PRINTER'S NO.  2023

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

SENATE BILL

 

No.

1450

Session of

2012

  

  

INTRODUCED BY PICCOLA, PILEGGI, BROWNE, SMUCKER, MENSCH, WAUGH, ERICKSON, VANCE, RAFFERTY, EARLL, D. WHITE AND EICHELBERGER, MARCH 16, 2012

  

  

REFERRED TO EDUCATION, MARCH 16, 2012  

  

  

  

AN ACT

  

1

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

2

act relating to the public school system, including certain

3

provisions applicable as well to private and parochial

4

schools; amending, revising, consolidating and changing the

5

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

6

school directors, further providing for elementary schools;

7

in school finances, further providing for when district

8

distressed; repealing provisions relating to special board of

9

control, petition and appointments, to when no appointment is

10

made, and to compensation of special board of control;

11

further providing for powers of special board of control;

12

repealing provisions relating to additional tax and to school

13

directors to remain in office and elections; and adding

14

provisions relating to certain school district financial

15

recovery.

16

The General Assembly of the Commonwealth of Pennsylvania

17

hereby enacts as follows:

18

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

19

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

20

read:

21

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

22

directors in every school district shall establish, equip,

23

furnish, and maintain a sufficient number of elementary public

24

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

 


1

educate every person, residing in such district, between the

2

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

3

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

4

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

5

(1)  Operating a school building.

6

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

7

(3)  Contracting with any individual or entity authorized to

8

establish a charter school under section 1717-A(a) to operate a

9

charter school building.

10

(4)  Paying tuition for students residing in the school

11

district to attend school in another school district upon the

12

agreement of both school districts.

13

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

14

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

15

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

16

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

17

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

18

distressed when any one of the following circumstances shall

19

arise and the Secretary of Education, after proper investigation

20

of the district's financial condition, the administrative

21

practices of the board and such other matters deemed appropriate

22

by the Secretary of Education, has issued a certificate

23

declaring such district in financial distress:

24

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

25

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

26

(2)  The tuition due another school district remains unpaid

27

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

28

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

29

amount of the claim.

30

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

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1

a joint board agreement remains unpaid for a period of ninety

2

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

3

board's articles of agreement.

4

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

5

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

6

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

7

action has been initiated within that period of time to make

8

payment.

9

(5)  The school district has contracted any loan not

10

authorized by law.

11

(6)  The school district has accumulated and has operated

12

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

13

assessed valuation of the taxable real estate within the

14

district for two successive years.

15

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

16

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

17

merged or union school district was a distressed school district

18

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

19

district.

20

* * *

21

Section 3.  Section 692, amended December 9, 2002 (P.L.1472,

22

No.187), of the act is repealed:

23

[Section 692.  Special Board of Control; Petition;

24

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

25

as herein provided for, the Secretary of Education has declared

26

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

27

class or fourth class to be a distressed school district under

28

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

29

a person trained in public school administration, possessing the

30

certification prerequisites demanded of a district or assistant

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1

superintendent, or holding in the Department of Education the

2

rank of Deputy Secretary, shall petition the court of common

3

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

4

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

5

qualified electors and taxpayers in the county in which the

6

school district is located. School directors and employes of any

7

such school district shall be ineligible for appointment by the

8

court. The appointees, together with the designated

9

representative of the Secretary of Education, shall constitute a

10

special board of control and shall serve for terms of five

11

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

12

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

13

and convincing evidence of malfeasance or misfeasance in office

14

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

15

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

16

with a written statement of the reasons for removal and an

17

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

18

Subch. A (relating to practice and procedure of Commonwealth

19

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

20

Commonwealth agency action). Vacancies occurring because of

21

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

22

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

23

the manner in which that position was originally filled. A

24

member of the board shall hold office until a successor is

25

appointed and qualified. The special board of control shall

26

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

27

the place of the school directors during the period necessary to

28

reestablish a sound financial structure in the district. The

29

costs of the court proceedings shall be paid by the Department

30

of Education.]

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1

Section 3.1.  Section 692.1 of the act, amended January 14,

2

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

3

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

4

that the court of common pleas has made no appointment of

5

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

6

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

7

Superintendent of Public Instruction may designate the executive

8

director of the intermediate unit and a member of the

9

intermediate unit board of directors of the intermediate unit in

10

which the petition is presented to serve until the court makes

11

its appointments. A school director of the distressed school

12

district serving on the intermediate board of directors shall be

13

ineligible for appointment.]

14

Section 3.2.  Section 692.2 of the act, amended June 30, 1995

15

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

16

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

17

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

18

member other than the executive director of the intermediate

19

unit appointed on a temporary basis by the Superintendent of

20

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

21

each meeting of the regular board of school directors of the

22

distressed school district which they attend: Provided, however,

23

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

24

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

25

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

26

shall be charged to administrative services even though no

27

previous provision has been made in the budget of the school

28

district for such expenses.]

29

Section 4.  Section 693 of the act, added December 15, 1959

30

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

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1

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

2

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

3

special board of control assumes control of a distressed school

4

district, it shall have power and is hereby authorized to

5

exercise all the rights, powers, privileges, prerogatives and

6

duties imposed or conferred by law on the board of school

7

directors of the distressed district, and the board of school

8

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

9

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

10

of control shall have power to require the board of directors

11

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

12

purpose of effecting such economies as it deems necessary to

13

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

14

special board of control may require the board:

15

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

16

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

17

a party, if such cancellation or renegotiation of contract will

18

effect needed economies in the operation of the district's

19

schools.

20

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

21

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

22

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

23

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

24

Such special tax collector shall exercise all the rights and

25

perform all the duties imposed by law on tax collectors for

26

school districts. The superseded tax collector shall not be

27

entitled to any commissions on the taxes collected by the

28

special collector of delinquent taxes.

29

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

30

or to appoint a competent independent public accountant to audit

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1

the accounts of the distressed school districts.

2

(5)  To dispense with the services of such nonprofessional

3

employes as in his judgment are not actually needed for the

4

economical operation of the school system.

5

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

6

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

7

professional and temporary professional employes as may be

8

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

9

twenty-six pupils per teacher for the combined elementary and

10

secondary school enrollments.

11

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

12

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

13

or fourth class.

14

Section 5.  Section 694 of the act, added December 15, 1959

15

(P.L.1842, No.675), is repealed: 

16

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

17

distressed school district has been assumed by the special board

18

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

19

upon the recommendation and with the approval of the special

20

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

21

liquidate the indebtedness of the district: Provided, That when

22

such school directors fail to levy such additional taxes within

23

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

24

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

25

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

26

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

27

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

28

from office for neglect of duty subject to the provisions of

29

section 318 of this act. Notwithstanding present limitations on

30

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

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1

distressed school districts.]

2

Section 5.1.  Section 695 of the act, amended July 31, 1963

3

(P.L.407, Mo.215), is repealed:

4

[Section 695.  School Directors to Remain in Office;

5

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

6

not resign their offices, except with the unanimous consent of

7

the special board of control and shall continue in office,

8

unless removed from office for neglect of duty under the

9

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

10

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

11

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

12

to another position not compatible with the position of school

13

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

14

requirement that said appointee shall hold no elective office,

15

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

16

operated by the special board of control and shall perform any

17

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

18

distressed school district by the special board of control shall

19

in no way interfere with the regular election or reelection of

20

school directors for the district.]

21

Section 6.  The act is amended by adding an article to read:

22

ARTICLE VI-A

23

SCHOOL DISTRICT FINANCIAL RECOVERY

24

(a)  Preliminary Provisions

25

Section 601-A.  Scope of article.

26

This article provides for financial recovery in certain

27

school districts.

28

Section 602-A.  Definitions.

29

The following words and phrases when used in this article

30

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

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1

context clearly indicates otherwise:

2

"Advisory committee."  The advisory committee established by

3

a board of school directors under section 661-A.

4

"Chief recovery officer."  The chief recovery officer

5

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

6

"Claim."  A right to:

7

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

8

judgment, liquidated, unliquidated, fixed, contingent,

9

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

10

secured or unsecured; or

11

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

12

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

13

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

14

contingent, matured, unmatured, disputed, undisputed, secured

15

or unsecured.

16

"Commonwealth agency."  The Governor and any department,

17

board, commission, authority and other officer and agency of the

18

Commonwealth, whether or not subject to the policy supervision

19

and control of the Governor.

20

"Creditor."  An individual, partnership, corporation,

21

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

22

against a school district. The term shall include the Public

23

School Employees' Retirement Board.

24

"Deficit." The excess of expenditures over revenues,

25

calculated as a percentage of revenue, during an accounting

26

period, and which calculation includes all governmental fund

27

types and all proprietary fund types, but excludes all fiduciary

28

fund types of the school district.

29

"Department."  The Department of Education of the

30

Commonwealth.

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1

"Employee organization."  A public school employee

2

organization as defined in section 1101-A.

3

"Expenditures."  Reductions in fund equity, including current

4

operating expenses that require the use of fund equity, debt

5

service and capital outlays. The term shall not include

6

interfund transfers.

7

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

8

plan under subarticle (c).

9

"Financial recovery school district."  A school district of

10

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

11

declared by the Secretary of Education to be in financial

12

recovery status under section 621-A.

13

"Financial recovery school district revolving loan fund."

14

The fund for loans awarded under subdivision (vi) of subarticle

15

(c).

16

"Financial recovery team."  The team of individuals employed

17

or contracted to staff the Office of Financial Recovery under

18

section 611-A(b)(2).

19

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

20

liabilities.

21

"Matured claim."  A claim that has been reduced to judgment

22

or liquidated in amount by agreement for a period of 90 days

23

prior to the earlier of a declaration of financial recovery

24

status under this article or the filing of a petition for a

25

declaration of financial recovery status under this article.

26

"Office."  The Office of Financial Recovery established in

27

section 611-A(a).

28

"Receiver."  The receiver of a financial recovery school

29

district appointed under subdivision (iv) of subarticle (c).

30

"Revenues."  Additions to fund equity other than from

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1

interfund transfers, proceeds of debt and proceeds of

2

disposition of general fixed assets.

3

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

4

second class, third class and fourth class and a financial

5

recovery school district. The term does not include a school

6

district of the first class.

7

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

8

(b)  Administrative Provisions

9

Section 611-A.  Office of Financial Recovery.

10

(a)  Establishment.-–The Office of Financial Recovery is

11

established in the department. There shall be a director of the

12

office who shall report directly to the secretary.

13

(b)  Office space and staffing.--

14

(1)  The department shall provide office space and

15

administrative staffing as necessary to carry out the powers

16

and duties of the office.

17

(2)  (i)  In addition to the administrative staff

18

provided by the department under paragraph (1), the

19

office shall be staffed by a financial recovery team

20

consisting of individuals who:

21

(A)  possess at least five years' experience in

22

one or more of the following areas: budget and

23

financial management; public school finance; school

24

administration; accounting; academic assessment; or

25

education law; or

26

(B)  hold a graduate degree from an accredited

27

institution of higher education in business or

28

finance and have at least four years' relevant

29

experience in business, finance or management.

30

(ii)  The department may employ personnel or contract

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1

for consulting services as may be necessary to form the

2

financial recovery team.

3

(c)  Powers and duties.--The office shall have the following

4

powers and duties:

5

(1)  Compile financial data and maintain accurate and

6

current information and data on the financial conditions of

7

school districts. Each school district shall provide its

8

financial data and information to the office upon request.

9

(2)  Regularly analyze and assess school district budget

10

reports, data and other information directly related to the

11

financial conditions of school districts and determine if

12

individual school districts have satisfied the criteria for

13

financial recovery status under section 621-A(a).

14

(3)  Develop an early warning system pursuant to section

15

613-A to identify financial difficulties in a school district

16

before the school district satisfies the criteria for

17

financial recovery status under section 621-A(a).

18

(4)  Undertake a review process, including, but not

19

limited to, consultation, correspondence and visits with a

20

school district which appears to satisfy the criteria for

21

financial recovery status under section 621-A(a).

22

(5)  Upon an indication that a school district may

23

satisfy the criteria for financial recovery status under

24

section 621-A(a), provide each Commonwealth agency with

25

written notice that the school district may satisfy the

26

criteria and request that the Commonwealth agency provide the

27

office with data, reports and information to assist the

28

office in confirming that the criteria for financial recovery

29

status under section 621-A(a) have been satisfied. The office

30

shall furnish all information received from any Commonwealth

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1

agency pursuant to section 612-A to the chief recovery

2

officer appointed under section 631-A for possible inclusion

3

of such information into the financial recovery plan for the

4

school district.

5

(6)  Assist a school district to correct minor financial

6

problems in order for the school district not to be declared

7

in financial recovery status.

8

(7)  If the office determines that a school district

9

satisfies the criteria for financial recovery status under

10

section 621-A(a), file a petition with the secretary pursuant

11

to section 622-A(a)(1) requesting that the school district be

12

declared to be in financial recovery status.

13

(8)  Consult with the chief recovery officer appointed

14

for a financial recovery school district under section 631-A

15

and provide technical assistance upon the request of the

16

chief recovery officer.

17

Section 612-A.  Commonwealth agencies.

18

(a)  Review programs.--Upon notification by the office

19

pursuant to section 611-A(c)(5) that a school district may

20

satisfy the criteria for financial recovery status under section

21

621-A(a), each Commonwealth agency shall review all matters and

22

programs pending, underway or about to be commenced or possible

23

programs concerning the school district. The Commonwealth agency

24

shall report to the office any recommended action which is

25

within the authority and budget of the Commonwealth agency and,

26

in the judgment of the head of the agency, will help to improve

27

the school district's financial situation.

28

(b)  Transfer documented information.--Within 30 days of a

29

request from the office under section 611-A(c)(5), each

30

Commonwealth agency shall forward to the office all documented

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1

reports, data and other information requested by the office.

2

(c)  Notify agencies of determination.--When a school

3

district is declared to be in financial recovery status under

4

section 621-A, the secretary shall immediately notify the heads

5

of all Commonwealth agencies of the declaration.

6

Section 613-A.  Early warning system.

7

(a)  Establishment.--

8

(1)  The office shall develop and implement an early

9

warning system utilizing appropriate fiscal and socioeconomic

10

variables to:

11

(i)  Identify financial difficulties in school

12

districts before a school district satisfies the criteria

13

for financial recovery status under section 621-A(a).

14

(ii)  Notify an affected school district

15

appropriately.

16

(iii)  Offer technical assistance to school districts

17

that are experiencing financial difficulties, but do not

18

satisfy the criteria for a declaration of financial

19

recovery status under section 621-A(a).

20

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

21

economic variables to be used in identifying school

22

districts that experience financial difficulties, shall

23

test the validity and reliability of the variables and

24

shall continuously monitor the variables to assure their

25

effectiveness.

26

(ii)  The variables developed by the office under

27

this paragraph shall include, but shall not be limited

28

to, whether any political subdivision located within the

29

school district is a financially distressed municipality

30

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

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1

the Municipalities Financial Recovery Act.

2

(3)  In developing an early warning system under this

3

section, the office may employ or contract with fiscal

4

consultants as deemed necessary to administer the provisions

5

of this section.

6

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

7

the early warning system as experiencing financial difficulties,

8

the office shall:

9

(1)  Notify the school district that the office has

10

identified the school district as experiencing financial

11

difficulties.

12

(2)  Request from the school district all information

13

necessary to enable the office to conduct a review of the

14

school district's financial condition. A school district that

15

receives a request for information under this paragraph shall

16

provide the office with all information requested within 15

17

days of the request.

18

(3)  Provide notice and a request for information to

19

Commonwealth agencies pursuant to section 611-A(c)(5).

20

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

21

financial condition, which shall include a review of the

22

information provided by the school district under paragraph

23

(2) and from Commonwealth agencies under section 612-A and

24

which may include visits and correspondence with school

25

district officers and employees.

26

(5)  Provide the school district with technical

27

assistance appropriate to remedying the school district's

28

financial difficulties, which may include, but shall not be

29

limited to, contracting with financial consultants to assist

30

the school district.

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1

(6)  Petition the secretary to declare the school

2

district in financial recovery status if the review conducted

3

by the office indicates that the criteria for a declaration

4

of financial recovery status under section 621-A(a) have been

5

satisfied.

6

(7)  Recommend to the secretary that the school district

7

receive a loan under subarticle (d) or other financial

8

assistance.

9

(c)  Guidelines.--

10

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

11

section, the department shall establish guidelines for the

12

operation of the early warning system established under this

13

section, including a description of the variables that will

14

be used by the office to identify school districts that

15

experience financial difficulties. The guidelines shall be

16

published as a statement of policy in the Pennsylvania

17

Bulletin and shall be posted on the department's publicly

18

accessible Internet website.

19

(2)  Notwithstanding any other provision of law to the

20

contrary, guidelines required under this subsection shall not

21

be subject to review, regulation or approval by the State

22

Board of Education.

23

(3)  The guidelines established by the department, and

24

any amendments thereto, shall be exempt from the requirements

25

of the following:

26

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

27

known as the Regulatory Review Act.

28

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

29

referred to as the Commonwealth Documents Law.

30

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

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1

known as the Commonwealth Attorneys Act.

2

(4)  The early warning system may not become operational

3

until publication of the guidelines as required under

4

paragraph (1).

5

(c)  School District Financial Recovery

6

(i)  Declaration of School District

7

Financial Recovery Status

8

Section 621-A.  Issuance of declaration.

9

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

10

and (c) and after proper investigation of the school district's

11

financial condition, the administrative practices of the board

12

of school directors and such other matters deemed appropriate by

13

the secretary, the following shall apply:

14

(1)  The secretary shall issue a declaration that a

15

school district is in financial recovery status upon the

16

occurrence of any one or more of the following circumstances

17

within the previous three years:

18

(i)  The school district requests an advance of its

19

basic education funding subsidy at any time.

20

(ii)  The salaries of any teachers or other employees

21

of the school district are unpaid when due.

22

(iii)  The school district has defaulted in payment

23

of its bonds or interest on such bonds or in payment of

24

lease rentals.

25

(2)  The secretary may issue a declaration that a school

26

district is in financial recovery status upon the occurrence

27

of any of the following circumstances within the previous

28

three years:

29

(i)  The school district's assigned and unassigned

30

total fund balance is less than zero in the school

- 17 -

 


1

district's general fund.

2

(ii)  The school district's assigned and unassigned

3

fund balance in the school district's general fund as a

4

percentage of total expenditures is less than 3%.

5

(iii)  The school district experiences a delinquent

6

tax rate of more than 10%.

7

(iv)  The assessed valuation of taxable real estate

8

in the school district has not increased over the

9

previous five years.

10

(v)  The tuition due another school district remains

11

unpaid on and after January 1 of the year following the

12

school year in which it was due and there is no dispute

13

regarding the validity or amount of the claim.

14

(vi)  Any amount due a joint board of school

15

directors under a joint board agreement remains unpaid

16

beyond the due date specified in the joint board's

17

articles of agreement.

18

(vii)  The school district has contracted a loan not

19

authorized by law.

20

(viii)  The school district has accumulated and

21

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

22

assessed valuation of the taxable real estate within the

23

school district for two successive years.

24

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

25

formed and one or more of the former school districts

26

which compose the merged or union school district was a

27

distressed school district under section 691 or a

28

financial recovery school district under this article at

29

the time of the formation of the new, merged or union

30

school district.

- 18 -

 


1

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

2

district shall be declared in financial recovery status by

3

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

4

caused by the failure of the Commonwealth to make any payment of

5

money due the school district at the time the payment is due,

6

including payment of any Federal funding that is distributed

7

through the Commonwealth.

8

(c)  Declaration by action of secretary or by petition.--

9

Where a school district satisfies the criteria for a declaration

10

of financial recovery status under subsection (a), the secretary

11

may make the declaration by the secretary's own action or

12

following the receipt of a petition under section 622-A.

13

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

14

the secretary under this section is appealable pursuant to 2

15

Pa.C.S. (relating to administrative law and procedure).

16

Section 622-A.  Petition.

17

(a)  Standing.--Any of the following parties may petition the

18

secretary to declare a school district in financial recovery

19

status:

20

(1)  The office itself, if, following its review and

21

analysis under section 611-A(c) or 613-A, it concludes that

22

the school district satisfies the criteria enumerated in

23

section 621-A(a) for a declaration of financial recovery

24

status.

25

(2)  The board of school directors, upon adoption of a

26

resolution by a majority vote at a public meeting duly

27

advertised as required by law.

28

(3)  A creditor with a matured claim to whom the school

29

district owes at least $10,000, if the creditor agrees in

30

writing to suspend pending actions and not to bring an

- 19 -

 


1

alternate or additional legal action against the school

2

district to collect the debt or part of it:

3

(i)  for a period of nine months; or

4

(ii)  until the school district adopts a financial

5

recovery plan under this act,

6

whichever occurs first.

7

(4)  At least 10% of the number of electors of the school

8

district who voted at the last school district election.

9

(5)  At least 10% of the school district's pension

10

beneficiaries, if the school district has not timely

11

deposited its minimum obligation payment.

12

(6)  The Public School Employees' Retirement Board, if

13

the school district has not timely deposited its minimum

14

obligation payment.

15

(7)  At least 10% of the employees of the school district

16

who have not been paid due to a missed payroll.

17

(8)  A trustee or paying agent of a school district bond

18

or note indenture or resolution.

19

(9)  Any of the appointed independent auditors or

20

controllers of the school district, if they have reason to

21

believe the school district satisfies the criteria in section

22

621-A(a) for a declaration of financial recovery status.

23

(10)  The superintendent of the school district.

24

(b)  Contents of petition.--The petition shall be signed by

25

the petitioning party and shall:

26

(1)  Allege the petitioning party has standing to

27

petition the secretary for a declaration of financial

28

recovery status under section 622-A(a).

29

(2)  State why the petitioning party believes the school

30

district should be declared to be in financial recovery

- 20 -

 


1

status under the criteria set forth in section 621-A(a).

2

(3)  Include any other material allegation that justifies

3

a declaration of financial recovery status.

4

(4)  Include documentation that supports the allegations

5

in the petition.

6

Section 623-A.  Commitment to ensure delivery of effective

7

educational services.

8

The Commonwealth shall ensure the delivery of effective

9

educational services to all students enrolled in a school

10

district in financial recovery status under subdivision (i) or

11

in receivership under subdivision (iv).

12

Section 624-A.  School directors to remain in office and

13

elections.

14

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

15

school district that has been declared in financial recovery

16

status under this subdivision or is in receivership under

17

subdivision (iv) may not resign their offices, except with the

18

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

19

(1)  Remain in office, unless:

20

(i)  removed from office for neglect of duty under

21

the provisions of section 318; or

22

(ii)  the directors are elected to another position

23

incompatible with the position of school director or are

24

appointed to any position for which there is a

25

requirement that the appointee must hold no elective

26

office,

27

for the remainder of their terms during the time the school

28

district is in financial recovery status or receivership.

29

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

30

recovery officer or the receiver appointed to serve the

- 21 -

 


1

school district.

2

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

3

chief recovery officer or the receiver if the directive is

4

consistent with the financial recovery plan for the school

5

district.

6

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

7

secretary that a school district is in financial recovery status

8

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

9

subdivision (iv) shall in no way interfere with the regular

10

election or reelection of school directors for the school

11

district.

12

(ii)  Chief Recovery Officer

13

Section 631-A.  Appointment.

14

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

15

declaration of financial recovery status under section 621-A,

16

the secretary shall appoint a chief recovery officer for the

17

financial recovery school district. The chief recovery officer

18

shall serve at the pleasure of the secretary.

19

(b)  Qualifications and prohibitions.--

20

(1)  The chief recovery officer must be:

21

(i)  a member of the financial recovery team; or

22

(ii)  the current business manager or financial

23

officer of a school district in this Commonwealth.

24

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

25

an appointed official or employee of the financial recovery

26

school district for which he is appointed to serve as chief

27

recovery officer.

28

(3)  During the term of appointment as chief recovery

29

officer and for the following two years, the chief recovery

30

officer may not seek or hold elected office in the financial

- 22 -

 


1

recovery school district for which the chief recovery officer

2

was appointed or in any political subdivision located in the

3

financial recovery school district.

4

(c)  Not subject to contractual competitive bidding

5

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

6

contrary, the appointment of a chief recovery officer shall not

7

be subject to contractual competitive bidding procedures.

8

Section 632-A.  Compensation.

9

The department shall pay a chief recovery officer appointed

10

by the secretary under section 631-A actual and necessary

11

expenses incurred in the performance of duties as chief recovery

12

officer and a reasonable salary determined by the department.

13

Section 633-A.  Powers and duties.--

14

The chief recovery officer shall:

15

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

16

implement and administer a financial recovery plan in

17

accordance with subdivision (iii).

18

(2)  Maintain oversight of the financial recovery school

19

district during the transition period under section 647-A.

20

(3)  Attend regular and executive sessions of the board

21

of school directors.

22

(4)  Meet at least twice monthly with the advisory

23

committee established under section 661-A.

24

(5)  When a receiver is appointed to oversee the

25

management of the financial recovery school district under

26

subdivision (iv), serve as an advisor to the receiver.

27

Section 634-A.  Access to information.

28

(a)  School district required to provide records and

29

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

30

access to all records of the financial recovery school district.

- 23 -

 


1

Employees and elected and appointed officials of the financial

2

recovery school district shall provide the chief recovery

3

officer with all records and information requested by the chief

4

recovery officer.

5

(b)  Enforcement.--

6

(1)  If the chief recovery officer reasonably believes

7

that an employee or an elected or appointed official of the

8

financial recovery school district has failed to answer

9

questions accurately or completely or has failed to furnish

10

information requested, the chief recovery officer shall

11

direct the employee or elected or appointed official in

12

writing to furnish answers to questions or to furnish

13

documents or records, or both.

14

(2)  If the employee or elected or appointed official

15

refuses to furnish answers to questions or to furnish

16

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

17

chief recovery officer shall petition the court of common

18

pleas of the county in which the financial recovery school

19

district or the largest part in area of the financial

20

recovery school district is located for a writ of mandamus

21

requiring the employee or elected or appointed official to

22

provide the chief recovery officer with the information,

23

documents or records requested.

24

Section 635-A.  Public and private meetings.

25

(a)  Public meetings authorized.--

26

(1)  The chief recovery officer may hold public meetings

27

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

28

in connection with the preparation and implementation of a

29

financial recovery plan.

30

(2)  Meetings between the chief recovery officer and the

- 24 -

 


1

advisory committee shall be public meetings as defined in 65

2

Pa.C.S. Ch. 7.

3

(b)  Private meetings authorized.--Notwithstanding the

4

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

5

conduct private negotiation sessions between the financial

6

recovery school district and the individual creditors of the

7

financial recovery school district in an effort to obtain the

8

consent of each creditor to the proposed adjustment and handling

9

of specific claims against the financial recovery school

10

district.

11

(iii)  Financial Recovery Plan

12

Section 641-A.  Contents.

13

A financial recovery plan developed by a chief recovery

14

officer under section 633-A(1) shall:

15

(1)  Provide for the delivery of effective educational

16

services to all students enrolled in the financial recovery

17

school district.

18

(2)  Provide for the payment of lawful financial

19

obligations of the financial recovery school district.

20

(3)  Provide for the timely deposit of required payments

21

to the Public School Employees' Retirement Fund.

22

(4)  Provide a plan for the financial recovery school

23

district's return to financial stability, which may include

24

any of the following, if appropriate to restoring the

25

financial recovery school district's financial stability:

26

(i)  Projections of revenues and expenditures for the

27

current year and the next two years, both assuming the

28

continuation of present operations and as impacted by the

29

measures included in the financial recovery plan.

30

(ii)  Recommendations for:

- 25 -

 


1

(A)  Satisfying judgments, past-due accounts

2

payable and past-due and payable payroll and fringe

3

benefits.

4

(B)  Eliminating deficits and deficit funds.

5

(C)  Restoring to special fund accounts money

6

from those accounts that was used for purposes other

7

than those specifically authorized.

8

(D)  Balancing the budget, avoiding future

9

deficits in funds and maintaining current payments of

10

payroll, fringe benefits and accounts through

11

possible revenue enhancement recommendations,

12

including tax or fee changes.

13

(E)  Avoiding a future declaration of financial

14

recovery status.

15

(F)  Enhancing the ability of the financial

16

recovery school district to negotiate new general

17

obligation bonds, lease rental debt, funded debt and

18

tax and revenue anticipation borrowings.

19

(G)  Considering changes in accounting and

20

automation procedures for the financial benefit of

21

the financial recovery school district.

22

(H)  Proposing a reduction of debt due on

23

specific claims by an amortized or lump-sum payment

24

considered to be the most reasonable disposition of

25

each claim possible for the financial recovery school

26

district considering the totality of the

27

circumstances.

28

(iii)  Recommendations for:

29

(A)  Changes in collective bargaining agreements

30

and other contracts.

- 26 -

 


1

(B)  Changes in permanent and temporary staffing

2

levels.

3

(C)  Changes in organization.

4

(D)  Changes in school district policy.

5

(E)  Special audits or further studies.

6

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

7

other use or disposition of the financial recovery

8

school district's assets.

9

(G)  The application for a loan under the

10

Financial Recovery Loan Program established in

11

subarticle (d).

12

(iv)  An analysis of whether functional consolidation

13

or privatization of existing school district services is

14

appropriate and feasible and recommendations for carrying

15

out such consolidation or privatization.

16

(v)  A capital budget which addresses infrastructure

17

deficiencies.

18

(vi)  Recommendations for greater use of Commonwealth

19

programs.

20

(vii)  Recommendations for the use of powers

21

permitted to be used under section 642-A.

22

(5)  Require the financial recovery school district to

23

use financial data software that is connected directly to the

24

department's financial data systems to ensure that both the

25

financial recovery school district and the department are

26

using accurate data. All costs of the financial data software

27

required to be used by the financial recovery school district

28

under this paragraph shall be paid by the department.

29

(6)  Establish specific criteria that the financial

30

recovery school district must satisfy before the secretary

- 27 -

 


1

may terminate the financial recovery school district's

2

financial recovery status. Such criteria shall include, but

3

shall not be limited to:

4

(i)  The financial recovery school district does not

5

request an advance of its basic education subsidy.

6

(ii)  The financial recovery school district's

7

assigned and unassigned fund balance in the General Fund

8

as a percentage of total expenditures is at least 3%.

9

(iii)  The financial recovery school district reduces

10

its delinquent tax rate to not more than 10%.

11

(iv)  All employee salaries, tuition due other school

12

districts and amounts payable to a joint board of school

13

directors under a joint board agreement are paid when

14

due.

15

(v)  The financial recovery school district is not in

16

default on any bonds, notes or lease rentals.

17

(vi)  The financial recovery school district has not

18

contracted any new loans not authorized by law.

19

(vii)  Accrued deficits have been eliminated.

20

(viii)  Obligations issued to finance all or part of

21

the financial recovery school district's deficits have

22

been retired.

23

(ix)  The financial recovery school district has

24

operated under a positive current operating fund balance

25

or equity for a period of at least two years.

26

Section 642-A.  Powers and duties.

27

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

28

status under this subdivision or in receivership under

29

subdivision (iv) may exercise any of the following powers only

30

to the extent that the powers are specifically included in the

- 28 -

 


1

school district's financial recovery plan:                                                                                    

2

(1)  Suspend professional employees. The following shall

3

apply:

4

(i)  Notwithstanding sections 1124 and 1125.1, the

5

board of school directors of the school district may

6

suspend the necessary number of professional employees

7

for any of the causes enumerated in section 1124 or for

8

economic reasons, as part of a plan to reduce or control

9

school district costs.

10

(ii)  Professional employees suspended under the

11

authority granted by this section shall be suspended

12

based upon the school district's evaluation of the

13

following factors:

14

(A)  The professional employee's certification.

15

(B)  The professional employee's performance,

16

including, but not limited to, performance under the

17

Pennsylvania Value Added Assessment System and local

18

school entity performance criteria.

19

(C)  For a professional employee who teaches

20

subjects or grade levels that are not evaluated under

21

the Pennsylvania Value Added Assessment System,

22

whether the professional employee meets

23

qualifications established by the school district to

24

teach a particular subject or grade level.

25

(D)  Specific qualifications established by the

26

school district.

27

(iii)  A school district that suspends professional

28

employees under the authority granted by this section may

29

reinstate suspended professional employees at its

30

discretion, notwithstanding seniority.

- 29 -

 


1

(iv)  No suspended employee shall be prevented from

2

engaging in another occupation during the period of

3

suspension.

4

(2)  Convert school buildings to charter schools. The

5

following shall apply:

6

(i)  The school district may convert an existing

7

public school building or a portion of an existing public

8

school building to a charter school. There shall be no

9

limit on the number of public schools in the school

10

district that can be converted to a charter school.

11

(ii)  The board of school directors may designate and

12

approve by majority vote the existing public school

13

building or portion of an existing public school building

14

that it seeks to convert to a charter school.

15

(iii)  (A)  The board of school directors shall

16

solicit applications to operate a charter school

17

established under this paragraph through a

18

competitive request for proposal process. The content

19

and dissemination of the request for proposal shall

20

be consistent with the purpose and the requirements

21

of Article XVII-A. The board of school directors may

22

accept applications by an individual or entity

23

authorized to establish a charter school under

24

section 1717-A(a) to operate the converted charter

25

school.

26

(B)  The board of school directors shall evaluate

27

each submitted proposal in a public manner. Once a

28

proposal has been selected, the board of school

29

directors shall explain how and why the proposal was

30

selected and provide evidence, if available, of the

- 30 -

 


1

provider's success in serving student populations

2

similar to the targeted population, including

3

demonstrated academic achievement and successful

4

management of nonacademic school functions, if

5

applicable.

6

(C)  No member of the board of school directors

7

may serve on the board of trustees of an existing

8

school or portion of an existing school which is

9

converted to a charter school under this subsection.

10

(D)  The provisions of Article XVII-A shall apply

11

to an existing public school building or portion of

12

an existing public school building converted to a

13

charter school, provided that any application to

14

operate a charter school under the provisions of this

15

section and any charter school established under the

16

provisions of this section shall not be subject to

17

sections 1717-A(b), (c), (d), (e), (f), (g), (h) and

18

(i) and 1724-A, including after the school district's

19

financial recovery status is terminated under section

20

646-A or after the school district's receivership

21

expires under section 655-A.

22

(E)  In the case of an existing school or portion

23

of an existing school being converted to a charter

24

school, the board of school directors shall establish

25

the alternative arrangements for current students who

26

choose not to attend the charter school.

27

(3)  Cancel or renegotiate any contract to which the

28

board of school directors or the school district is a party,

29

if the cancellation or renegotiation of contract will affect

30

needed economies in the operation of the district's schools.

- 31 -

 


1

(4)  Increase tax levies in such amounts and at such

2

times as is recommended by the chief recovery officer.

3

Notwithstanding the provisions of the act of June 27, 2006

4

(1st Sp.Sess., P.L.1873, No.1), known as the Taxpayer Relief

5

Act, the board of school directors of the school district may

6

increase the rate of taxes by up to three times the index, as

7

such term is defined in section 302 of the Taxpayer Relief

8

Act, without obtaining the approval of the electorate of the

9

school district in a public referendum.

10

(5)  Appoint a special collector of delinquent taxes for

11

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

12

district. The special tax collector shall exercise all the

13

rights and perform all the duties imposed by law on tax

14

collectors for school districts. The tax collector superseded

15

by the special tax collector shall not be entitled to any

16

commissions on the taxes collected by the special tax

17

collector.

18

(6)  Dispense with the services of such nonprofessional

19

employees as in the judgment of the chief recovery officer

20

and the board of school directors are not actually needed for

21

the economical operation of the school district.

22

(7)  Appoint such persons and other entities as needed to

23

conduct fiscal and performance audits and other necessary

24

analyses.

25

(8)  Enter into agreements with persons or for-profit or

26

nonprofit organizations to operate one or more schools. A

27

school operated under this paragraph shall be funded in

28

accordance with the terms of the agreement.

29

(9)  Suspend or revoke a charter pursuant to section

30

1729-A.

- 32 -

 


1

(10)  Suspend the requirements of this act and

2

regulations of the State Board of Education, except that the

3

school district shall remain subject to the provisions of

4

section 1732-A(a), (b) and (c) and regulations promulgated

5

under those sections.

6

(11)  Employ professional and senior management employees

7

who do not hold State certifications if the secretary has

8

approved the qualifications of the persons at salaries

9

established by the board of school directors that are within

10

the limitations stated in the financial recovery plan.

11

(12)  Enter into agreements with persons or for-profit or

12

nonprofit organizations providing educational or other

13

services to or for the school district. Services provided

14

under this paragraph shall be funded in accordance with the

15

terms of the agreement.

16

(13)  Close or reconstitute a school, including the

17

reassignment, suspension or dismissal of professional

18

employees.

19

(14)  Appoint managers, administrators or for-profit or

20

nonprofit organizations to oversee the operations of a school

21

or group of schools within the school district.

22

(15)  Reallocate resources, amend school procedures,

23

develop achievement plans and implement testing or other

24

evaluation procedures for educational purposes.

25

(16)  Supervise and direct principals, teachers and

26

administrators.

27

(17)  Negotiate a new collective bargaining agreement or

28

memoranda of understanding under the collective bargaining

29

agreement in existence on the effective date of this section,

30

provided that:

- 33 -

 


1

(i)  Collective bargaining between employees and the

2

school district shall be conducted in accordance with

3

this subsection.

4

(ii)  No school district in financial recovery status

5

under this subdivision or in receivership under

6

subdivision (iv) shall be required to engage in

7

collective bargaining negotiations or enter into

8

memoranda of understanding or other agreements regarding

9

any of the following issues:

10

(A)  Contracts with third parties for the

11

provision of goods or services, including educational

12

services or the potential impact of such contracts on

13

employees.

14

(B)  Decisions related to reductions in force.

15

(C)  Staffing patterns and assignments, class

16

schedules, academic calendar, places of instruction,

17

pupil assessment and teacher preparation time.

18

(D)  The use, continuation or expansion of

19

programs designated by the chief recovery officer or

20

board of directors as pilot or experimental programs.

21

(E)  The approval or designation of a school as a

22

charter or magnet school.

23

(F)  The use of technology to provide

24

instructional or other services.

25

(iii)  A collective bargaining agreement for

26

professional employees entered into after the expiration

27

or termination of the collective bargaining agreement in

28

effect on the date of the declaration of financial

29

recovery status shall provide for the following:

30

(A)  The school day for professional employees

- 34 -

 


1

shall be equal to or exceed the State average as

2

determined by the department. An extension of the

3

school day resulting from this requirement shall be

4

used exclusively for instructional time for students.

5

(B)  The number of instructional days shall be

6

equal to or exceed the State average number of

7

instructional days.

8

(C)  The board of directors shall not increase

9

compensation for employees solely to fulfill the

10

requirements under clauses (A) and (B).

11

(iv)  A provision in any contract in effect on the

12

date of the declaration of financial recovery status

13

under this article that is in conflict with this section

14

shall be discontinued in any new or renewed contract.

15

(v)  If, upon the termination of a collective

16

bargaining agreement in effect on the date of the

17

declaration of financial recovery status under this

18

article, a new collective bargaining agreement has not

19

been ratified, the board of school directors shall

20

establish a personnel salary schedule, subject to the

21

approval of the chief recovery officer, to be used until

22

a new agreement is ratified.

23

(vi)  During the time the school district is in

24

financial recovery status or in receivership under

25

subdivision (iv), all school employees shall be

26

prohibited from engaging in any strike as defined in

27

Article XI-A and section 301 of the act of July 23, 1970

28

(P.L.563, No.195), known as the Public Employe Relations

29

Act. The secretary may suspend the certificate of an

30

employee who violates this subparagraph.

- 35 -

 


1

(18) Delegate to a person, including an employee of the

2

school district or a for-profit or nonprofit organization,

3

powers the chief recovery officer and the board of school

4

directors deem necessary to carry out the purposes of this

5

article, subject to the supervision and direction of the

6

board of school directors.

7

(19)  Employ, contract with or assign persons or for-

8

profit or nonprofit organizations to review the financial and

9

educational programs of school buildings and make

10

recommendations to the chief recovery officer and the board

11

of school directors regarding improvements to the financial

12

or educational programs of school buildings.

13

(b)  Definitions.--As used in this section, the following

14

words and phrases shall have the meanings given to them in this

15

subsection unless the context clearly indicates otherwise:

16

"Professional employee."  The term shall have the meaning as

17

given in section 1101(1).

18

"Teacher."  An individual who holds an instructional

19

certificate issued by the Department of Education under this act

20

and is employed full time as a temporary professional or

21

professional employee by a school entity and provides learning

22

experiences directly to students during the instructional day.

23

Section 643-A.  Development and approval of plan.

24

(a)  Submission of plan.--

25

(1)  Within 90 days of appointment, the chief recovery

26

officer shall develop a financial recovery plan that complies

27

with section 641-A and provide copies of the plan to the

28

school district business office, each member of the board of

29

school directors, the superintendent of the school district,

30

the solicitor of the school district, each member of the

- 36 -

 


1

advisory committee and all parties who petitioned the

2

secretary for a declaration of financial recovery status. The

3

chief recovery officer may comply with this subsection by

4

providing copies of the plan by electronic mail.

5

(2)  (i)  The chief recovery officer may request from the

6

secretary an extension of time to comply with paragraph

7

(1).

8

(ii)  The secretary shall grant the request for an

9

extension of time, if the secretary determines that the

10

chief recovery officer needs additional time to develop a

11

financial recovery plan that complies with section 641-A.

12

(b)  Public inspection.--Upon receipt of the plan, the board

13

of school directors shall immediately place the plan on file for

14

public inspection in the school district business office and

15

make the plan available on the school district's publicly

16

accessible Internet website.

17

(c)  Board of school directors' approval.--

18

(1)  Within 30 days of the chief recovery officer's

19

submission of the plan to the board of school directors, the

20

board of school directors shall approve or disapprove the

21

plan by majority vote at a public meeting of the board of

22

school directors.

23

(2)  (i)  If the board of school directors does not

24

approve the plan within 30 days, the secretary shall

25

petition the court of common pleas of the county in which

26

the school district or the largest part in area of the

27

school district is located for the appointment of a

28

receiver under subdivision (iv).

29

(ii)  The secretary shall file the petition under

30

this paragraph not later than five days following the

- 37 -

 


1

vote by the board of school directors to disapprove the

2

plan or 35 days after the chief recovery officer's

3

submission of the plan to the board of school directors,

4

whichever is earlier.

5

(d)  Secretary approval.--

6

(1)  If the board of school directors approves the plan

7

under subsection (c), the chief recovery officer shall

8

provide a copy of the plan to the secretary.

9

(2)  Within ten days of the chief recovery officer's

10

submission of the plan to the secretary, the secretary shall

11

approve or disapprove the plan in a written statement.

12

(3)  If the secretary disapproves the plan, the following

13

shall apply:

14

(i)  The secretary's written statement shall state

15

the reasons for the secretary's disapproval of the plan

16

and recommendations for revisions to the plan.

17

(ii)  The chief recovery officer shall develop a

18

revised plan within 20 days of receipt of the secretary's

19

written statement disapproving the plan, distribute

20

copies of the plan as required under subsection (a) and

21

submit the revised plan to the board of school directors

22

and the secretary for approval pursuant to subsection (c)

23

and this subsection.

24

Section 644-A.  Implementation of financial recovery plan.

25

(a)  Chief recovery officer charged with implementing plan.--

26

Following the secretary's approval of the financial recovery

27

plan under section 643-A(d), the chief recovery officer shall

28

implement the plan and:

29

(1)  Give written notice of the plan's adoption to

30

creditors, the employee organization and other parties who

- 38 -

 


1

will be directly affected by the plan's implementation. The

2

notice shall outline the provisions of the plan and specify

3

how that party's claim or interest will be treated.

4

(2)  Oversee the implementation and completion of the

5

plan by directly controlling the implementation process,

6

including directing employees and elected or appointed

7

officials of the school district to take actions that, in the

8

judgment of the chief recovery officer, are necessary to

9

implement the plan and to refrain from taking actions that,

10

in the judgment of the chief recovery officer, would impede

11

the implementation of the plan.

12

(3)  Provide the office and the secretary with monthly

13

reports that contain the following information:

14

(i)  Evidence of payments to creditors as required

15

under the plan.

16

(ii)  Evidence that any loan given to the school

17

district from the department under subdivision (vi) is

18

being repaid.

19

(iii)  Monthly revenue and expenditure sheets which

20

indicate the balances of each in relation to the other.

21

(iv)  Evidence that the recommendations stated in the

22

plan are being accomplished by the dates specified in the

23

plan where applicable.

24

(4)  Suggest amendments or revisions to the plan that may

25

be necessary to implement or complete the plan or adapt to

26

circumstances that arise or become apparent after approval of

27

the plan by the secretary. In determining whether to suggest

28

amendments or revisions to the plan, the chief recovery

29

officer shall consult with the board of school directors, the

30

advisory committee and the superintendent of the school

- 39 -

 


1

district. Amendments or revisions to the plan shall be

2

submitted to the board of school directors and the secretary

3

for approval as provided in section 643-A.

4

(5)  Upon achievement of the goals and objectives stated

5

in the plan, recommend to the secretary that financial

6

recovery status be terminated under section 646-A.

7

(b)  Duty to comply.--

8

(1)  The board of school directors shall comply with all

9

directives of the chief recovery officer under subsection (a)

10

(2) and may take no action that is:

11

(i)  inconsistent with the plan;

12

(ii)  not specifically identified in the plan; or

13

(iii)  not directed by the chief recovery officer as

14

necessary to implement the plan.

15

(2)  If a board of school directors fails to comply with

16

paragraph (1), the school district shall be subject to the

17

appointment of a receiver under subdivision (iv).

18

Section 645-A.  Financial recovery plan not affected by certain

19

collective bargaining agreements or settlements.

20

No collective bargaining agreement or arbitration settlement

21

may in any manner violate, expand or diminish the provisions of

22

a financial recovery plan in effect on the date of execution of

23

the collective bargaining agreement or arbitration settlement.

24

Section 646-A.  Termination of status.

25

(a)  Declaration by secretary.--

26

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

27

district has satisfied and is continuing to satisfy the

28

criteria enumerated in section 641-A(6), the secretary

29

may issue a declaration terminating the school district's

30

financial recovery status.

- 40 -

 


1

(ii)  In making the determination under this

2

paragraph, the secretary shall consider whether the

3

monthly financial reports submitted by the chief recovery

4

officer to the secretary and the office concerning the

5

school district's progress under the financial recovery

6

plan indicate that termination of financial recovery

7

status is appropriate.

8

(2)  If the secretary determines to terminate a school

9

district's financial recovery status under this section, the

10

secretary shall issue a written declaration stating:

11

(i)  That the school district's financial recovery

12

status has been terminated.

13

(ii)  The effective date of the termination of

14

financial recovery status.

15

(iii)  A statement of the facts upon which the

16

secretary relied in making the determination.

17

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

18

financial recovery school district may petition the secretary

19

for a declaration that the school district's financial recovery

20

status has been terminated. A declaration issued under this

21

subsection shall comply with subsection (a).

22

Section 647-A.  Transition period.

23

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

24

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

25

terminates a school district's financial recovery status under

26

section 646-A, the following shall apply:

27

(1)  The board of school directors shall resume full

28

control over school district management.

29

(2)  The chief recovery officer and the office shall

30

oversee the board of school directors for six years to ensure

- 41 -

 


1

financial stability is maintained.

2

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

3

transition period after the secretary terminates a school

4

district's financial recovery status under section 646-A, the

5

board of school directors fails to maintain the objectives

6

stated in the financial recovery plan, the secretary shall

7

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

8

school district or the largest part in area of the school

9

district is located for the appointment of a receiver under

10

subdivision (iv).

11

(c)  Oversight where municipalities financially distressed.--

12

Notwithstanding the provisions of subsection (a), the chief

13

recovery officer and the office shall oversee the board of

14

school directors of any former financial recovery school

15

district for so long as any political subdivision located within

16

the school district is a financially distressed municipality

17

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

18

Municipalities Financial Recovery Act, without regard to whether

19

the school district continues to maintain the objectives stated

20

in its financial recovery plan. The oversight shall be subject

21

to the provisions of subsection (b).

22

(iv)  Receivership

23

Section 651-A.  Appointment of a receiver.

24

(a)  General rule.--The secretary shall petition the court of

25

common pleas in the county in which a school district or the

26

largest part in area of the school district is located for the

27

appointment of the individual named in the petition to serve as

28

receiver for the school district upon the occurrence of any of

29

the following conditions:

30

(1)  A failure by the board of school directors to

- 42 -

 


1

approve a financial recovery plan under section 643-A(c).

2

(2)  A failure by the board of school directors to comply

3

with directives issued by the chief recovery officer under

4

section 644-A(a)(2).

5

(3)  A failure by the board of school directors to

6

satisfy or continue to satisfy the objectives stated in the

7

financial recovery plan under section 641-A(6) during the

8

transition period under section 647-A.

9

(b)  Financial recovery plan.--The secretary shall attach to

10

the petition filed under subsection (a) a copy of the financial

11

recovery plan for the school district. The financial recovery

12

plan shall be in the form developed by the chief recovery

13

officer under section 641-A with any modifications deemed

14

necessary by the secretary.

15

(c)  Requirements for individual appointed as receiver.--

16

(1)  To be appointed as receiver under this section, an

17

individual must:

18

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

19

or more of the following areas: budget and financial

20

management, public school finance, school administration,

21

accounting, academic assessment or education law; or

22

(ii)  hold a graduate degree from an accredited

23

higher education institution in business or finance and

24

have at least four years' relevant experience in

25

business, finance or management.

26

(2)  The receiver shall not:

27

(i)  Seek or hold a position as an employee or as an

28

elected or appointed official of the school district for

29

which the individual is appointed to serve as receiver

30

during the term of the receivership or for a period of

- 43 -

 


1

two years after the receivership has ended.

2

(ii)  Seek or hold elected office in a political

3

subdivision within the school district during the term of

4

the receivership or for a period of two years after the

5

receivership has ended.

6

(iii)  Engage in any conduct prohibited by the act of

7

July 19, 1957 (P.L.1017, No.451), known as the State

8

Adverse Interest Act, or 65 Pa.C.S. Ch. 11 (relating to

9

ethics standards and financial disclosure).

10

(d)  Consent.--The occurrence of any of the conditions

11

enumerated in subsection (a) shall be deemed consent by the

12

board of school directors to a petition filed by the secretary

13

for the appointment of a receiver under this subdivision.

14

(e)  Notice.--On the same day the secretary files the

15

petition under subsection (a), the secretary shall:

16

(1)  Serve the petition by electronic mail, first class

17

mail or hand delivery upon all of the following:

18

(i)  Each member of the board of school directors of

19

the school district.

20

(ii)  The chief recovery officer of the school

21

district.

22

(iii)  The superintendent of the school district.

23

(iv)  The solicitor of the school district.

24

(v)  Each member of the advisory committee.

25

(2)  Publish notice of the filing of the petition once in

26

a newspaper of general circulation in the school district.

27

(f)  Hearing.--Within 15 days after the filing of a petition

28

under subsection (a), the court of common pleas shall conduct a

29

hearing on the petition.

30

(g)  Order.--

- 44 -

 


1

(1)  Not later than 30 days following the hearing

2

conducted under subsection (f), the court shall issue an

3

order granting or denying the receivership.

4

(2)  The court shall grant the receivership if the court

5

finds by a preponderance of the evidence that any of the

6

conditions in subsection (a) have occurred.

7

(3)  An order issued under this subsection granting the

8

receivership shall do all of the following:

9

(i)  Declare the school district to be in

10

receivership for a period of two years, subject to

11

extension under section 655-A(b).

12

(ii)  State the criteria upon which the order is

13

granted.

14

(iii)  State findings of fact to support the order.

15

(iv)  Appoint the individual named in the petition to

16

be the receiver if the individual satisfies the

17

provisions of subsection (c). The court may not appoint

18

anyone other than the individual named in the petition as

19

the receiver.

20

(v)  Direct the receiver to implement the financial

21

recovery plan attached to the petition pursuant to

22

subsection (b).

23

(4)  An order issued under this subsection denying the

24

receivership shall state:

25

(i)  The reasons the petition was denied.

26

(ii)  Findings of fact to support the order.

27

(h)  Compensation.--

28

(1)  The receiver's compensation shall be set by the

29

court of common pleas in the county in which the school

30

district or the largest part in area of the school district

- 45 -

 


1

is located and shall be paid by the department.

2

(2)  The department shall reimburse the receiver for all

3

actual and necessary expenses incurred in the performance of

4

the individual's duties as receiver.

5

(i)  Liability and immunity.--The receiver shall not be

6

personally liable for any obligations of the school district.

7

The receiver shall be entitled to sovereign and official

8

immunity as provided in 1 Pa.C.S. § 2310 (relating to sovereign

9

immunity reaffirmed; specific waiver) and shall remain immune

10

from suit except as provided by and subject to the provisions of

11

42 Pa.C.S. Ch. 85 Subchs. A (relating to general provisions) and

12

B (relating to actions against Commonwealth parties).

13

Section 652-A.  Powers and duties.

14

(a)  Assumption of powers and duties of board of school

15

directors.--

16

(1)  When a receiver is appointed under section 651-A,

17

the receiver shall assume all powers and duties of the board

18

of school directors, including all powers and duties of the

19

board of school directors stated in the financial recovery

20

plan, except the power to establish an advisory committee

21

under section 661-A(f).

22

(2)  Paragraph (1) shall not apply to the power to levy

23

and raise taxes. Such power shall remain solely with the

24

board of school directors, provided that the board of school

25

directors shall levy and raise taxes if directed to do so by

26

the receiver.

27

(3)  The chief recovery officer appointed for the

28

financial recovery school district under section 631-A shall

29

remain in place as an advisor to the receiver.

30

(b)  Powers and duties of the receiver.--In addition to the

- 46 -

 


1

powers assumed under subsection (a), a receiver appointed under

2

section 651-A shall have the following powers and duties,

3

notwithstanding any other provision of law to the contrary:

4

(1)  Implement the financial recovery plan attached to

5

the petition filed under section 651-A(a).

6

(2)  Submit quarterly reports to the secretary,

7

superintendent, board of school directors of the school

8

district and advisory committee concerning the progress of

9

the school district under the financial recovery plan. The

10

reports shall be posted on the school district's publicly

11

accessible Internet website.

12

(3)  Meet at least twice monthly with the advisory

13

committee.

14

(4)  Direct employees and appointed officials of the

15

school district to take actions that, in the judgment of the

16

receiver, are necessary to implement the financial recovery

17

plan and to refrain from taking actions that, in the judgment

18

of the receiver, would impede the implementation of the plan.

19

(5)  Direct the board of school directors to levy and

20

raise taxes.

21

(6)  Modify the financial recovery plan as necessary to

22

restore the school district to financial stability by

23

submitting a petition to the court of common pleas. Within 30

24

days of the filing of the petition, the court of common pleas

25

shall issue a decision approving or disapproving the

26

petition. The court of common pleas shall approve the

27

modification, unless the court finds clear and convincing

28

evidence that the modification is arbitrary, capricious or

29

wholly inadequate to alleviate the fiscal difficulties in the

30

school district.

- 47 -

 


1

(7)  Employ financial or legal experts the receiver deems

2

necessary to implement or modify the financial recovery plan.

3

Notwithstanding any law to the contrary, the employment of

4

such experts shall not be subject to contractual competitive

5

bidding procedures.

6

(8)  Attend regular and executive sessions of the board

7

of school directors of the school district.

8

(9)  Petition the court of common pleas in the county in

9

which the school district or the largest part in area of the

10

school district is located to issue a writ of mandamus upon

11

any employee or elected or appointed official of the school

12

district to secure compliance with a directive of the

13

receiver issued under paragraph (4) or (5). Within 15 days of

14

the filing of the petition, the court shall grant the relief

15

requested if the court determines that the order is

16

consistent with the financial recovery plan.

17

(c)  Prohibited activity.--Nothing in this subarticle or the

18

financial recovery plan shall be construed to authorize the

19

receiver to do any of the following:

20

(1)  Unilaterally levy or raise taxes.

21

(2)  Unilaterally abrogate, alter or otherwise interfere

22

with a lien, charge, covenant or relative priority that is:

23

(i)  Held by a holder of a debt obligation of a

24

school district.

25

(ii)  Granted by the contract, law, rule or

26

regulation governing the debt obligation.

27

(3)  Unilaterally impair or modify existing bonds, notes,

28

school district securities or other lawful contractual or

29

legal obligations of the school district, except as otherwise

30

ordered by a court of competent jurisdiction.

- 48 -

 


1

Section 653-A.  Effect of appointment of receiver.

2

(a)  General rule.--The appointment of a receiver under this

3

subdivision shall have the effect of:

4

(1)  Imposing on the employees and elected and appointed

5

officials of the school district a duty to comply with

6

directives of the receiver issued under section 652-A(b)(4)

7

or (5).

8

(2)  Suspending the authority of the elected and

9

appointed officials of the school district to exercise power

10

on behalf of the school district pursuant to law, charter,

11

resolution, ordinance, rule or regulation, except as directed

12

by the receiver under section 652-A(b)(4) or (5).

13

(b)  Form of government.--Appointment of a receiver under

14

this article shall not be construed to change the form of

15

government of the school district.

16

(c)  Petition by elected or appointed officials.--An elected

17

or appointed official of a school district that is in

18

receivership under this subdivision may petition the court of

19

common pleas in the county in which the school district or the

20

largest part in area of the school district is located to enjoin

21

any action of the receiver that is contrary to law.

22

Section 654-A.  Vacancy and revocation.

23

(a)  General rule.--When a vacancy in the office of the

24

receiver occurs, the secretary shall file a petition with the

25

court of common pleas in the county in which the school district

26

or the largest part in area of the school district is located

27

requesting that the individual named in the petition be

28

appointed as receiver.

29

(b)  Revocation.--The secretary may, for any reason, file a

30

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

- 49 -

 


1

the school district or the largest part in area of the school

2

district is located requesting that the appointment of the

3

receiver be revoked and that the current receiver be replaced by

4

the individual named in the petition.

5

(c)  Requirements.--

6

(1)  The requirements of section 651-A(c) shall apply to

7

the individual named in a petition filed under subsection (a)

8

or (b). Within 15 days of the secretary's filing of a

9

petition under subsection (a) or (b), the court shall grant

10

the petition to appoint the named individual as receiver if

11

the individual satisfies the requirements of section

12

651-A(c).

13

(2)  The court may not appoint anyone other than the

14

individual named in the petition as the receiver.

15

Section 655-A.  Termination of receivership.

16

(a)  Time.--Except as otherwise provided under subsection

17

(b), a receivership granted under section 651-A shall expire two

18

years after the initial appointment of the receiver under

19

section 651-A.

20

(b)  Extension.--

21

(1)  The secretary may petition the court of common pleas

22

in the county in which the school district or the largest

23

part in area of the school district is located for one or

24

more extensions of the receivership.

25

(2)  The court shall grant each extension for another two

26

years if the secretary establishes by a preponderance of the

27

evidence that further implementation of the financial

28

recovery plan is necessary to restore the school district to

29

financial stability.

30

Section 656-A.  Transition period.

- 50 -

 


1

(a)  Board resumes control.--Subject to the provisions of

2

subsections (b) and (c), after a receivership granted under

3

section 651-A expires according to the provisions of section

4

655-A, the following shall apply:

5

(1)  The board of school directors shall resume full

6

control over school district management.

7

(2)  The chief recovery officer and the office shall

8

oversee the board of school directors for six years to ensure

9

financial stability is maintained.

10

(b)  Declaration of financial recovery status.--If, during

11

the transition period after the expiration of the receivership,

12

the board of school directors fails to maintain the objectives

13

stated in the financial recovery plan, the school district shall

14

be subject to a declaration of financial recovery status under

15

subarticle (a).

16

(c)  Oversight where municipalities financially distressed.--

17

Notwithstanding the provisions of subsection (a), the chief

18

recovery officer and the office shall oversee the board of

19

school directors of any school district formerly in receivership

20

under this subarticle for so long as any political subdivision

21

located within the school district is a financially distressed

22

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

23

known as the Municipalities Financial Recovery Act, without

24

regard to whether the school district continues to maintain the

25

objectives stated in its financial recovery plan.

26

(v)  Advisory Committee

27

Section 661-A.  Advisory committee.

28

(a)  Establishment.--

29

(1)  Within ten days after a school district is declared

30

to be in financial recovery status under section 621-A, the

- 51 -

 


1

board of school directors shall establish an advisory

2

committee to meet and consult with the chief recovery officer

3

or receiver in carrying out the duties of the chief recovery

4

officer or receiver under this article.

5

(2)  The sole function of the advisory committee shall be

6

to provide recommendations and feedback to the chief recovery

7

officer or receiver on the development and implementation of

8

the financial recovery plan.

9

(b)  Composition.--The advisory committee established under

10

subsection (a) shall consist of:

11

(1)  The following members appointed by the board of

12

school directors:

13

(i)  Two members of the board of school directors.

14

(ii)  One principal employed by the school district.

15

(iii)  One business official employed by the school

16

district.

17

(2)  The following members appointed by the intermediate

18

unit of which the school district is a member:

19

(i)  One employee of the intermediate unit.

20

(ii)  One representative of a charter school or cyber

21

charter school in which students residing in the school

22

district are enrolled.

23

(iii)  One special education advocate.

24

(iv)  One superintendent, school director or business

25

official of an adjoining school district.

26

(v)  Two residents of the school district.

27

(3)  One teacher appointed by the employee organization

28

that represents teachers employed by the school district.

29

(c)  Compensation.--Members of the advisory committee shall

30

receive no compensation for their services.

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1

(d)  Meetings.--The advisory committee shall meet with the

2

chief recovery officer or receiver at least twice monthly to

3

discuss the development or implementation of the financial

4

recovery plan. Meetings of the advisory committee shall be in

5

accordance with 65 Pa.C.S. Ch. 7 (relating to open meetings).

6

(e)  Termination.--The advisory committee shall terminate

7

when the school district's financial recovery status terminates

8

under section 647-A.

9

(f)  Establishment of advisory committee following

10

appointment of receiver.--

11

(1)  If a receiver is appointed under section 651-A(a)

12

(3), the board of school directors shall establish an

13

advisory committee within ten days of the appointment of the

14

receiver.

15

(2)  The sole function of the advisory committee shall be

16

to provide recommendations and feedback to the receiver on

17

the development and implementation of the financial recovery

18

plan.

19

(3)  The provisions of subsections (b), (c) and (d) shall

20

apply to the advisory committee.

21

(4)  The advisory committee shall terminate when the

22

school district's receivership expires under section 655-A.

23

(vi)  Financial Recovery Loan Program

24

Section 671-A.  Program.

25

(a)  Establishment.--The Financial Recovery Loan Program is

26

established in the department to provide loans to school

27

districts that have approved a financial recovery plan under

28

section 643-A(c) and are implementing the plan.

29

(b)  Nature of loans.--All loans granted by the department

30

shall be free from interest and shall be repayable according to

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1

a covenant that states a schedule for repayment in specified

2

amounts and dates.

3

(c)  Funding of loans.--All loans granted by the department

4

under this subarticle may be made from moneys in the fund

5

established under subsection (d).

6

(d)  Revolving fund.--

7

(1)  The Financial Recovery School District Revolving

8

Loan Fund is established in the State Treasury.

9

(2)  The fund may be funded by any annual appropriation

10

from the General Assembly for this program, principal

11

repayments on all loans made under this subdivision and any

12

interest earned on moneys in the fund.

13

(3)  The moneys in the fund may be used to make loans

14

under this subdivision.

15

(e)  Eligibility and suspension of loan.--

16

(1)  A school district that fails to approve a financial

17

recovery plan under section 643-A(c) or implement a financial

18

recovery plan shall not be eligible for a loan under this

19

section.

20

(2)  Any loan granted under this section to a school

21

district that, in the judgment of the secretary, fails to

22

take all actions necessary to implement a financial recovery

23

plan under section 643-A(c) shall be suspended and

24

immediately due and payable.

25

(f)  Voluntary agreement.--

26

(1)  A school district that receives a loan under this

27

subdivision may enter into a voluntary agreement with one or

28

more charter schools in which students residing within the

29

school district are enrolled, which agreement provides that

30

the charter school may give the school district funds to

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1

assist the school district in repayment of the loan.

2

(2)  Any amount provided by the charter school under this

3

subsection shall be in an amount agreed upon by the charter

4

school and the school district.

5

Section 672-A.  Loan procedure.

6

(a)  General rule.--Following the approval of a financial

7

recovery plan by a school district under section 643-A(c), the

8

chief recovery officer of the school district may apply to the

9

secretary for a loan. If a receiver has been appointed for the

10

school district in accordance with section 651-A(a)(3), the

11

receiver may apply to the secretary for a loan on behalf of the

12

school district.

13

(b)  Immediate emergencies.--Prior to a school district's

14

approval of a financial recovery plan, the chief recovery

15

officer may apply to the secretary for an expedited loan to

16

immediately assist the school district if the chief recovery

17

officer verifies that upon reasonable belief either of the

18

following exists:

19

(1)  the school district is in imminent danger of

20

insolvency; or

21

(2)  the school district may cease operations within 30

22

days.

23

(c)  Approval.--

24

(1)  Upon receipt of an application under this section,

25

the secretary shall review all data immediately available and

26

shall determine whether a loan is warranted.

27

(2)  If warranted, the secretary shall approve the

28

application and order the department to distribute moneys

29

requested.

30

(3)  The secretary's determination under this subsection

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1

is appealable under 2 Pa.C.S. (relating to administrative law

2

and procedure).

3

Section 673-A.  Limitations.

4

(a)  Use.--A loan to a school district under this subdivision

5

shall be used solely for the payment of current expenses of the

6

school district.

7

(b)  Local Government Unit Debt Act.--A loan to a school

8

district under this chapter shall not be subject to the

9

provisions of 53 Pa.C.S. Pt. VII Subpt. B (relating to

10

indebtedness and borrowing).

11

(c)  Amount.--The following provisions shall apply to loans

12

to school districts under this subdivision:

13

(1)  The aggregate amount of the loans shall not at any

14

time exceed the amount in the Financial Recovery School

15

District Revolving Loan Fund.

16

(2)  The secretary shall not award any one school

17

district a loan in an amount which will substantially impair

18

the department's ability to distribute the amount remaining

19

in the Financial Recovery School District Revolving Loan Fund

20

fairly and equitably to other school districts.

21

(vii)  Miscellaneous Provisions

22

Section 681-A.  Applicability.

23

(a)  General rule.--Except as otherwise provided in

24

subsection (b), nothing in this article is intended to limit or

25

otherwise abrogate the applicability of any other part of this

26

act.

27

(b)  Conflict.--If there is a conflict between a provision of

28

this article and any other provision of this act or other State

29

law, the provision of this article shall prevail.

30

Section 682-A.  Bankruptcy prohibited.

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1

A school district may not file a municipal debt adjustment

2

action under the Bankruptcy Code (11 U.S.C. § 101 et seq).

3

Section 683-A.  Termination of special board of control.

4

Where a school district is governed by a special board of

5

control under section 692 as of the effective date of this

6

section, the special board of control shall terminate

7

immediately upon the appointment of a chief recovery officer for

8

the school district as provided under section 631-A.

9

Section 7.  The provisions of Article VI-A of the act are

10

severable. If any provision of that article or its application

11

to any person or circumstance is held invalid, the invalidity

12

shall not affect other provisions or applications of that

13

article which can be given effect without the invalid provision

14

or application.

15

Section 8.  This act shall take effect as follows:

16

(1)  The amendment or repeal of sections 691, 692, 692.1,

17

692.2, 693, 694 and 695 of the act shall take effect in 180

18

days.

19

(2)  The remainder of this act shall take effect

20

immediately.

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