employment arrangement              

17  between an intermediate district and 1 or more of its constituent           

18  districts that took effect in the 2004-2005 or a subsequent                 

19  school year.  The costs associated with the joint                           

20  shared-employment arrangement shall instead be allocated entirely           

21  to the constituent district or districts.  In addition, if an               

22  intermediate district entered into such a joint shared-employment           

23  arrangement that took effect in the 2004-2005 or a subsequent               

24  school year and subsequently becomes the sole employer of an                

25  employee who had been subject to the joint shared-employment                

26  arrangement, total approved costs of special education do not               

27  include the costs of employing that employee unless the                     

1   department determines that employing the employee has resulted in           

2   a significant cost savings or an increase in efficiency that is             

3   sufficient to justify the arrangement.

4       (b) Reimbursement for ancillary and other related services,                 

5   as defined by R 340.1701c of the Michigan administrative code,              

6   shall not be provided when those services are covered by and                

7   available through private group health insurance carriers or                

8   federal reimbursed program sources unless the department and                

9   district or intermediate district agree otherwise and that                  

10  agreement is approved by the state budget director.  Expenses,              

11  other than the incidental expense of filing, shall not be borne             

12  by the parent.  In addition, the filing of claims shall not delay           

13  the education of a pupil.  A district or intermediate district              

14  shall be responsible for payment of a deductible amount and for             

15  an advance payment required until the time a claim is paid.                 

16      (8) From the allocation in subsection (1), there is allocated               

17  for 2004-2005 an amount not to exceed $15,313,900.00 to                     

18  intermediate districts.  The payment under this subsection to               

19  each intermediate district shall be equal to the amount of the              

20  1996-97 allocation to the intermediate district under subsection            

21  (6) of this section as in effect for 1996-97.                               

22      (9) A pupil who is enrolled in a full-time special education                

23  program conducted or administered by an intermediate district or            

24  a pupil who is enrolled in the Michigan schools for the deaf and            

25  blind shall not be included in the membership count of a                    

26  district, but shall be counted in membership in the intermediate            

27  district of residence.                                                      

1       (10) Special education personnel transferred from 1 district                

2   to another to implement the revised school code shall be entitled           

3   to the rights, benefits, and tenure to which the person would               

4   otherwise be entitled had that person been employed by the                  

5   receiving district originally.                                              

6       (11) If a district or intermediate district uses money                      

7   received under this section for a purpose other than the purpose            

8   or purposes for which the money is allocated, the department may            

9   require the district or intermediate district to refund the                 

10  amount of money received.  Money that is refunded shall be                  

11  deposited in the state treasury to the credit of the state school           

12  aid fund.                                                                   

13      (12) From the funds allocated in subsection (1), there is                   

14  allocated for 2004-2005 the amount necessary, estimated at                  

15  $6,100,000.00, to pay the foundation allowances for pupils                  

16  described in this subsection.  The allocation to a district under           

17  this subsection shall be calculated by multiplying the number of            

18  pupils described in this subsection who are counted in membership           

19  in the district times the sum of the foundation allowance under             

20  section 20 of the pupil's district of residence plus the amount             

21  of the district's per pupil allocation under section 20j(2), not            

22  to exceed $6,500.00 adjusted by the dollar amount of the                    

23  difference between the basic foundation allowance under section             

24  20 for the current fiscal year and $5,000.00 minus $200.00, or,             

25  for a pupil described in this subsection who is counted in                  

26  membership in a district that is a public school academy or                 

27  university school, times an amount equal to the amount per                  

1   membership pupil under section 20(6).  The allocation to an                 

2   intermediate district under this subsection shall be calculated             

3   in the same manner as for a district, using the foundation                  

4   allowance under section 20 of the pupil's district of residence,            

5   not to exceed $6,500.00 adjusted by the dollar amount of the                

6   difference between the basic foundation allowance under section             

7   20 for the current fiscal year and $5,000.00 minus $200.00, and             

8   that district's per pupil allocation under section 20j(2).  This            

9   subsection applies to all of the following pupils:                          

10      (a) Pupils described in section 53a.                                        

11      (b) Pupils counted in membership in an intermediate district                

12  who are not special education pupils and are served by the                  

13  intermediate district in a juvenile detention or child caring               

14  facility.                                                                   

15      (c) Emotionally impaired pupils counted in membership by an                 

16  intermediate district and provided educational services by the              

17  department of community health.                                             

18      (13) After payments under subsections (2) and (12) and                      

19  section 51c, the remaining expenditures from the allocation in              

20  subsection (1) shall be made in the following order:                        

21      (a) 100% of the reimbursement required under section 53a.                   

22      (b) 100% of the reimbursement required under subsection (6).                

23      (c) 100% of the payment required under section 54.                          

24      (d) 100% of the payment required under subsection (3).                      

25      (e) 100% of the payment required under subsection (8).                      

26      (f) 100% of the payments under section 56.                                  

27      (14) The allocations under subsection (2), subsection (3),                  

1   and subsection (12) shall be allocations to intermediate                    

2   districts only and shall not be allocations to districts, but               

3   instead shall be calculations used only to determine the state              

4   payments under section 22b.