SENATE AMENDED

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY MILNE, BOYD, CLYMER, COHEN, D. COSTA, DAY, GABLER, GINGRICH, HALUSKA, KAVULICH, MAJOR, MILLARD, MOUL, PAYTON, PICKETT, PYLE, RAPP, REICHLEY, ROSS, SCHRODER, SONNEY, THOMAS, TOEPEL AND WAGNER, APRIL 7, 2011

SENATOR CORMAN, APPROPRIATIONS, IN SENATE, RE-REPORTED AS AMENDED, JUNE 18, 2012   

AN ACT

Amending the act of March 10, 1949 (P.L.30, No.14), entitled "An

act relating to the public school system, including certain

provisions applicable as well to private and parochial

schools; amending, revising, consolidating and changing the

laws relating thereto," in duties and powers of boards of

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school directors, further providing for elementary schools;

in school finances, further providing for when district

distressed; repealing provisions relating to special board of

control, petition and appointments, when no appointment is

made and compensation of special board of control; further

providing for powers of special board of control and for

distress in school districts of the first class; repealing

provisions relating to additional tax and to school directors

to remain in office and elections; adding provisions relating

to school district financial recovery; establishing the

Financial Recovery School District Transitional Loan Account; 

further providing for distress in school districts of the

first class; in intermediate units, further providing for

subsidies for services, for financial reports and for

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superintendents' salaries; and and for financial reports;

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further providing for manner of election or approval;

providing for performance review; further providing for

election of assistant district superintendents, for term and

salary of assistants, for commissions and for removal; in

high schools, further providing for attendance in other

districts; and providing for wearing of military uniform at

graduation ceremony and for audits of school districts 

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superintendents of schools or buildings and of supplies.

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The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 696(i)(3) of the act of March 10, 1949

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(P.L.30, No.14), known as the Public School Code of 1949,

amended October 30, 2001 (P.L.828, No.83), is amended to read:

Section 1.  Section 501 of the act of March 10, 1949 (P.L.30,

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No.14), known as the Public School Code of 1949, is amended to

read:

Section 501.  Elementary Schools.--(a)  The board of school

directors in every school district shall establish, equip,

furnish, and maintain a sufficient number of elementary public

schools, in compliance with the provisions of this act, to

educate every person, residing in such district, between the

ages of six and twenty-one years, who may attend.

(b)  A board of school directors may satisfy the requirement

set forth in subsection (a) by any of the following:

(1)  Operating a school building.

(2)  Converting a school building to a charter school. 

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pursuant to section 1717-A, provided that a school district in

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financial recovery status or in receivership under Article VI-A

that seeks to convert a school building to a charter school

shall comply with the provisions of section 642-A(2).

(3)  Contracting with an education management service

provider to operate a school building. For purposes of this

paragraph, "education management service provider" shall mean a

for-profit education management organization, nonprofit charter

management organization, school design provider, business

manager or any other partner entity with which a school district

contracts to provide educational design, business services,

comprehensive management or personnel functions. The term shall

not include a charter school foundation.

(4)  Paying tuition for students residing in the school

district to attend school in another school district upon the

agreement of both school districts.

Section 2.  Section 691(a) of the act, amended April 27, 1998

(P.L.270, No.46), is amended to read:

Section 691.  When District Distressed.--(a)  [A] Except for

a school district of the first class A, second class, third

class or fourth class, a school district shall be deemed to be

distressed when any one of the following circumstances shall

arise and the Secretary of Education, after proper investigation

of the district's financial condition, the administrative

practices of the board and such other matters deemed appropriate

by the Secretary of Education, has issued a certificate

declaring such district in financial distress:

(1)  The salaries of any teachers or other employes have

remained unpaid for a period of ninety (90) days.

(2)  The tuition due another school district remains unpaid

on and after January first of the year following the school year

it was due and there is no dispute regarding the validity or

amount of the claim.

(3)  Any amount due any joint board of school directors under

a joint board agreement remains unpaid for a period of ninety

(90) calendar days beyond the due date specified in the joint

board's articles of agreement.

(4)  The school district has defaulted in payment of its

bonds or interest on such bonds or in payment of rentals due any

authority for a period of ninety (90) calendar days and no

action has been initiated within that period of time to make

payment.

(5)  The school district has contracted any loan not

authorized by law.

(6)  The school district has accumulated and has operated

with a deficit equal to two per centum (2%) or more of the

assessed valuation of the taxable real estate within the

district for two successive years.

(7)  A new, merged or union school district has been formed

and one or more of the former school districts which compose the

merged or union school district was a distressed school district

at the time of the formation of the merged or union school

district.

* * *

Section 3.  Section 692 of the act, amended December 9, 2002

(P.L.1472, No.187), is repealed:

[Section 692.  Special Board of Control; Petition;

Appointments.--Whenever on the basis of a proper investigation

as herein provided for, the Secretary of Education has declared

a school district of the first class A, second class, third

class or fourth class to be a distressed school district under

section 691(a), he or his designated representative who shall be

a person trained in public school administration, possessing the

certification prerequisites demanded of a district or assistant

superintendent, or holding in the Department of Education the

rank of Deputy Secretary, shall petition the court of common

pleas of the county in which such district, or the largest part

in area, is located to appoint two citizens who shall be

qualified electors and taxpayers in the county in which the

school district is located. School directors and employes of any

such school district shall be ineligible for appointment by the

court. The appointees, together with the designated

representative of the Secretary of Education, shall constitute a

special board of control and shall serve for terms of five

years. No member of the board may be removed from office during

a term, except that the Secretary of Education may upon clear

and convincing evidence of malfeasance or misfeasance in office

remove a member prior to the expiration of the term. Before a

member of the board is removed, that member must be provided

with a written statement of the reasons for removal and an

opportunity for a hearing in accordance with 2 Pa.C.S. Ch. 5

Subch. A (relating to practice and procedure of Commonwealth

agencies) and Ch. 7 Subch. A (relating to judicial review of

Commonwealth agency action). Vacancies occurring because of

death, removal or resignation of members of the board shall be

filled within thirty (30) days of the creation of the vacancy in

the manner in which that position was originally filled. A

member of the board shall hold office until a successor is

appointed and qualified. The special board of control shall

assume control of the affairs of the district and operate it in

the place of the school directors during the period necessary to

reestablish a sound financial structure in the district. The

costs of the court proceedings shall be paid by the Department

of Education.]

Section 4.  Section 692.1 of the act, amended January 14,

1970 (1969 P.L.468, No.192), is repealed:

[Section 692.1.  When No Appointment Is Made.--In the event

that the court of common pleas has made no appointment of

members to a special board of control within thirty (30) days of

the date of the filing of the petition for such appointment, the

Superintendent of Public Instruction may designate the executive

director of the intermediate unit and a member of the

intermediate unit board of directors of the intermediate unit in

which the petition is presented to serve until the court makes

its appointments. A school director of the distressed school

district serving on the intermediate board of directors shall be

ineligible for appointment.]

Section 5.  Section 692.2 of the act, amended June 30, 1995

(P.L.220, No.26), is repealed:

[Section 692.2.  Compensation of Special Board of Control.--

The members of the special board appointed by the court, or the

member other than the executive director of the intermediate

unit appointed on a temporary basis by the Superintendent of

Public Instruction, shall be paid seventy-five dollars ($75) for

each meeting of the regular board of school directors of the

distressed school district which they attend: Provided, however,

That the total amount to be paid in any fiscal year to each such

member shall not exceed nine hundred dollars ($900). Such

payments shall be made from the funds of the school district and

shall be charged to administrative services even though no

previous provision has been made in the budget of the school

district for such expenses.]

Section 6.  Section 693 of the act, added December 15, 1959

(P.L.1842, No.675), is amended to read:

Section 693.  Powers of Special Board of Control.--[When]

(a)  Except as otherwise provided in subsection (b), when the

special board of control assumes control of a distressed school

district, it shall have power and is hereby authorized to

exercise all the rights, powers, privileges, prerogatives and

duties imposed or conferred by law on the board of school

directors of the distressed district, and the board of school

directors shall have no power to act without the approval of the

special board of control. In addition thereto, the special board

of control shall have power to require the board of directors

within sixty (60) days to revise the district's budget for the

purpose of effecting such economies as it deems necessary to

improve the district's financial condition. To this end the

special board of control may require the board:

(1)  To cancel or to renegotiate any contract other than

teachers' contracts to which the board or the school district is

a party, if such cancellation or renegotiation of contract will

effect needed economies in the operation of the district's

schools.

(2)  To increase tax levies in such amounts and at such times

as is permitted by the act to which this is an amendment.

(3)  To appoint a special collector of delinquent taxes for

the district who need not be a resident of the school district.

Such special tax collector shall exercise all the rights and

perform all the duties imposed by law on tax collectors for

school districts. The superseded tax collector shall not be

entitled to any commissions on the taxes collected by the

special collector of delinquent taxes.

(4)  To direct the special school auditors of the department

or to appoint a competent independent public accountant to audit

the accounts of the distressed school districts.

(5)  To dispense with the services of such nonprofessional

employes as in his judgment are not actually needed for the

economical operation of the school system.

(6)  To suspend, in accordance with the provisions of section

1124 of the act to which this is an amendment, such number of

professional and temporary professional employes as may be

necessary to maintain a pupil-teacher ratio of not less than

twenty-six pupils per teacher for the combined elementary and

secondary school enrollments.

(b)  The provisions of subsection (a) shall not apply to a

school district of the first class A, second class, third class

or fourth class.

Section 7.  Section 694 of the act, added December 15, 1959

(P.L.1842, No.675), is repealed: 

[Section 694.  Additional Tax.--When the operation of a

distressed school district has been assumed by the special board

of control, the board of school directors of the district shall,

upon the recommendation and with the approval of the special

board of control, levy an additional tax or taxes sufficient to

liquidate the indebtedness of the district: Provided, That when

such school directors fail to levy such additional taxes within

a reasonable time, the special board of control may petition the

court of common pleas of the county in which such district or

the largest part in area is located to issue a writ of mandamus

requiring the board to levy such additional tax or taxes, or he

may, in his own name, initiate action to have the board removed

from office for neglect of duty subject to the provisions of

section 318 of this act. Notwithstanding present limitations on

tax rates imposed by law, such limitations shall not apply to

distressed school districts.]

Section 8.  Section 695 of the act, amended July 31, 1963

(P.L.407, No.215), is repealed:

[Section 695.  School Directors to Remain in Office;

Elections.--The school directors of a distressed district may

not resign their offices, except with the unanimous consent of

the special board of control and shall continue in office,

unless removed from office for neglect of duty under the

provisions of section 318 of this act by the court of common

pleas of the county in which such district or the largest part

in area is located, or unless any of such directors are elected

to another position not compatible with the position of school

director or are appointed to any position for which there is a

requirement that said appointee shall hold no elective office,

for the remainder of their terms during the time the district is

operated by the special board of control and shall perform any

duties delegated to them by it. The assumption of control of a

distressed school district by the special board of control shall

in no way interfere with the regular election or reelection of

school directors for the district.]

Section 9.  Section 696(i)(3) of the act, amended October 30,

2001 (P.L.828, No.83), is amended to read:

Section 696.  Distress in School Districts of the First

Class.--* * *

(i)  In addition to all powers granted to the superintendent

by law and a special board of control under section 693 and

notwithstanding any other law to the contrary, the School Reform

Commission shall have the following powers:

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(3)  To suspend the requirements of this act and regulations

of the State Board of Education except that the school district

shall remain subject to those provisions of this act set forth

in [section] 1075, section sections 1073, 1073.1, 1076, 1077,

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1078, 1080, 1732-A(a), (b) and (c) [and section], 1714-B and

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2104 and regulations under those sections.

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Section 2.  Section 907-A of the act, added May 4, 1970

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(P.L.311, No.102), is amended to read:

Section 907-A.  Subsidies for Services.--(a)  Intermediate

units shall receive subsidies from the Commonwealth as herein

provided only for services performed pursuant to and authorized

by law, as hereinafter provided. Nothing contained herein shall

prohibit intermediate units from receiving funds from school

districts and other sources including nonpublic nonprofit

schools and expending such funds to provide additional services

not included in the approved program of services.

(b)  (1)  No later than February 1, 2012, and each year

thereafter, the Department of Education shall prepare a report

on subsidies and funds received under this section. The report

shall include, but not be limited to, the following information:

(i)  A listing of all contracts, interagency agreements and

purchase orders executed by a Commonwealth agency with each

intermediate unit and between intermediate units.

(ii)  The total amount, including annual amount for any

multiyear contract, agreement or purchase order, and the

duration of each.

(iii)  The source and amount of funding to cover the entire

cost of the contract.

(iv)  A description of programs and services being provided,

including performance measures by which each intermediate unit

will be assessed and penalties for nonperformance, if any.

(v)  A description of the selection process used in entering

into the arrangement.

(vi)  The number of all employes, contractors and agents

covered under the contracts and the remuneration provided under

the contract.

(2)  The Department of Education shall develop the format to

be used by the intermediate unit in the collection of the

information specified in paragraph (1).

(3)  The Department of Education shall post the reports on

the department's Internet website.

(4)  The report submitted in 2011-2012 shall cover fiscal

years 2009-2010 and 2010-2011. Future reports shall cover the

previous fiscal year.

Section  3.  Section 921-A of the act is amended by adding a

subsection to read:

Section 921-A.  Financial Reports.--* * *

(a.1)  The Department of Education shall post on its Internet

website, in the format consistent with those already posted for

the other local education agencies, information included in the

intermediate units' annual financial report.

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Section 4.  Section 1075 of the act, amended January 14, 1970

(1969 P.L.468, No.192), is amended to read:

Section 1075.  Salary.--(a)  The board of school directors at

any convention electing a district superintendent or an

assistant district superintendent shall determine the amount of

salary to be paid such district superintendent or assistant

district superintendent which compensation shall be paid out of

the funds of the district. If a district superintendent or an

assistant district superintendent is employed in a joint school

system including kindergarten or grades 1 to 12, his salary

shall be fixed by a majority vote of all the school directors in

the districts operating the joint school systems, and shall be

paid by the districts in the same proportions as they contribute

to the support of the joint school.

(b)  District superintendents and assistant district

superintendents shall be entitled to the following minimum

annual salaries:

(1)  Assistant district superintendents having less than one

hundred (100) teachers under their supervision, nine thousand

dollars ($9,000).

(2)  Assistant district superintendents having one hundred

(100) teachers or more but less than three hundred (300)

teachers under their supervision, ten thousand dollars

($10,000).

(3)  Assistant district superintendents having three hundred

(300) or more teachers under their supervision, eleven thousand

dollars ($11,000).

(4)  District superintendents having less than one hundred

(100) teachers under their supervision, thirteen thousand

dollars ($13,000).

(5)  District superintendents having one hundred (100)

teachers or more but less than three (300) teachers under their

supervision, fourteen thousand dollars ($14,000).

(6)  District superintendents having three hundred (300) or

more teachers under their supervision, fifteen thousand dollars

($15,000).

(c)  Except as provided under subsection (b), district

superintendents and assistant district superintendents of a

school district that has been issued a certification declaring

the school district in financial distress under section 691 may

not receive:

(1)  Any form of annual compensation except for an annual

salary. For the purposes of this paragraph, annual compensation

shall include bonuses, incentive payments and any other type of

compensation. Annual compensation shall not include medical

benefits or a severance payment if the district superintendent

or assistant district superintendent is not terminated.

(2)  Any type of severance payment if the district

superintendent or assistant district superintendent was

terminated.

Section 10.  The act is amended by adding an article to read:

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ARTICLE VI-A

SCHOOL DISTRICT FINANCIAL RECOVERY

(a)  Preliminary Provisions

Section 601-A.  Scope of article.

This article provides for financial recovery in certain

school districts.

Section 602-A.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Advisory committee."  The advisory committee established by

a board of school directors under section 654-A.

"Chief recovery officer."  The chief recovery officer

appointed by the Secretary of Education under section 631-A.

"Claim."  A right to:

(1)  payment, whether or not the right is reduced to

judgment, liquidated, unliquidated, fixed, contingent,

matured, unmatured, disputed, undisputed, legal, equitable,

secured or unsecured; or

(2)  an equitable remedy for breach of performance if the

breach gives rise to a right to payment, whether or not the

right to an equitable remedy is reduced to judgment, fixed,

contingent, matured, unmatured, disputed, undisputed, secured

or unsecured.

"Creditor."  An individual, partnership, corporation,

association, estate, trust or governmental unit that has a claim

against a school district. The term shall include the Public

School Employees' Retirement Board.

"Deficit."  The excess of expenditures over revenues,

calculated as a percentage of revenue, during an accounting

period, and which calculation includes all governmental fund

types and all proprietary fund types, but excludes all fiduciary

fund types of the school district.

"Department."  The Department of Education of the

Commonwealth.

"Employee organization."  As defined in section 1101-A.

"Expenditures."  Reductions in fund equity, including current

operating expenses that require the use of fund equity, debt

service and capital outlays. The term shall not include

interfund transfers.

"Financial recovery plan" or "plan."  A financial recovery

plan under subarticle (c).

"Financial recovery school district."  A school district of

the first class A, second class, third class or fourth class

declared by the Secretary of Education to be in financial

recovery status under section 621-A.

"Financial recovery school district transitional loan

account."  The account for loans awarded under Subdivision (vii)

of subarticle (c).

"Fund equity."  Excess of assets of a fund over its

liabilities. The term shall include a fund balance.

"Receiver."  The receiver of a financial recovery school

district appointed under Subdivision (vi) of subarticle (c).

"Revenues."  Additions to fund equity other than from

interfund transfers, proceeds of debt and proceeds of

disposition of general fixed assets.

"School district."  A school district of the first class A,

second class, third class and fourth class and a financial

recovery school district. The term does not include a school

district of the first class.

"Secretary."  The Secretary of Education of the Commonwealth.

(b)  School District Financial Watch

Section 611-A.  Early warning system.

(a)  Establishment.--

(1)  The department shall develop and implement an early

warning system under which the department shall:

(i)  Compile financial data and maintain accurate and

current information and data on the financial conditions

of school districts. Each school district shall provide

its financial data and information to the department

within 15 days of a request by the department.

(ii)  Regularly analyze and assess school district

budget reports, data and other information directly

related to the financial conditions of school districts.

(iii)  Utilize appropriate fiscal and socioeconomic

variables to identify financial difficulties in school

districts in financial watch status.

(iv)  Notify any school district identified for

financial watch status.

(v)  Offer technical assistance to school districts

in financial watch status to correct minor financial

problems and to avoid a declaration of financial recovery

status under section 621-A.

(2)  (i)  The department shall develop the fiscal and

economic variables to be used in identifying school

districts in financial watch status, shall test the

validity and reliability of the variables and shall

continuously monitor the variables to assure their

effectiveness.

(ii)  The variables developed by the department under

this paragraph shall include, but shall not be limited

to, whether any political subdivision located within the

school district is a financially distressed municipality

under the act of July 10, 1987 (P.L.246, No.47), known as

the Municipalities Financial Recovery Act.

(3)  In developing an early warning system under this

section, the department may employ or contract with fiscal

consultants as deemed necessary to administer the provisions

of this section.

(b)  Duties.--When a school district is identified through

the early warning system for financial watch status, the

department shall:

(1)  Notify the school district that the department has

identified the school district for financial watch status.

(2)  Request from the school district all information

necessary to enable the department to conduct a review of the

school district's financial condition. A school district that

receives a request for information under this paragraph shall

provide the department with all information requested within

15 days.

(3)  Perform a thorough review of the school district's

financial condition, which shall include a review of the

information provided by the school district under paragraph

(2) and which may include visits and correspondence with

school district officers and employees.

(4)  Provide the school district with technical

assistance appropriate to remedying the school district's

financial difficulties, which may include, but shall not be

limited to, contracting with financial consultants to assist

the school district.

(c)  Guidelines.--

(1)  Within 60 days of the effective date of this

section, the department shall establish guidelines for the

operation of the early warning system established under this

section, including a description of the variables that will

be used by the department to identify school districts in

financial watch status. The guidelines shall be published as

a statement of policy in the Pennsylvania Bulletin and shall

be posted on the department's publicly accessible Internet

website.

(2)  Notwithstanding any other provision of law to the

contrary, guidelines required under this subsection shall not

be subject to review, regulation or approval by the State

Board of Education.

(3)  The guidelines established by the department, and

any amendments thereto, shall be exempt from the requirements

of the following:

(i)  The act of June 25, 1982 (P.L.633, No.181),

known as the Regulatory Review Act.

(ii)  The act of July 31, 1968 (P.L.769, No.240),

referred to as the Commonwealth Documents Law.

(iii)  The act of October 15, 1980 (P.L.950, No.164),

known as the Commonwealth Attorneys Act.

(4)  The early warning system may not become operational

until publication of the guidelines as required under

paragraph (1).

(c)  School District Financial Recovery

(i)  Declaration of School District

Financial Recovery Status

Section 621-A.  Issuance of declaration.

(a)  Criteria.--Subject to the provisions of subsection (b)

and after proper investigation of the school district's

financial condition, the administrative practices of the board

of school directors and such other matters deemed appropriate by

the secretary, the following shall apply:

(1)  (i)  Subject to the provisions of subparagraph (ii),

the secretary shall issue a declaration that a school

district is in financial recovery status when either of

the following applies:

(A)  The school district has an average daily

membership greater than 7,500 and receives an advance

of its basic education subsidy at any time.

(B)  The school district receives an advance of

its basic education subsidy at any time and is either

subject to a declaration of financial distress under

section 691 or engaged in litigation against the

Commonwealth in which the school district seeks

financial assistance from the Commonwealth to allow

the school district to continue in operation.

(ii)  Notwithstanding the provisions of subparagraph

(i), the following shall apply:

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(A)  Not more than nine school districts may be

under a declaration of financial recovery status

under this section or in receivership under

subdivision (vi) at any time.

(B)  the secretary may decline to issue a

declaration that a school district is in financial

recovery status where the secretary determines that

the school district, within the previous five years,

has faced an emergency that caused the occurrence of

a circumstance set forth in subparagraph (i).

(2)  (i)  Within two years of the effective date of this

section, the State Board of Education shall promulgate

final-omitted regulations under the act of June 25, 1982

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(P.L.633, No.181), known as the Regulatory Review Act,

establishing additional criteria which the secretary may

consider in determining whether to issue a declaration

that a school district is in financial recovery status

and whether a school district in financial recovery

status shall be deemed a moderate financial recovery

school district under subdivision (iv) or a severe

financial recovery school district under subdivision

(v)., provided that not more than nine school districts

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may be under a declaration of financial recovery status

under this section or in receivership under subdivision

(vi) at any time. The criteria the secretary may consider

in determining whether to issue a declaration that a

school district is in financial recovery status shall

include, but shall not be limited to, the following:

(A)  The school district receives at least 85% of

its per pupil funding from the Commonwealth and

collects less than 50% of local taxes levied to fund

the school district.

(B)  The school district's unreserved fund

balance has declined for three consecutive years and

is less than 5% of the school district's annual

expenditures.

(C)  The school district's fixed costs are at

least 30% of the school district's total annual

expenditures.

(D)  The school district's total outstanding debt

is greater than the school district's annual

expenditures.

(E)  The salaries of any teachers or other

employees of the school district are unpaid at least

15 days after payment is due.

(F)  The school district is subject to

withholding of its State appropriation under section

633.

(G)  The school district has defaulted on the

payment of a debt due to any school district,

intermediate unit or charter school that remains

unpaid on or after January 1 of the year following

the school year it was due and there is no dispute

regarding the validity or amount of the claim.

(H)  The school district's assigned and

unassigned total fund balance is less than zero in

the school district's general fund.

(I)  The school district's assigned and

unassigned total fund balance in the school

district's general fund as a percentage of total

expenditures is less than 3%.

(J)  The school district experiences a delinquent

tax rate of more than 10%.

(K)  The assessed valuation of taxable real

estate in the school district has not increased over

the previous five years.

(L)  Any amount due a joint board of school

directors under a joint board agreement remains

unpaid beyond the due date specified in the joint

board's articles of agreement.

(M)  The school district has contracted a loan

not authorized by law.

(N)  The school district has accumulated and

operated with a deficit equal to at least 2% of the

assessed valuation of the taxable real estate within

the school district for two successive years.

(O)  A new, merged or union school district has

been formed and one or more of the former school

districts which compose the merged or union school

district was a distressed school district under

section 691 or a financial recovery school district

under this article at the time of the formation of

the new, merged or union school district.

(ii)  (A)  In promulgating the regulations required

under subparagraph (i), the State Board of Education

shall convene and consult with a Statewide advisory

committee which shall include a superintendent, a

school board member, a school district business

manager or chief financial officer, one designee from

the department and one designee from the Office of

the Budget.

(B)  Members of the Statewide advisory committee

required to be convened under clause (A) shall be

selected to be representative of the rural, suburban

and urban school districts of this Commonwealth.

(C)  The Statewide advisory committee required to

be convened under clause (A) shall be convened not

later than 60 days after the effective date of this

section and shall meet regularly to fulfill the

requirements of this paragraph.

(b)  Failure of Commonwealth to make payment.--No school

district shall be declared in financial recovery status by

reason of any of the circumstances enumerated in subsection (a)

(1) or any of the criteria stated in regulations promulgated

under subsection (a)(2) having been caused by the failure of the

Commonwealth to make any payment of money due the school

district at the time the payment is due, including payment of

any Federal funding that is distributed through the

Commonwealth.

(c)  Appeal.--A declaration of financial recovery status by

the secretary under this section is appealable under 2 Pa.C.S.

(relating to administrative law and procedure).

Section 622-A.  Commitment to ensure delivery of effective

educational services.

The Commonwealth shall ensure the delivery of effective

educational services to all students enrolled in a school

district in financial recovery status under Subdivision (i) or

in receivership under Subdivision (vi).

Section 623-A.  School directors to remain in office and

elections.

(a)  Resignation prohibited.--The school directors of a

school district that has been declared in financial recovery

status under this subdivision or is in receivership under

Subdivision (vi) may not resign their offices, except with the

consent of the chief recovery officer or receiver, and shall:

(1)  Remain in office, unless:

(i)  removed from office for neglect of duty under

the provisions of section 318; or

(ii)  the directors are elected to another position

incompatible with the position of school director or are

appointed to any position for which there is a

requirement that the appointee must hold no elective

office,

for the remainder of their terms during the time the school

district is in financial recovery status or receivership.

(2)  Perform any duties delegated to them by the chief

recovery officer or the receiver appointed to serve the

school district.

(3)  Comply with any directive issued to them by the

chief recovery officer or the receiver if the directive is

consistent with the financial recovery plan for the school

district.

(b)  No interference with elections.--A declaration by the

secretary that a school district is in financial recovery status

under section 621-A or the appointment of a receiver under

Subdivision (vi) shall in no way interfere with the regular

election or reelection of school directors for the school

district.

Section 624-A.  Termination of status.

(a)  Declaration by secretary.--

(1)  (i)  Following a determination that the school

district has satisfied and is continuing to satisfy the

criteria for termination of financial recovery status

enumerated in section 641-A(9), the secretary may issue a

declaration terminating the school district's financial

recovery status.

(ii)  In making the determination under this

paragraph, the secretary shall consider whether the

monthly financial reports submitted by the chief recovery

officer to the secretary and the department concerning

the school district's progress under the financial

recovery plan under section 653-A(a)(3) or 664-A(a)(3)

indicate that termination of financial recovery status is

appropriate.

(2)  If the secretary determines to terminate a school

district's financial recovery status under this section, the

secretary shall issue a written declaration stating:

(i)  That the school district's financial recovery

status has been terminated.

(ii)  The effective date of the termination of

financial recovery status.

(iii)  A statement of the facts upon which the

secretary relied in making the determination.

(b)  Determination upon petition by a school district.--A

financial recovery school district may petition the secretary

for a declaration that the school district's financial recovery

status has been terminated. A declaration issued under this

subsection shall comply with subsection (a).

Section 625-A.  Transition period.

(a)  Board resumes control and oversight.--Subject to the

provisions of subsections (b) and (c), after the secretary

terminates a school district's financial recovery status under

section 624-A, the following shall apply:

(1)  The board of school directors shall resume full

control over school district management.

(2)  The chief recovery officer and the department shall

oversee the board of school directors for five years to

ensure financial stability is maintained.

(b)  Petition for appointment of receiver.--If, during the

transition period after the secretary terminates a school

district's financial recovery status under section 624-A, the

board of school directors fails to maintain the objectives

stated in the financial recovery plan, the secretary shall

petition the court of common pleas in the county in which the

school district or the largest part in area of the school

district is located for the appointment of a receiver under

Subdivision (vi).

(c)  Oversight where municipalities financially distressed.--

Notwithstanding the provisions of subsection (a), the chief

recovery officer and the department shall oversee the board of

school directors of any former financial recovery school

district for so long as any political subdivision located within

the school district is a financially distressed municipality

under the act of July 10, 1987 (P.L.246, No.47), known as the

Municipalities Financial Recovery Act, without regard to whether

the school district continues to maintain the objectives stated

in its financial recovery plan. The oversight shall be subject

to the provisions of subsection (b).

Section 626-A.  Technical assistance.

Subject to sections 652-A(c)(2)(ii) and 663-A(c)(2)(ii), the

department shall provide technical assistance to each financial

recovery school district. The department's provision of

technical assistance shall be coordinated through the chief

recovery officer or receiver appointed to serve the financial

recovery school district.

(ii)  Chief Recovery Officer

Section 631-A.  Appointment.

(a)  Appointment.--Not later than five days after a

declaration of financial recovery status under section 621-A,

the secretary shall appoint a chief recovery officer for the

financial recovery school district. The chief recovery officer

shall serve at the pleasure of the secretary.

(b)  Qualifications and prohibitions.--

(1)  The chief recovery officer must be an individual who

satisfies one of the following:

(i)  possesses at least five years' experience in one

or more of the following areas: budget and financial

management, public school finance, school administration,

accounting, academic assessment or education law;

(ii)  holds a graduate degree from an accredited

institution of higher education in business or finance

and has at least four years' relevant experience in

business, finance or management; or

(iii)  is the current business manager or financial

officer of a school district in this Commonwealth.

(2)  The chief recovery officer may not be an elected or

an appointed official or employee of the financial recovery

school district for which he is appointed to serve as chief

recovery officer., provided that the current business manager

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or financial officer of a financial recovery school district

may serve as chief recovery officer for the financial

recovery school district by which he is employed.

(3)  During the term of appointment as chief recovery

officer and for the following two years, the chief recovery

officer may not seek or hold elected office in the financial

recovery school district for which the chief recovery officer

was appointed or in any political subdivision located in the

financial recovery school district.

(c)  Not subject to contractual competitive bidding

procedures.--Notwithstanding any other provision of law to the

contrary, the appointment of a chief recovery officer shall not

be subject to contractual competitive bidding procedures.

Section 632-A.  Compensation.

The department shall pay a chief recovery officer appointed

by the secretary under section 631-A actual and necessary

expenses incurred in the performance of duties as chief recovery

officer and a reasonable salary determined by the department.

Section 633-A.  Powers and duties.

Subject to section 662-A, the chief recovery officer shall:

(1)  With the assistance of the department, develop,

implement and administer a financial recovery plan in

accordance with Subdivision (iii).

(2)  Coordinate the department's provision of technical

assistance to the financial recovery school district under

section 626-A.

(3)  Maintain oversight of the financial recovery school

district during the transition period under section 625-A.

(4)  Attend regular and executive sessions of the board

of school directors.

(5)  When a receiver is appointed to oversee the

management of the financial recovery school district under

Subdivision (vi), serve as an advisor to the receiver.

(6)  Where an advisory committee is established under

section 654-A, meet at least monthly with the advisory

committee.

(7)  In a financial recovery school district to which

section 654-A does not apply, conduct at least four public

forums on the basis for the financial recovery declaration

and the development and implementation of a financial

recovery plan.

Section 634-A.  Access to information.

(a)  School district required to provide records and

information.--The chief recovery officer shall be given full

access to all records of the financial recovery school district.

Employees and elected and appointed officials of the financial

recovery school district shall provide the chief recovery

officer with all records and information requested.

(b)  Enforcement.--

(1)  If the chief recovery officer reasonably believes

that an employee or an elected or appointed official of the

financial recovery school district has failed to answer

questions accurately or completely or has failed to furnish

information requested, the chief recovery officer shall

direct the employee or elected or appointed official in

writing to furnish answers to questions or to furnish

documents or records, or both.

(2)  If the employee or elected or appointed official

refuses to furnish answers to questions or to furnish

documents or records within 15 days of a written request, the

chief recovery officer shall petition the court of common

pleas of the county in which the financial recovery school

district or the largest part in area of the financial

recovery school district is located for a writ of mandamus

requiring the employee or elected or appointed official to

provide the chief recovery officer with the information,

documents or records requested.

(3)  Within seven days of the filing of a petition under

paragraph (2), the court shall conduct a hearing on the

petition. The court shall grant the petition and compel the

employee or elected or appointed official to provide the

requested information unless the court finds by clear and

convincing evidence that the request for information is

arbitrary, capricious or wholly irrelevant to the duties of

the chief recovery officer.

Section 635-A.  Public and private meetings.

(a)  Public meetings authorized.--

(1)  The chief recovery officer may hold public meetings,

as defined in 65 Pa.C.S. Ch. 7 (relating to open meetings),

in connection with the preparation and implementation of a

financial recovery plan.

(2)  Meetings between the chief recovery officer and an

advisory committee established under section 654-A shall be

public meetings as defined in 65 Pa.C.S. Ch. 7.

(b)  Private meetings authorized.--Notwithstanding the

provisions of 65 Pa.C.S. Ch. 7, the chief recovery officer may

conduct private negotiation sessions between the financial

recovery school district and the individual creditors of the

financial recovery school district in an effort to obtain the

consent of each creditor to the proposed adjustment and handling

of specific claims against the financial recovery school

district.

(iii)  Financial Recovery Plan

Section 641-A.  Contents.

A financial recovery plan developed under this subarticle

shall:

(1)  Provide for the delivery of effective educational

services to all students enrolled in the financial recovery

school district.

(2)  Provide for the payment of lawful financial

obligations of the financial recovery school district.

(3)  Provide for the timely deposit of required payments

to the Public School Employees' Retirement Fund.

(4)  Provide a plan for the financial recovery school

district's return to financial stability, which may include

any of the following, if appropriate to restoring the

financial recovery school district's financial stability:

(i)  Recommendations for:

(A)  Satisfying judgments, past-due accounts

payable and past-due and payable payroll and fringe

benefits.

(B)  Eliminating deficits and deficit funds.

(C)  Restoring to special fund accounts money

from those accounts that was used for purposes other

than those specifically authorized.

(D)  Balancing the budget, avoiding future

deficits in funds and maintaining current payments of

payroll, fringe benefits and accounts through

possible revenue enhancement recommendations,

including tax or fee changes.

(E)  Avoiding a future declaration of financial

recovery status.

(F)  Enhancing the ability of the financial

recovery school district to negotiate new general

obligation bonds, lease rental debt, funded debt and

tax and revenue anticipation borrowings.

(G)  Considering changes in accounting and

automation procedures for the financial benefit of

the financial recovery school district.

(H)  Proposing a reduction of debt due on

specific claims by an amortized or lump-sum payment

considered to be the most reasonable disposition of

each claim possible for the financial recovery school

district considering the totality of the

circumstances.

(ii)  Recommendations for:

(A)  Changes in permanent and temporary staffing

levels.

(B)  Changes in organization.

(C)  Changes in school district policy.

(D)  Special audits or further studies.

(E)  The sale, lease, conveyance, assignment or

other use or disposition of the financial recovery

school district's assets.

(F)  The application for a loan under the

Financial Recovery Transitional Loan Program

established in Subdivision (vii) in an amount

specified by the chief recovery officer in the

financial recovery plan. The financial recovery plan

shall specify the current expenses of the school

district to which the loan proceeds would be applied.

(iii)  An analysis of whether functional

consolidation or privatization of existing

noninstructional or other school district services is

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appropriate and feasible and recommendations for carrying

out such consolidation or privatization, including

timelines for implementation and anticipated cost

efficiencies to be attained.

(iv)  A capital budget which addresses infrastructure

deficiencies.

(v)  Recommendations for greater use of Commonwealth

or intermediate unit programs.

(vi)  Recommendations for, and anticipated cost

savings resulting from, the use of powers permitted to be

used under section 642-A.

(5)  Set forth a cash flow analysis for the financial

recovery school district.

(6)  State projections of revenues and expenditures for

the current year and the next two years, both assuming the

continuation of present operations and as impacted by the

measures included in the financial recovery plan.

(7)  State benchmarks and timelines for restoring the

financial recovery school district to financial stability.

(8)  Require the financial recovery school district to

use financial data software that is connected directly to the

department's financial data systems to ensure that both the

financial recovery school district and the department are

using accurate and consistent data. All costs of the

financial data software required to be used by the financial

recovery school district under this paragraph shall be paid

by the department.

(9)  Establish specific criteria that the financial

recovery school district must satisfy before the secretary

may terminate the financial recovery school district's

financial recovery status under section 624-A. Such criteria

shall include, but shall not be limited to:

(i)  The financial recovery school district does not

request an advance of its basic education subsidy.

(ii)  All teacher and other employee salaries are

paid when due.

(iii)  The financial recovery school district is not

in default on any bonds, notes or lease rentals and is

not subject to withholding by the secretary under section

633.

(iv)  The financial recovery school district does not

satisfy the criteria stated in regulations promulgated

under section 621-A(a)(2).

(v)  The financial recovery school district is making

progress toward financial stability.

Section 642-A.  Powers and duties.

(a)  General rule.--A school district in financial recovery

status under this subdivision or in receivership under

Subdivision (vi) may exercise any of the following powers only

to the extent that the powers are specifically included in the

school district's financial recovery plan and the exercise of

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the powers will effect needed economies in the operation of the

district's schools:                                                                                    

(1)  Reopen its budget for the current school year,

notwithstanding any other provision of law.

(2)  Convert school buildings to charter schools. The

following shall apply:

(i)  The school district may convert an existing

public school building or a portion of an existing public

school building to a charter school, provided that

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conversion will result in financial savings. There shall

be no limit on the number of public schools in the school

district that can be converted to a charter school.

(ii)  The board of school directors may designate and