May 21, 2014, Introduced by Senator WALKER and referred to the Committee on Appropriations.
A bill to amend 1979 PA 94, entitled
"The state school aid act of 1979,"
by amending sections 17a and 18 (MCL 388.1617a and 388.1618),
section 17a as amended by 2013 PA 97 and section 18 as amended by
2013 PA 60.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 17a. (1) The department may withhold all or part of any
payment that a district or intermediate district is entitled to
receive under this act to the extent the withholdings are a
component part of a plan, developed and implemented pursuant to the
revised municipal finance act, 2001 PA 34, MCL 141.2101 to
141.2821, the emergency municipal loan act, 1980 PA 243, MCL
141.931 to 141.942, the local financial stability and choice act,
2012 PA 436, MCL 141.1541 to 141.1575, section 1356 of the revised
school code, MCL 380.1356, or other statutory authority, for
financing an outstanding obligation upon which the district or
intermediate district defaulted. Amounts withheld shall be used to
pay, on behalf of the district or intermediate district, unpaid
amounts or subsequently due amounts, or both, of principal and
interest on the outstanding obligation upon which the district or
intermediate district defaulted.
(2) The state treasurer may withhold all or part of any
payment that a district or intermediate district is entitled to
receive under this act to the extent authorized or required under
section 15 of the school bond qualification, approval, and loan
act, 2005 PA 92, MCL 388.1935, the emergency municipal loan act,
1980 PA 243, MCL 141.931 to 141.942, the local financial stability
and choice act, 2012 PA 436, MCL 141.1541 to 141.1575, section 1356
of the revised school code, MCL 380.1356, or other statutory
authority.
(3) Under an agreement entered into by a district or
intermediate district assigning all or a portion of the payment
that it is eligible to receive under this act to the Michigan
finance authority or to the trustee of a pooled arrangement or
pledging the amount for payment of an obligation it incurred with
the Michigan finance authority or with the trustee of a pooled
arrangement, the state treasurer shall transmit to the Michigan
finance authority or a trustee designated by the Michigan finance
authority or to the trustee of a pooled arrangement or other
designated depository the amount of the payment that is assigned or
pledged under the agreement.
(4) If a district or intermediate district for which an
emergency
manager has been appointed pursuant to is in place under
the local financial stability and choice act, 2012 PA 436, MCL
141.1541 to 141.1575, or that has an approved deficit elimination
plan or an approved enhanced deficit elimination plan under section
102,
1220 of the revised school
code, MCL 380.1220, enters into or
has entered into an agreement described in subsection (3) pursuant
to section 1225(2) of the revised school code, MCL 380.1225,
whether the obligation was issued before or after the effective
date of this subsection, the portion of state school aid paid or to
be paid on behalf of the district or intermediate district directly
to the Michigan finance authority, or to a trustee designated by
the Michigan finance authority, for the sole purpose of paying the
principal of and interest on the obligation is subject to a lien
and trust that is a statutory lien and trust, paramount and
superior to all other liens and interests of any kind, for the sole
purpose of paying the principal of and interest on the obligation.
The statutory lien and trust applies to the state school aid
received or to be received by the Michigan finance authority, or
trustee designated by the Michigan finance authority, on behalf of
the district or intermediate district, immediately upon the later
of
the effective date of this subsection February 7, 2012 or the
time when the state school aid is allocated to the district or
intermediate district, but is subject to any subsequent reduction
of the state school aid allocation by operation of law or executive
order. The lien and trust imposed by this section with respect to
state school aid has a priority as established in the agreement,
except that the agreement shall not impair any existing lien and
trust previously created pursuant to this section, including any
lien and trust applicable to a multi-year repayment agreement under
section 1225 of the revised school code, MCL 380.1225. Except as
otherwise provided in this subsection, the lien and trust created
under this subsection for the benefit of holders of the obligation
issued pursuant to this section is valid and binding against a
party having a claim of any kind in tort, contract, or otherwise
against the district or intermediate district that has issued the
obligation secured by a pledge of state school aid pursuant to this
section, regardless of whether that party has notice of the pledge.
A pledge made pursuant to this section for the benefit of the
holders of obligations or others is perfected without delivery,
recording, or notice. The state school aid paid or to be paid on
behalf of a district or intermediate district to the Michigan
finance authority, or trustee designated by the Michigan finance
authority, shall be held in trust for the sole benefit of the
holders of the obligation issued pursuant to this section or
section 1225 of the revised school code, MCL 380.1225, and is
exempt from being levied upon, taken, sequestered, or applied
toward paying the debts or liabilities of the district or
intermediate district other than for payment of the obligation to
which the lien applies. However, nothing in this subsection alters
the ability of the state treasurer to withhold state school aid
from a district or intermediate district as provided by law.
(5) Notwithstanding the payment dates prescribed by this act
for distributions under this act, the state treasurer may advance
all or part of a payment that is dedicated for distribution or for
which the appropriation authorizing the payment has been made if
and to the extent, under the terms of an agreement entered into by
a district or intermediate district and the Michigan finance
authority, the payment that the district or intermediate district
is eligible to receive has been assigned to or pledged for payment
of an obligation it incurred with the Michigan finance authority.
(6) This section does not require the state to make an
appropriation to any school district or intermediate school
district and shall not be construed as creating an indebtedness of
the state, and any agreement made pursuant to this section shall
contain a statement to that effect.
(7) As used in this section, "trustee of a pooled arrangement"
means the trustee of a trust approved by the state treasurer and,
subject to the conditions and requirements of that approval,
established for the purpose of offering for sale, as part of a
pooled arrangement, certificates representing undivided interests
in notes issued by districts or intermediate districts under
section 1225 of the revised school code, MCL 380.1225.
(8) If a trustee applies to the state treasurer for approval
of a trust for the purposes of this section, the state treasurer
shall approve or disapprove the trust within 10 days after receipt
of the application.
(9) An allocation to a district or intermediate district under
this article is contingent upon the district's or intermediate
district's compliance with this section.
Sec. 18. (1) Except as provided in another section of this
article, each district or other entity shall apply the money
received by the district or entity under this article to salaries
and other compensation of teachers and other employees, tuition,
transportation, lighting, heating, ventilation, water service, the
purchase of textbooks, other supplies, and any other school
operating expenditures defined in section 7. However, not more than
20% of the total amount received by a district or intermediate
district under this article may be transferred by the board to
either the capital projects fund or to the debt retirement fund for
debt service. The money shall not be applied or taken for a purpose
other than as provided in this section. The department shall
determine the reasonableness of expenditures and may withhold from
a recipient of funds under this article the apportionment otherwise
due upon a violation by the recipient.
(2) A district or intermediate district shall adopt an annual
budget in a manner that complies with the uniform budgeting and
accounting
act, 1968 PA 2, MCL 141.421 to 141.440a. Within
30 15
days after a district board adopts its annual operating budget for
the following school fiscal year, or after a district board adopts
a subsequent revision to that budget, the district shall make all
of the following available through a link on its website home page,
or may make the information available through a link on its
intermediate district's website home page, in a form and manner
prescribed by the department:
(a) The annual operating budget and subsequent budget
revisions.
(b) Using data that have already been collected and submitted
to the department, a summary of district expenditures for the most
recent fiscal year for which they are available, expressed in the
following 2 pie charts:
(i) A chart of personnel expenditures, broken into the
following subcategories:
(A) Salaries and wages.
(B) Employee benefit costs, including, but not limited to,
medical, dental, vision, life, disability, and long-term care
benefits.
(C) Retirement benefit costs.
(D) All other personnel costs.
(ii) A chart of all district expenditures, broken into the
following subcategories:
(A) Instruction.
(B) Support services.
(C) Business and administration.
(D) Operations and maintenance.
(c) Links to all of the following:
(i) The current collective bargaining agreement for each
bargaining unit.
(ii) Each health care benefits plan, including, but not limited
to, medical, dental, vision, disability, long-term care, or any
other type of benefits that would constitute health care services,
offered to any bargaining unit or employee in the district.
(iii) The audit report of the audit conducted under subsection
(4) for the most recent fiscal year for which it is available.
(iv) The bids required under section 5 of the public employee
employees health benefits act, 2007 PA 106, MCL 124.75.
(d) The total salary and a description and cost of each fringe
benefit included in the compensation package for the superintendent
of the district and for each employee of the district whose salary
exceeds $100,000.00.
(e) The annual amount spent on dues paid to associations.
(f) The annual amount spent on lobbying or lobbying services.
As used in this subdivision, "lobbying" means that term as defined
in section 5 of 1978 PA 472, MCL 4.415.
(g) Any deficit elimination or enhanced deficit elimination
plan the district was required to submit under section 1220 of the
revised school code, MCL 380.1220.
(3) For the information required under subsection (2)(a),
(2)(b)(i), and (2)(c), an intermediate district shall provide the
same information in the same manner as required for a district
under subsection (2).
(4) For the purpose of determining the reasonableness of
expenditures and whether a violation of this article has occurred,
all of the following apply:
(a) The department shall require that each district and
intermediate district have an audit of the district's or
intermediate district's financial and pupil accounting records
conducted at least annually at the expense of the district or
intermediate district, as applicable, by a certified public
accountant or by the intermediate district superintendent, as may
be required by the department, or in the case of a district of the
first class by a certified public accountant, the intermediate
superintendent, or the auditor general of the city.
(b) If a district operates in a single building with fewer
than 700 full-time equated pupils, if the district has stable
membership, and if the error rate of the immediately preceding 2
pupil accounting field audits of the district is less than 2%, the
district may have a pupil accounting field audit conducted
biennially but must continue to have desk audits for each pupil
count. The auditor must document compliance with the audit cycle in
the pupil auditing manual. As used in this subdivision, "stable
membership" means that the district's membership for the current
fiscal year varies from the district's membership for the
immediately preceding fiscal year by less than 5%.
(c) A district's or intermediate district's annual financial
audit shall include an analysis of the financial and pupil
accounting data used as the basis for distribution of state school
aid.
(d) The pupil and financial accounting records and reports,
audits, and management letters are subject to requirements
established in the auditing and accounting manuals approved and
published by the department.
(e)
All of the following shall be done not later than November
October 15 each year:
(i) A district shall file the annual financial audit reports
with the intermediate district and the department.
(ii) The intermediate district shall file the annual financial
audit reports for the intermediate district with the department.
(iii) The intermediate district shall enter the pupil membership
audit reports for its constituent districts and for the
intermediate district, for the pupil membership count day and
supplemental count day, in the Michigan student data system.
(f) The annual financial audit reports and pupil accounting
procedures reports shall be available to the public in compliance
with the freedom of information act, 1976 PA 442, MCL 15.231 to
15.246.
(g) Not later than January 31 of each year, the department
shall notify the state budget director and the legislative
appropriations subcommittees responsible for review of the school
aid budget of districts and intermediate districts that have not
filed an annual financial audit and pupil accounting procedures
report required under this section for the school year ending in
the immediately preceding fiscal year.
(5)
By November October 15 of each year, each district and
intermediate district shall submit to the center, in a manner
prescribed by the center, annual comprehensive financial data
consistent with accounting manuals and charts of accounts approved
and published by the department. For an intermediate district, the
report shall also contain the website address where the department
can access the report required under section 620 of the revised
school code, MCL 380.620. The department shall ensure that the
prescribed Michigan public school accounting manual chart of
accounts includes standard conventions to distinguish expenditures
by allowable fund function and object. The functions shall include
at minimum categories for instruction, pupil support, instructional
staff support, general administration, school administration,
business administration, transportation, facilities operation and
maintenance, facilities acquisition, and debt service; and shall
include object classifications of salary, benefits, including
categories for active employee health expenditures, purchased
services, supplies, capital outlay, and other. Districts shall
report the required level of detail consistent with the manual as
part of the comprehensive annual financial report.
(6) By September 30 of each year, each district and
intermediate district shall file with the department the special
education actual cost report, known as "SE-4096", on a form and in
the manner prescribed by the department.
(7) By October 7 of each year, each district and intermediate
district shall file with the center the transportation expenditure
report, known as "SE-4094", on a form and in the manner prescribed
by the center.
(8) The department shall review its pupil accounting and pupil
auditing manuals at least annually and shall periodically update
those manuals to reflect changes in this article.
(9) If a district that is a public school academy purchases
property using money received under this article, the public school
academy shall retain ownership of the property unless the public
school academy sells the property at fair market value.
(10) If a district or intermediate district does not comply
with subsections (4), (5), (6), and (7), the department shall
withhold all state school aid due to the district or intermediate
district under this article, beginning with the next payment due to
the district or intermediate district, until the district or
intermediate district complies with subsections (4), (5), (6), and
(7). If the district or intermediate district does not comply with
subsections (4), (5), (6), and (7) by the end of the fiscal year,
the district or intermediate district forfeits the amount withheld.
(11) If a district or intermediate district does not comply
with subsection (2), the department may withhold up to 10% of the
total state school aid due to the district or intermediate district
under this article, beginning with the next payment due to the
district or intermediate district, until the district or
intermediate district complies with subsection (2). If the district
or intermediate district does not comply with subsection (2) by the
end of the fiscal year, the district or intermediate district
forfeits the amount withheld.
(12) (11)
Not later than September 1, 2014, if
a district or
intermediate district offers online learning, the district or
intermediate district shall submit to the department a report that
details the per-pupil costs of operating the online learning. The
report shall include at least all of the following information
concerning the operation of online learning for the school fiscal
year ending June 30, 2014:
(a) The name of the district operating the online learning and
of each district that enrolled students in the online learning.
(b) The total number of students enrolled in the online
learning and the total number of membership pupils enrolled in the
online learning.
(c) For each pupil who is enrolled in a district other than
the district offering online learning, the name of that district.
(d) The district in which the pupil was enrolled before
enrolling in the district offering online learning.
(e) The number of participating students who had previously
dropped out of school.
(f) The number of participating students who had previously
been expelled from school.
(g) The total cost to enroll a student in the program. This
cost shall be reported on a per-pupil, per-course, per-semester or
trimester basis. The total shall include costs broken down by cost
for training, personnel, hardware and software, payment to each
online learning provider, and other costs associated with operating
online learning.
(h) The name of each online education provider contracted by
the district and the state in which each online education provider
is headquartered.
(13) An allocation to a district or another entity under this
article is contingent upon the district's or entity's compliance
with this section.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 97th Legislature are
enacted into law:
(a) Senate Bill No.954
.
(b) Senate Bill No.957
.
(c) Senate Bill No.952
.