HB-5287, As Passed Senate, May 16, 2012

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5287

A bill to amend 1976 PA 451, entitled

"The revised school code,"

by amending sections 622, 1211, and 1223 (MCL 380.622, 380.1211,

and 380.1223), sections 622 and 1223 as amended by 2009 PA 22 and

section 1211 as amended by 2011 PA 317.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 622. (1) The intermediate school board shall select

financial institutions for the deposit of school funds. The

intermediate school board shall keep a set of coded accounts to be

approved by the superintendent of public instruction and shall have

its books audited at least annually by a certified public

accountant. General operating funds, building and site funds,

cooperative education funds, special education funds, vocational-

technical education funds, and debt retirement funds shall be

maintained separately and shall not be commingled, except that the

intermediate school board, by resolution, may authorize the

treasurer to combine money from more than 1 fund for the purpose of

making an investment authorized by subsection (2)(g).

(2) The treasurer of an intermediate school district, if

authorized by resolution of the intermediate school board, may

invest general operating funds, special education funds, area

vocational-technical education funds, building and site funds,

cooperative education funds, and debt retirement funds of the

district. Investments shall be made subject to subsection (4) and

shall be restricted to any of the following:

(a) Bonds, bills, or notes of the United States or obligations

of this state.

(b) Certificates of deposit issued by a financial institution.

maturing not more than 270 days after the date of purchase.

(d) Securities issued or guaranteed by agencies or

instrumentalities of the United States government.

(e) United States government or federal agency obligation

repurchase agreements.

(f) Bankers' acceptances issued by a bank that is a member of

the federal deposit insurance corporation.

(g) Investment pools, as authorized by the surplus funds

investment pool act, 1982 PA 367, MCL 129.111 to 129.118, composed

entirely of instruments that are legal for direct investment by an

intermediate school district.

(h) Mutual funds composed entirely of investment vehicles that

are legal for direct investment by an intermediate school district.

(i) Certificates of deposit issued in accordance with the

following conditions:

(i) The funds are initially invested through a financial

institution that is not ineligible to be a depository of surplus

funds belonging to this state under section 6 of 1855 PA 105, MCL

21.146.

(ii) The financial institution arranges for the investment of

the funds in certificates of deposit in 1 or more insured

depository institutions, as defined in 12 USC 1813, or 1 or more

insured credit unions, as defined in 12 USC 1752, for the account

of the intermediate school district.

(iii) The full amount of the principal and any accrued interest

of each certificate of deposit is insured by an agency of the

United States.

(iv) The financial institution acts as custodian for the

intermediate school district with respect to each certificate of

deposit.

(v) At the same time that the funds of the intermediate school

district are deposited and the certificate or certificates of

deposit are issued, the financial institution receives an amount of

deposits from customers of other insured depository institutions or

insured credit unions equal to or greater than the amount of the

funds initially invested by the intermediate school district

through the financial institution.

(j) Deposit accounts that meet all of the following

conditions:

(i) The funds are initially deposited in a financial

institution that is not ineligible to be a depository of surplus

funds belonging to this state under section 6 of 1855 PA 105, MCL

21.146.

(ii) The financial institution arranges for the deposit of the

funds in deposit accounts in 1 or more insured depository

institutions, as defined in 12 USC 1813, or 1 or more insured

credit unions, as defined in 12 USC 1752, for the account of the

intermediate school district.

(iii) The full amount of the principal and any accrued interest

of each deposit account is insured by an agency of the United

States.

(iv) The financial institution acts as custodian for the

intermediate school district with respect to each deposit account.

(v) On the same date that the funds of the intermediate school

district are deposited under subparagraph (ii), the financial

institution receives an amount of deposits from customers of other

insured depository institutions or insured credit unions equal to

or greater than the amount of the funds initially deposited by the

intermediate school district in the financial institution.

(3) The earnings of an investment shall become a part of the

fund from which the investment was made. When money of more than 1

fund of a single intermediate school district or money of more than

1 intermediate school district are combined for an investment pool

authorized by subsection (2)(g), the money shall be accounted for

separately, and the earnings from the investment shall be

separately and individually computed, recorded, and credited to the

fund or intermediate school district, as the case may be, for which

the investment was acquired.

(4) Notwithstanding subsection (2), additional funds of an

intermediate school district shall not be deposited or invested in

a financial institution that is not eligible to be a depository of

surplus funds belonging to this state under section 6 of 1855 PA

105, MCL 21.146.

(5) Assets acceptable for pledging to secure deposits of funds

under this act are limited to any of the following:

(a) Assets considered acceptable to the state treasurer under

section 3 of 1855 PA 105, MCL 21.143, to secure deposits of state

surplus funds.

(b) Any of the following:

(i) Securities issued by the federal home loan mortgage

corporation.

(ii) Securities issued by the federal national mortgage

association.

(iii) Securities issued by the government national mortgage

association.

school board and the financial institution.

(6) Security in the form of collateral, surety bond, or

another form may be taken for the deposits or investments of an

intermediate school district in a financial institution. However,

an investment under subsection (2)(e) or in an investment pool that

includes instruments eligible for investments under subsection

(2)(e) shall be secured by the transfer of title and custody of the

obligations to which the repurchase agreements relate and an

undivided interest in those obligations must be pledged to the

intermediate school district for these agreements.

(7) ~~(6)~~ As used in this section, "deposit" includes purchases

of or investment in shares of a credit union.

(8) ~~(7)~~ As used in this section, "financial institution" means

a state or nationally chartered bank or a state or federally

chartered savings and loan association, savings bank, or credit

union whose deposits are insured by an agency of the United States

government and that maintains a principal office or branch office

located in this state under the laws of this state or the United

States.

Sec. 1211. (1) Except as otherwise provided in this section

and section 1211c, the board of a school district shall levy not

more than 18 mills for school operating purposes or the number of

mills levied in 1993 for school operating purposes, whichever is

less. A principal residence, qualified agricultural property,

qualified forest property, supportive housing property, property

occupied by a public school academy, and industrial personal

property are exempt from the mills levied under this subsection

except for the number of mills by which that exemption is reduced

under this subsection. Except as otherwise provided in subsection

(9), the board of a school district that had a foundation allowance

for the 1994-95 state fiscal year greater than $6,500.00 may reduce

the number of mills from which a principal residence, qualified

agricultural property, qualified forest property, supportive

housing property, property occupied by a public school academy, and

industrial personal property are exempted under this subsection by

up to the number of mills, as certified under section 1211a,

required to be levied on a principal residence, qualified

agricultural property, qualified forest property, supportive

housing property, property occupied by a public school academy, and

industrial personal property for the school district's combined

state and local revenue per membership pupil for the school fiscal

year ending in 1995 to be equal to the school district's foundation

allowance for the state fiscal year ending in 1995, and the board

also may levy in 1994 or a succeeding year that number of mills for

school operating purposes on a principal residence, qualified

agricultural property, qualified forest property, supportive

housing property, property occupied by a public school academy, and

industrial personal property.

(2) Subject to subsection (3), if the department of treasury

determines that the maximum number of mills allowed to be levied

under subsection (1) on all classes of property was not sufficient

for a school district's combined state and local revenue per

membership pupil for the school fiscal year ending in 1995 to be

equal to the school district's foundation allowance for that school

fiscal year, the board of the school district may levy in 1994 or a

succeeding year additional mills uniformly on all property up to

the number of mills required for the school district's combined

state and local revenue per membership pupil for the school fiscal

year ending in 1995 to be equal to the school district's foundation

allowance for the state fiscal year ending in 1995. However, the

board of a school district described in this subsection, by board

resolution, may elect to exempt each principal residence and all

qualified agricultural property, qualified forest property,

supportive housing property, property occupied by a public school

academy, and industrial personal property located in the school

district from some or all of the mills that the board is authorized

to levy under this subsection.

(3) After 1994, the number of mills a school district may levy

under this section on any class of property shall not exceed the

lesser of the number of mills the school district was certified by

the department of treasury under section 1211a to levy on that

class of property under this section in 1994 or the number of mills

required to be levied on that class of property under this section

to ensure that the increase from the immediately preceding state

fiscal year in the school district's combined state and local

revenue per membership pupil, calculated as if the school district

had levied the maximum number of mills the school district was

allowed to levy under this section regardless of the number of

mills the school district actually levied, does not exceed the

lesser of the dollar amount of the increase in the basic foundation

allowance under section 20 of the state school aid act of 1979, MCL

388.1620, from the immediately preceding state fiscal year or the

percentage increase in the general price level in the immediately

preceding calendar year. If the number of mills a school district

is allowed to levy under this section in a year after 1994 is less

than the number of mills the school district was allowed to levy

under this section in the immediately preceding year, any reduction

required by this subsection in the school district's millage rate

shall be calculated by first reducing the number of mills the

school district is allowed to levy under subsection (2) and then

increasing the number of mills from which a principal residence,

qualified agricultural property, qualified forest property,

supportive housing property, property occupied by a public school

academy, and industrial personal property are exempted under

subsection (1).

(4) Commercial personal property is exempt from 12 of the

mills levied under this section. However, if the number of mills

from which industrial personal property is exempted for a specific

school district is reduced under this section, then the number of

mills from which commercial personal property is exempted for that

school district shall be reduced by that same number of mills.

(5) Millage levied under this section must be approved by the

school electors. For the purposes of this section, millage approved

by the school electors before January 1, 1994 for which the

authorization has not expired is considered to be approved by the

school electors.

(6) If a school district levies millage for school operating

purposes that is in excess of the limits of this section, the

amount of the resulting excess tax revenue shall be deducted from

the school district's next regular tax levy.

(7) If a school district levies millage for school operating

purposes that is less than the limits of this section, the board of

the school district may levy at the school district's next regular

tax levy an additional number of mills not to exceed the additional

millage needed to make up the shortfall.

(8) A school district shall not levy mills allocated under the

property tax limitation act, 1933 PA 62, MCL 211.201 to 211.217a,

other than mills allocated to a school district of the first class

for payment to a public library commission under section 11(4) of

the property tax limitation act, 1933 PA 62, MCL 211.211, after

1993.

(9) Beginning with taxes levied for 2011, if a school district

had a foundation allowance for the 1994-95 state fiscal year

greater than $6,500.00 and if the school district's foundation

allowance for the 2009-2010 state fiscal year was less than the

basic foundation allowance prescribed for the 2009-2010 state

fiscal year under section 20 of the state school aid act of 1979,

MCL 388.1620, the school district may not reduce the number of

mills from which certain classes of property are exempted from the

levy of millage under subsection (1) and may not levy that number

of mills on those classes of property as would otherwise be allowed

under subsection (1).

(10) As used in this section:

(a) "Combined state and local revenue per membership pupil"

means that term as defined in section 20 of the state school aid

act of 1979, MCL 388.1620.

(b) "Commercial personal property" means property classified

as commercial personal property under section 34c of the general

property tax act, 1893 PA 206, MCL 211.34c.

foundation allowance as calculated under section 20 of the state

school aid act of 1979, MCL 388.1620.

(d) "General price level" means that term as defined in

section 33 of article IX of the state constitution of 1963.

(e) "Industrial personal property" means the following:

(i) Except as otherwise provided in subparagraph (ii), property

classified as industrial personal property under section 34c of the

general property tax act, 1893 PA 206, MCL 211.34c.

(ii) Beginning December 31, 2011, industrial personal property

does not include a turbine powered by gas, steam, nuclear energy,

coal, or oil the primary purpose of which is the generation of

electricity for sale.

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

the state school aid act of 1979, MCL 388.1606.

(g) "Owner", "person", "principal residence", and "qualified

agricultural property" mean those terms as defined in section 7dd

of the general property tax act, 1893 PA 206, MCL 211.7dd.

(h) "Property occupied by a public school academy" means

property occupied by a public school academy, urban high school

academy, or school of excellence that is used exclusively for

educational purposes.

(i) ~~(h)~~ "Qualified forest property" means that term as defined

in section 7jj of the general property tax act, 1893 PA 206, MCL

211.7jj[1].

(j) ~~(i)~~ "School operating purposes" includes expenditures for

furniture and equipment, for alterations necessary to maintain

school facilities in a safe and sanitary condition, for funding the

cost of energy conservation improvements in school facilities, for

deficiencies in operating expenses for the preceding year, and for

paying the operating allowance due from the school district to a

joint high school district in which the school district is a

participating school district under former part 3a. Taxes levied

for school operating purposes do not include any of the following:

(i) Taxes levied by a school district for operating a community

college under part 25.

(ii) Taxes levied under section 1212.

(iii) Taxes levied under section 1356 for eliminating an

operating deficit.

(iv) Taxes levied for operation of a library under section 1451

or for operation of a library established pursuant to 1913 PA 261,

MCL 397.261 to 397.262, that were not included in the operating

millage reported by the district to the department as of April 1,

1993. However, a district may report to the department not later

than April 1, 1994 the number of mills it levied in 1993 for a

purpose described in this subparagraph that the school district

does not want considered as operating millage and then that number

of mills is excluded under this section from taxes levied for

school operating purposes.

(v) Taxes paid by a school district of the first class to a

public library commission pursuant to section 11(4) of the property

tax limitation act, 1933 PA 62, MCL 211.211.

(vi) Taxes levied under former section 1512 for operation of a

community swimming pool. In addition, if a school district included

the millage it levied in 1993 for operation of a community swimming

pool as part of its operating millage reported to the department

for 1993, the school district may report to the department not

later than June 17, 1994 the number of mills it levied in 1993 for

operation of a community swimming pool that the school district

does not want considered as operating millage and then that number

of mills is excluded under this section from taxes levied for

school operating purposes.

(k) ~~(j)~~ "Supportive housing property" means real property

certified as supportive housing property under chapter 3B of the

state housing development authority act of 1966, 1966 PA 346, MCL

125.1459 to ~~125.1459b.~~125.1459a.

Sec. 1223. (1) If authorized by resolution of the board of a

school district, the treasurer may invest debt retirement funds,

building and site funds, building and site sinking funds, or

general funds of the district. The investment shall be made ~~under~~

subject to subsection (7) and shall be restricted to the following:

(a) Bonds, bills, or notes of the United States; obligations,

the principal and interest of which are fully guaranteed by the

United States; or obligations of the state. In a primary or fourth

class school district, the bonds, bills, or notes shall be payable,

at the option of the holder, upon not more than 90 days' notice, or

if not so payable, shall have maturity dates not more than 5 years

after the purchase dates.

(b) Certificates of deposit issued by a financial institution

or share certificates of a state or federal credit union that is a

financial institution.

maturing not more than 270 days after the date of purchase.

(d) Securities issued or guaranteed by agencies or

instrumentalities of the United States government.

(e) United States government or federal agency obligation

repurchase agreements.

(f) Bankers' acceptances issued by a bank that is a member of

the federal deposit insurance corporation.

(g) Mutual funds composed entirely of investment vehicles that

are legal for direct investment by a school district.

(h) Investment pools, as authorized by the surplus funds

investment pool act, 1982 PA 367, MCL 129.111 to 129.118, composed

entirely of instruments that are legal for direct investment by a

school district.

(i) Certificates of deposit issued in accordance with the

following conditions:

(i) The funds are initially invested through a financial

institution that is not ineligible to be a depository of surplus

funds belonging to this state under section 6 of 1855 PA 105, MCL

21.146.

(ii) The financial institution arranges for the investment of

the funds in certificates of deposit in 1 or more insured

depository institutions, as defined in 12 USC 1813, or 1 or more

insured credit unions, as defined in 12 USC 1752, for the account

of the school district.

(iii) The full amount of the principal and any accrued interest

of each certificate of deposit is insured by an agency of the

United States.

(iv) The financial institution acts as custodian for the school

district with respect to each certificate of deposit.

(v) At the same time that the funds of the school district are

deposited and the certificate or certificates of deposit are

issued, the financial institution receives an amount of deposits

from customers of other insured depository institutions or insured

credit unions equal to or greater than the amount of the funds

initially invested by the school district through the financial

institution.

(j) Deposit accounts that meet all of the following

conditions:

(i) The funds are initially deposited in a financial

institution that is not ineligible to be a depository of surplus

funds belonging to this state under section 6 of 1855 PA 105, MCL

21.146.

(ii) The financial institution arranges for the deposit of the

funds in deposit accounts in 1 or more insured depository

institutions, as defined in 12 USC 1813, or 1 or more insured

credit unions, as defined in 12 USC 1752, for the account of the

school district.

(iii) The full amount of the principal and any accrued interest

of each deposit account is insured by an agency of the United

States.

(iv) The financial institution acts as custodian for the school

district with respect to each deposit account.

(v) On the same date that the funds of the school district are

deposited under subparagraph (ii), the financial institution

receives an amount of deposits from customers of other insured

depository institutions or insured credit unions equal to or

greater than the amount of the funds initially deposited by the

school district in the financial institution.

(2) An obligation purchased under this section, when received

by the treasurer, shall be deposited with the financial institution

having the deposit of the money of the particular fund from which

the obligation was purchased.

(3) Money in the several funds of a school district shall not

be commingled for the purpose of making an investment authorized by

this section except ~~that:~~as follows:

(a) The board of a school district may establish and maintain

1 common debt retirement fund for issues of bonds of similar

character.

(b) The board of a school district, by resolution, may

authorize the treasurer to combine money from more than 1 fund for

the purpose of making an investment authorized by subsection

(1)(h).

(4) Earnings of an investment shall become a part of the fund

for which the investment was made. When money of more than 1 fund

of a single district or money of more than 1 district are combined

for an investment pool authorized by subsection (1)(h), the money

shall be accounted for separately, and the earnings from the

investment shall be separately and individually computed, recorded,

and credited to the fund or district, as the case may be, for which

the investment was acquired.

(5) The treasurer of a school district, if authorized by

resolution of the board, may deposit upon approval of the employee,

funds accumulated under a deferred compensation program in a

federally insured financial institution authorized by law to do

business in this state. If authorized by a resolution of the board,

the treasurer of a school district, with the prior consent of the

employee, may use funds accumulated under a deferred compensation

plan to purchase from a life insurance company authorized to do

business in this state an annuity contract or life insurance policy

in the manner and for the purposes described in section 457 of the

internal revenue code.

(6) Security in the form of collateral, surety bond, or

another form may be taken for the deposits or investments of a

school district in a financial institution. However, an investment

under ~~section 622(2)(e) or~~ subsection (1)(e) or in an investment

pool that includes instruments eligible for investments under

~~section 622(2)(e) or~~ subsection (1)(e) shall be secured by the

transfer of title and custody of the obligations to which the

repurchase agreements relate and an undivided interest in those

obligations must be pledged to the school district for these

agreements.

(7) Notwithstanding subsection (1), additional funds of a

school district shall not be deposited or invested in a financial

institution that is not eligible to be a depository of surplus

funds belonging to this state under section 6 of 1855 PA 105, MCL

21.146.

(8) As used in this section, "deposit" includes purchase of or

investment in shares of a credit union.

(9) As used in this section, "financial institution" means a