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SB-0279, As Passed House, June 29, 2005

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 279

A bill to amend 1979 PA 94, entitled

"The state school aid act of 1979,"

by amending sections 11, 11a, 11j, 22a, 22b, 51a, and 51c (MCL

388.1611, 388.1611a, 388.1611j, 388.1622a, 388.1622b, 388.1651a,

and 388.1651c), sections 11 and 51a as amended by 2004 PA 518,

section 11a as added by 2003 PA 158, and sections 11j, 22a, 22b,

and 51c as amended by 2004 PA 351.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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

~~this act for that fiscal year, for the fiscal year ending September~~

~~30, 2004, there is appropriated to the state school aid fund from~~

~~the unreserved balance in the general fund an amount equal to any~~

~~deficit balance that would otherwise exist in the state school aid~~

~~fund at bookclosing for the fiscal year ending September 30, 2004.~~

For the fiscal year ending September 30, 2005, there is

appropriated for the public schools of this state and certain other

state purposes relating to education the sum of ~~$10,909,200,000.00~~

$10,907,222,200.00 from the state school aid fund established by

section 11 of article IX of the state constitution of 1963, the sum

of $41,100,000.00 from the proceeds of capitalization of the school

bond loan fund revolving fund, and the sum of ~~$264,700,000.00~~

$165,200,000.00 from the general fund. In addition, available

federal funds are appropriated for each ~~of those~~ fiscal ~~years~~

year.

(2) The appropriations under this section shall be allocated

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

the general fund shall be expended to fund the purposes of this act

before the expenditure of money appropriated under this section

from the state school aid fund. If the maximum amount appropriated

under this section from the state school aid fund for a fiscal year

exceeds the amount necessary to fully fund allocations under this

act from the state school aid fund, that excess amount shall not be

expended in that state fiscal year and shall not lapse to the

general fund, but instead shall be deposited into the school aid

stabilization fund created in section 11a.

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

the state school aid fund and the school aid stabilization fund for

a fiscal year exceeds the amount available for expenditure from the

state school aid fund for that fiscal year, payments under sections

11f, 11g, 11j, 22a, 26a, 31d, 51a(2), 51a(12), 51c, 53a, and 56

shall be made in full. In addition, for districts beginning

operations after 1994-95 that qualify for payments under section

22b, payments under section 22b shall be made so that the

qualifying districts receive the lesser of an amount equal to the

1994-95 foundation allowance of the district in which the district

beginning operations after 1994-95 is located or $5,500.00. The

amount of the payment to be made under section 22b for these

qualifying districts shall be as calculated under section 22a, with

the balance of the payment under section 22b being subject to the

proration otherwise provided under this subsection and subsection

(4). Subject to subsection (5), if proration is necessary after

2002-2003, state payments under each of the other sections of this

act from all state funding sources shall be prorated in the manner

prescribed in subsection (4) as necessary to reflect the amount

available for expenditure from the state school aid fund for the

affected fiscal year. However, if the department of treasury

determines that proration will be required under this subsection,

or if the department of treasury determines that further proration

is required under this subsection after an initial proration has

already been made for a fiscal year, the department of treasury

shall notify the state budget director, and the state budget

director shall notify the legislature at least 30 calendar days or

6 legislative session days, whichever is more, before the

department reduces any payments under this act because of the

proration. During the 30 calendar day or 6 legislative session day

period after that notification by the state budget director, the

department shall not reduce any payments under this act because of

proration under this subsection. The legislature may prevent

proration from occurring by, within the 30 calendar day or 6

legislative session day period after that notification by the state

budget director, enacting legislation appropriating additional

funds from the general fund, countercyclical budget and economic

stabilization fund, state school aid fund balance, or another

source to fund the amount of the projected shortfall.

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

department shall calculate the proration in district and

intermediate district payments that is required under subsection

(3) as follows:

(a) The department shall calculate the percentage of total

state school aid allocated under this act for the affected fiscal

year for each of the following:

(i) Districts.

(ii) Intermediate districts.

(iii) Entities other than districts or intermediate districts.

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

amount required under subsection (3) that is equal to the

percentage calculated under subdivision (a)(i) for districts by

reducing payments to districts. This reduction shall be made by

calculating an equal dollar amount per pupil as necessary to

recover this percentage of the proration amount and reducing each

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

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

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

amount required under subsection (3) that is equal to the

percentage calculated under subdivision (a)(ii) for intermediate

districts by reducing payments to intermediate districts. This

reduction shall be made by reducing the payments to each

intermediate district, other than payments under sections 11f, 11g,

26a, 51a(2), 51a(12), 53a, and 56, on an equal percentage basis.

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

amount required under subsection (3) that is equal to the

percentage calculated under subdivision (a)(iii) for entities other

than districts and intermediate districts by reducing payments to

these entities. This reduction shall be made by reducing the

payments to each of these entities, other than payments under

sections 11j and 26a, on an equal percentage basis.

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

financial manager in place under the local government fiscal

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

to that district are not subject to proration under this section.

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

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

the state fiscal year are transferred to the ~~state~~ school aid

stabilization fund created under section 11a. ~~If it is determined~~

~~at the May 2005 revenue estimating conference conducted under~~

~~section 367b of the management and budget act, 1984 PA 431, MCL~~

~~18.1367b, that there is additional school aid fund revenue beyond~~

~~that determined at the May 2004 revenue estimating conference, then~~

~~it is the intent of the legislature to enact legislation to fund,~~

~~to the extent that revenues are available, the same programs in the~~

~~same amount that were funded under section 81 in 2003 PA 236 and~~

~~the same pupil membership formula as in effect under 2003 PA 236.~~

Sec. 11a. (1) The school aid stabilization fund is created as

a separate account within the state school aid fund established by

section 11 of article IX of the state constitution of 1963.

(2) The state treasurer may receive money or other assets from

any source for deposit into the school aid stabilization fund. The

state treasurer shall deposit into the school aid stabilization

fund all of the following:

(a) Unexpended and unencumbered state school aid fund revenue

for a fiscal year that remains in the state school aid fund as of

the bookclosing for that fiscal year.

(b) Money statutorily dedicated to the school aid

stabilization fund.

(3) Money available in the school aid stabilization fund may

not be expended without a specific appropriation from the school

aid stabilization fund. Money in the school aid stabilization fund

shall be expended only for purposes for which state school aid fund

money may be expended.

(4) The state treasurer shall direct the investment of the

school aid stabilization fund. The state treasurer shall credit to

the school aid stabilization fund interest and earnings from fund

investments.

(5) Money in the school aid stabilization fund at the close of

a fiscal year shall remain in the school aid stabilization fund and

shall not lapse to the unreserved school aid fund balance or the

general fund.

(6) If the maximum amount appropriated under section 11 from

the state school aid fund for a fiscal year exceeds the amount

available for expenditure from the state school aid fund for that

fiscal year, there is appropriated from the school aid

stabilization fund to the state school aid fund an amount equal to

the projected shortfall as determined by the department of

treasury, but not to exceed available money in the school aid

stabilization fund. If the money in the school aid stabilization

fund is insufficient to fully fund an amount equal to the projected

shortfall, the state budget director shall notify the legislature

as required under section 11(3) and state payments in an amount

equal to the remainder of the projected shortfall shall be prorated

in the manner provided under section 11(4).

(7) For 2004-2005, there is transferred from the school aid

stabilization fund to the state school aid fund the amount

necessary to fully fund the allocations under this act.

Sec. 11j. From the appropriation in section 11 from the

proceeds of capitalization of the school bond loan fund revolving

fund, there is allocated an amount not to exceed $41,100,000.00 for

2004-2005 for payments to the school loan bond redemption fund in

the department of treasury on behalf of districts and intermediate

districts. Notwithstanding section 11 or any other provision of

this act, funds allocated under this section are not subject to

proration and shall be paid in full.

Sec. 22a. (1) From the appropriation in section 11, there is

allocated ~~an amount not to exceed $6,765,300,000.00 for 2003-2004~~

~~and~~ an amount not to exceed ~~$6,678,977,800.00~~ $6,615,000,000.00

for 2004-2005 for payments to districts, qualifying university

schools, and qualifying public school academies to guarantee each

district, qualifying university school, and qualifying public

school academy an amount equal to its 1994-95 total state and local

per pupil revenue for school operating purposes under section 11 of

article IX of the state constitution of 1963. Pursuant to section

11 of article IX of the state constitution of 1963, this guarantee

does not apply to a district in a year in which the district levies

a millage rate for school district operating purposes less than it

levied in 1994. However, subsection (2) applies to calculating the

payments under this section. Funds allocated under this section

that are not expended in the state fiscal year for which they were

allocated, as determined by the department, may be used to

supplement the allocations under sections 22b and 51c in order to

fully fund those calculated allocations for the same fiscal year.

(2) To ensure that a district receives an amount equal to the

district's 1994-95 total state and local per pupil revenue for

school operating purposes, there is allocated to each district a

state portion of the district's 1994-95 foundation allowance in an

amount calculated as follows:

(a) Except as otherwise provided in this subsection, the state

portion of a district's 1994-95 foundation allowance is an amount

equal to the district's 1994-95 foundation allowance or $6,500.00,

whichever is less, minus the difference between the product of the

taxable value per membership pupil of all property in the district

that is not a homestead or qualified agricultural property times

the lesser of 18 mills or the number of mills of school operating

taxes levied by the district in 1993-94 and the quotient of the ad

valorem property tax revenue of the district captured under 1975 PA

197, MCL 125.1651 to 125.1681, the tax increment finance authority

act, 1980 PA 450, MCL 125.1801 to 125.1830, the local development

financing act, 1986 PA 281, MCL 125.2151 to 125.2174, or the

brownfield redevelopment financing act, 1996 PA 381, MCL 125.2651

to 125.2672, divided by the district's membership. For a district

that has a millage reduction required under section 31 of article

IX of the state constitution of 1963, the state portion of the

district's foundation allowance shall be calculated as if that

reduction did not occur.

(b) For a district that had a 1994-95 foundation allowance

greater than $6,500.00, the state payment under this subsection

shall be the sum of the amount calculated under subdivision (a)

plus the amount calculated under this subdivision. The amount

calculated under this subdivision shall be equal to the difference

between the district's 1994-95 foundation allowance minus $6,500.00

and the current year hold harmless school operating taxes per

pupil. If the result of the calculation under subdivision (a) is

negative, the negative amount shall be an offset against any state

payment calculated under this subdivision. If the result of a

calculation under this subdivision is negative, there shall not be

a state payment or a deduction under this subdivision. The taxable

values per membership pupil used in the calculations under this

subdivision are as adjusted by ad valorem property tax revenue

captured under 1975 PA 197, MCL 125.1651 to 125.1681, the tax

increment finance authority act, 1980 PA 450, MCL 125.1801 to

125.1830, the local development financing act, 1986 PA 281, MCL

125.2151 to 125.2174, or the brownfield redevelopment financing

act, 1996 PA 381, MCL 125.2651 to 125.2672, divided by the

district's membership.

(3) Beginning in 2003-2004, for pupils in membership in a

qualifying public school academy or qualifying university school,

there is allocated under this section to the authorizing body that

is the fiscal agent for the qualifying public school academy for

forwarding to the qualifying public school academy, or to the board

of the public university operating the qualifying university

school, an amount equal to the 1994-95 per pupil payment to the

qualifying public school academy or qualifying university school

under section 20.

(4) A district, qualifying university school, or qualifying

public school academy may use funds allocated under this section in

conjunction with any federal funds for which the district,

qualifying university school, or qualifying public school academy

otherwise would be eligible.

(5) For a district that is formed or reconfigured after June

1, 2000 by consolidation of 2 or more districts or by annexation,

the resulting district's 1994-95 foundation allowance under this

section beginning after the effective date of the consolidation or

annexation shall be the average of the 1994-95 foundation

allowances of each of the original or affected districts,

calculated as provided in this section, weighted as to the

percentage of pupils in total membership in the resulting district

in the state fiscal year in which the consolidation takes place who

reside in the geographic area of each of the original districts. If

an affected district's 1994-95 foundation allowance is less than

the 1994-95 basic foundation allowance, the amount of that

district's 1994-95 foundation allowance shall be considered for the

purpose of calculations under this subsection to be equal to the

amount of the 1994-95 basic foundation allowance.

(6) As used in this section:

(a) "1994-95 foundation allowance" means a district's 1994-95

foundation allowance calculated and certified by the department of

treasury or the superintendent under former section 20a as enacted

in 1993 PA 336 and as amended by 1994 PA 283.

(b) "Current state fiscal year" means the state fiscal year

for which a particular calculation is made.

pupil" means the per pupil revenue generated by multiplying a

district's 1994-95 hold harmless millage by the district's current

year taxable value per membership pupil.

(d) "Hold harmless millage" means, for a district with a 1994-

95 foundation allowance greater than $6,500.00, the number of mills

by which the exemption from the levy of school operating taxes on a

homestead and qualified agricultural property could be reduced as

provided in section 1211(1) of the revised school code, MCL

380.1211, and the number of mills of school operating taxes that

could be levied on all property as provided in section 1211(2) of

the revised school code, MCL 380.1211, as certified by the

department of treasury for the 1994 tax year.

(e) "Homestead" means that term as defined in section 1211 of

the revised school code, MCL 380.1211.

(f) "Membership" means the definition of that term under

section 6 as in effect for the particular fiscal year for which a

particular calculation is made.

(g) "Qualified agricultural property" means that term as

defined in section 1211 of the revised school code, MCL 380.1211.

(h) "Qualifying public school academy" means a public school

academy that was in operation in the 1994-95 school year and is in

operation in the current state fiscal year.

(i) "Qualifying university school" means a university school

that was in operation in the 1994-95 school year and is in

operation in the current fiscal year.

(j) "School operating taxes" means local ad valorem property

taxes levied under section 1211 of the revised school code, MCL

380.1211, and retained for school operating purposes.

(k) "Taxable value per membership pupil" means each of the

following divided by the district's membership:

(i) For the number of mills by which the exemption from the

levy of school operating taxes on a homestead and qualified

agricultural property may be reduced as provided in section 1211(1)

of the revised school code, MCL 380.1211, the taxable value of

homestead and qualified agricultural property for the calendar year

ending in the current state fiscal year.

(ii) For the number of mills of school operating taxes that may

be levied on all property as provided in section 1211(2) of the

revised school code, MCL 380.1211, the taxable value of all

property for the calendar year ending in the current state fiscal

year.

Sec. 22b. (1) From the appropriation in section 11, there is

allocated an amount not to exceed ~~$2,910,300,000.00~~

$2,923,200,000.00 for 2004-2005 for discretionary nonmandated

payments to districts under this section. Funds allocated under

this section that are not expended in the state fiscal year for

which they were allocated, as determined by the department, may be

used to supplement the allocations under sections 22a and 51c in

order to fully fund those calculated allocations for the same

fiscal year.

(2) Subject to subsection (3) and section 11, the allocation

to a district under this section shall be an amount equal to the

sum of the amounts calculated under sections 20, 20j, 51a(2),

51a(3), and 51a(12), minus the sum of the allocations to the

district under sections 22a and 51c.

(3) In order to receive an allocation under this section, each

district shall administer in each grade level that it operates in

grades 1 to 5 a standardized assessment approved by the department

of grade-appropriate basic educational skills. A district may use

the Michigan literacy progress profile to satisfy this requirement

for grades 1 to 3. Also, if the revised school code is amended to

require annual assessments at additional grade levels, in order to

receive an allocation under this section each district shall comply

with that requirement.

(4) From the allocation in subsection (1), the department

shall pay up to $1,000,000.00 in litigation costs incurred by this

state associated with lawsuits filed by 1 or more districts or

intermediate districts against this state. If the allocation under

this section is insufficient to fully fund all payments required

under this section, the payments under this subsection shall be

made in full before any proration of remaining payments under this

section.

(5) It is the intent of the legislature that all

constitutional obligations of this state have been fully funded

under sections 22a, 31d, 51a, and 51c. If a claim is made by an

entity receiving funds under this act that challenges the

legislative determination of the adequacy of this funding or

alleges that there exists an unfunded constitutional requirement,

the state budget director may escrow or allocate from the

discretionary funds for nonmandated payments under this section the

amount as may be necessary to satisfy the claim before making any

payments to districts under subsection (2). If funds are escrowed,

the escrowed funds are a work project appropriation and the funds

are carried forward into the following fiscal year. The purpose of

the work project is to provide for any payments that may be awarded

to districts as a result of litigation. The work project shall be

completed upon resolution of the litigation.

(6) If the local claims review board or a court of competent

jurisdiction makes a final determination that this state is in

violation of section 29 of article IX of the state constitution of

1963 regarding state payments to districts, the state budget

director shall use work project funds under subsection (5) or

allocate from the discretionary funds for nonmandated payments

under this section the amount as may be necessary to satisfy the

amount owed to districts before making any payments to districts

under subsection (2).

(7) If a claim is made in court that challenges the

legislative determination of the adequacy of funding for this

state's constitutional obligations or alleges that there exists an

unfunded constitutional requirement, any interested party may seek

an expedited review of the claim by the local claims review board.

If the claim exceeds $10,000,000.00, this state may remove the

action to the court of appeals, and the court of appeals shall have

and shall exercise jurisdiction over the claim.

(8) If payments resulting from a final determination by the

local claims review board or a court of competent jurisdiction that

there has been a violation of section 29 of article IX of the state

constitution of 1963 exceed the amount allocated for discretionary

nonmandated payments under this section, the legislature shall

provide for adequate funding for this state's constitutional

obligations at its next legislative session.

(9) If a lawsuit challenging payments made to districts

related to costs reimbursed by federal title XIX medicaid funds is

filed against this state during 2001-2002, 2002-2003, or 2003-2004,

50% of the amount allocated in subsection (1) not previously paid

out for 2002-2003, 2003-2004, and each succeeding fiscal year is a

work project appropriation and the funds are carried forward into

the following fiscal year. The purpose of the work project is to

provide for any payments that may be awarded to districts as a

result of the litigation. The work project shall be completed upon

resolution of the litigation. In addition, this state reserves the

right to terminate future federal title XIX medicaid reimbursement

payments to districts if the amount or allocation of reimbursed

funds is challenged in the lawsuit. As used in this subsection,

"title XIX" means title XIX of the social security act, 42 USC 1396

to 1396v.

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

allocated for 2004-2005 an amount not to exceed ~~$905,683,000.00~~

$896,383,000.00 from state sources and all available federal

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

disabilities education act, 20 USC 1411 to 1419, estimated at

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

appropriations. The allocations under this subsection are for the

purpose of reimbursing districts and intermediate districts for

special education programs, services, and special education

personnel as prescribed in article 3 of the revised school code,

MCL 380.1701 to 380.1766; net tuition payments made by intermediate

districts to the Michigan schools for the deaf and blind; and

special education programs and services for pupils who are eligible

for special education programs and services according to statute or

rule. For meeting the costs of special education programs and

services not reimbursed under this article, a district or

intermediate district may use money in general funds or special

education funds, not otherwise restricted, or contributions from

districts to intermediate districts, tuition payments, gifts and

contributions from individuals, or federal funds that may be

available for this purpose, as determined by the intermediate

district plan prepared pursuant to article 3 of the revised school

code, MCL 380.1701 to 380.1766. All federal funds allocated under

this section in excess of those allocated under this section for

2002-2003 may be distributed in accordance with the flexible

funding provisions of the individuals with disabilities education

act, title VI of Public Law 91-230, including, but not limited to,

34 CFR 300.234 and 300.235. Notwithstanding section 17b, payments

of federal funds to districts, intermediate districts, and other

eligible entities under this section shall be paid on a schedule

determined by the department.

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

allocated for 2004-2005 the amount necessary, estimated at

~~$168,900,000.00~~ $175,500,000.00 for ~~2003-2004~~ 2004-2005, for

payments toward reimbursing districts and intermediate districts

for 28.6138% of total approved costs of special education,

excluding costs reimbursed under section 53a, and 70.4165% of total

approved costs of special education transportation. Allocations

under this subsection shall be made as follows:

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

subsection toward fulfilling the specified percentages shall be

calculated by multiplying the district's special education pupil

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

the sum of the foundation allowance under section 20 of the pupil's

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

allocation under section 20j(2), not to exceed $6,500.00 adjusted

by the dollar amount of the difference between the basic foundation

allowance under section 20 for the current fiscal year and

$5,000.00 minus $200.00, or, for a special education pupil in

membership in a district that is a public school academy or

university school, times an amount equal to the amount per

membership pupil calculated under section 20(6). For an

intermediate district, the amount allocated under this subdivision

toward fulfilling the specified percentages shall be an amount per

special education membership pupil, excluding pupils described in

subsection (12), and shall be calculated in the same manner as for

a district, using the foundation allowance under section 20 of the

pupil's district of residence, not to exceed $6,500.00 adjusted by

the dollar amount of the difference between the basic foundation

allowance under section 20 for the current fiscal year and

$5,000.00 minus $200.00, and that district's per pupil allocation

under section 20j(2).

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

intermediate districts for which the payments under subdivision (a)

do not fulfill the specified percentages shall be paid the amount

necessary to achieve the specified percentages for the district or

intermediate district.

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

allocated for 2004-2005 the amount necessary, estimated at

~~$2,400,000.00~~ $3,000,000.00, to make payments to districts and

intermediate districts under this subsection. If the amount

allocated to a district or intermediate district for a fiscal year

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

allocated to the district or intermediate district for 1996-97

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

intermediate district for the fiscal year an amount equal to that

difference, adjusted by applying the same proration factor that was

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

adjusted to the district's or intermediate district's necessary

costs of special education used in calculations for the fiscal

year. This adjustment is to reflect reductions in special education

program operations or services between 1996-97 and subsequent

fiscal years. Adjustments for reductions in special education

program operations or services shall be made in a manner determined

by the department and shall include adjustments for program or

service shifts.

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

allocated for a fiscal year to a district or intermediate district

under subsection (2)(a) and (b) is not sufficient to fulfill the

specified percentages in subsection (2), then the shortfall shall

be paid to the district or intermediate district during the fiscal

year beginning on the October 1 following the determination and

payments under subsection (3) shall be adjusted as necessary. If

the department determines that the sum of the amounts allocated for

a fiscal year to a district or intermediate district under

subsection (2)(a) and (b) exceeds the sum of the amount necessary

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

department shall deduct the amount of the excess from the

district's or intermediate district's payments under this act for

the fiscal year beginning on the October 1 following the

determination and payments under subsection (3) shall be adjusted

as necessary. However, if the amount allocated under subsection

(2)(a) in itself exceeds the amount necessary to fulfill the

specified percentages in subsection (2), there shall be no

deduction under this subsection.

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

basis. Federal funds shall be allocated under applicable federal

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

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

intermediate districts on a competitive grant basis for programs,

equipment, and services that the department determines to be

designed to benefit or improve special education on a statewide

scale.

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

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

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

district or intermediate district in implementing the revisions in

the administrative rules for special education that became

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

increase in necessary costs" means the necessary additional costs

incurred solely because of new or revised requirements in the

administrative rules minus cost savings permitted in implementing

the revised rules. Net increase in necessary costs shall be

determined in a manner specified by the department.

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

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

determined in a manner specified by the department and may include

indirect costs, but shall not exceed 115% of approved direct costs

for section 52 and section 53a programs. The total approved costs

include salary and other compensation for all approved special

education personnel for the program, including payments for social

security and medicare and public school employee retirement system

contributions. The total approved costs do not include salaries or

other compensation paid to administrative personnel who are not

special education personnel as defined in section 6 of the revised

school code, MCL 380.6. Costs reimbursed by federal funds, other

than those federal funds included in the allocation made under this

article, are not included. Special education approved personnel not

utilized full time in the evaluation of students or in the delivery

of special education programs, ancillary, and other related

services shall be reimbursed under this section only for that

portion of time actually spent providing these programs and

services, with the exception of special education programs and

services provided to youth placed in child caring institutions or

juvenile detention programs approved by the department to provide

an on-grounds education program. ~~Total approved costs of special~~

~~education do not include the costs of a joint shared-employment~~

~~arrangement between an intermediate district and 1 or more of its~~

~~constituent districts that took effect in the 2004-2005 or a~~

~~subsequent school year. The costs associated with the joint shared-~~

~~employment arrangement shall instead be allocated entirely to the~~

~~constituent district or districts. In addition, if an intermediate~~

~~district entered into such a joint shared-employment arrangement~~

~~that took effect in the 2004-2005 or a subsequent school year and~~

~~subsequently becomes the sole employer of an employee who had been~~

~~subject to the joint shared-employment arrangement, total approved~~

~~costs of special education do not include the costs of employing~~

~~that employee unless the department determines that employing the~~

~~employee has resulted in a significant cost savings or an increase~~

~~in efficiency that is sufficient to justify the arrangement.~~

(b) Beginning with the 2004-2005 fiscal year, a district or

intermediate district that employed special education support

services staff to provide special education support services in

2003-2004 or in a subsequent fiscal year and that in a fiscal year

after 2003-2004 receives the same type of support services from

another district or intermediate district shall report the cost of

those support services for special education reimbursement purposes

under this act. This subdivision does not prohibit the transfer of

special education classroom teachers and special education

classroom aides if the pupils counted in membership associated with

those special education classroom teachers and special education

classroom aides are transferred and counted in membership in the

other district or intermediate district in conjunction with the

transfer of those teachers and aides.

services, as defined by R 340.1701c of the Michigan administrative

code, shall not be provided when those services are covered by and

available through private group health insurance carriers or

federal reimbursed program sources unless the department and

district or intermediate district agree otherwise and that

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

than the incidental expense of filing, shall not be borne by the

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

education of a pupil. A district or intermediate district shall be

responsible for payment of a deductible amount and for an advance

payment required until the time a claim is paid.

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

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

intermediate districts. The payment under this subsection to each

intermediate district shall be equal to the amount of the 1996-97

allocation to the intermediate district under subsection (6) of

this section as in effect for 1996-97.

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

program conducted or administered by an intermediate district or a

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

blind shall not be included in the membership count of a district,

but shall be counted in membership in the intermediate district of

residence.

(10) Special education personnel transferred from 1 district

to another to implement the revised school code shall be entitled

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

otherwise be entitled had that person been employed by the

receiving district originally.

(11) If a district or intermediate district uses money

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

purposes for which the money is allocated, the department may

require the district or intermediate district to refund the amount

of money received. Money that is refunded shall be deposited in the

state treasury to the credit of the state school aid fund.

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

allocated for 2004-2005 the amount necessary, estimated at

~~$6,100,000.00~~ $7,000,000.00, to pay the foundation allowances for

pupils described in this subsection. The allocation to a district

under this subsection shall be calculated by multiplying the number

of pupils described in this subsection who are counted in

membership in the district times the sum of the foundation

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

plus the amount of the district's per pupil allocation under

section 20j(2), not to exceed $6,500.00 adjusted by the dollar

amount of the difference between the basic foundation allowance

under section 20 for the current fiscal year and $5,000.00 minus

$200.00, or, for a pupil described in this subsection who is

counted in membership in a district that is a public school academy

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

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

intermediate district under this subsection shall be calculated in

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

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

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

between the basic foundation allowance under section 20 for the

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

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

subsection applies to all of the following pupils:

(a) Pupils described in section 53a.

(b) Pupils counted in membership in an intermediate district

who are not special education pupils and are served by the

intermediate district in a juvenile detention or child caring

facility.

intermediate district and provided educational services by the

department of community health.

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

51c, the remaining expenditures from the allocation in subsection

(1) shall be made in the following order:

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

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

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

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

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

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

subsection (12) shall be allocations to intermediate districts only

and shall not be allocations to districts, but instead shall be

calculations used only to determine the state payments under

section 22b.

Sec. 51c. As required by the court in the consolidated cases

known as Durant v State of Michigan, Michigan supreme court docket

no. 104458-104492, from the allocation under section 51a(1), there

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

~~$659,400,000.00~~ $642,000,000.00, for payments to reimburse

districts for 28.6138% of total approved costs of special education

excluding costs reimbursed under section 53a, and 70.4165% of total

approved costs of special education transportation. Funds allocated

under this section that are not expended in the state fiscal year

for which they were allocated, as determined by the department, may

be used to supplement the allocations under sections 22a and 22b in

order to fully fund those calculated allocations for the same

fiscal year.

Enacting section 1. In accordance with section 30 of article I

of the state constitution of 1963, total state spending from state

sources for fiscal year 2004-2005 in this amendatory act, 2004 PA

518, 2004 PA 351, and 2004 PA 185 is estimated at

$11,113,522,200.00 and state appropriations to be paid to local

units of government for fiscal year 2004-2005 are estimated at

$11,050,922,200.00.