PRINTER'S NO. 1251
No. 1075 Session of 1977
INTRODUCED BY PIEVSKY, JOHNSON, COHEN, RIEGER, OLIVER, SCANLON, GIAMMARCO, JONES, BORSKI, McINTYRE, WIGGINS, DUMAS, BARBER, GREENFIELD, WHITE, HARPER, CIANCIULLI AND RICHARDSON, APRIL 27, 1977
REFERRED TO COMMITTEE ON EDUCATION, APRIL 27, 1977
AN ACT 1 Providing for the creation of the Public School Finance 2 Assistance Authority and providing for its powers and duties; 3 and imposing additional powers and duties on the Department 4 of Education. 5 TABLE OF CONTENTS 6 Chapter 1. General Provisions. 7 Section 101. Short title. 8 Section 102. Legislative findings and determination of 9 policy. 10 Section 103. Definitions. 11 Chapter 2. Public School Finance Assistance Authority 12 Section 201. Creation of authority. 13 Section 202. General powers. 14 Section 203. Limitation on contracts. 15 Section 204. Leases, loans and transfer of buildings. 16 Chapter 3. Bonds; Notes; Obligations of the Authority 17 Section 301. Issuance of bonds and notes. 18 Section 302. Credit of Commonwealth or any subdivision
1 not pledged. 2 Section 303. Moneys of the authority. 3 Section 304. Annual report, books and records of the 4 authority. 5 Section 305. Exemptions from taxation. 6 Section 306. Bonds as legal investments. 7 Section 307. Covenant by Commonwealth not to limit or 8 alter powers vested in authority. 9 Chapter 4. Powers and Duties of the Secretary of Education 10 Section 401. Application. 11 Section 402. Requirements for application. 12 Section 403. Initial review by secretary. 13 Section 404. Financial schedule. 14 Section 405. Agreements. 15 Section 406. Approval of agreements. 16 Section 407. Closing. 17 Section 408. Amendments to financial schedule. 18 Section 409. Investigation and audits by the department. 19 Section 410. Noncompliance by school district. 20 Section 411. Special board of control; petition, 21 appointments. 22 Section 412. Powers of the special board of control. 23 Section 413. Additional tax. 24 Section 414. School directors to remain in 25 office; elections. 26 Section 415. Payments to school districts. 27 Section 416. Withholding Commonwealth funds for unpaid 28 indebtedness. 29 Chapter 5. Rules and Regulations; Effective Date 30 Section 501. Rules and regulations. 19770H1075B1251 - 2 -
1 Section 502. Secretary. 2 Section 503. Severability. 3 Section 504. Authorized investments for school district 4 funds. 5 Section 505. Effective date. 6 The General Assembly of the Commonwealth of Pennsylvania 7 hereby enacts as follows: 8 CHAPTER 1 9 GENERAL PROVISIONS 10 Section 101. Short title. 11 This act shall be known and may be cited as the "Public 12 School Finance Assistance Act." 13 Section 102. Legislative findings and determination of policy. 14 It is hereby determined and declared as a matter of 15 legislative finding that: 16 (1) The welfare of the Commonwealth is threatened by the 17 fact that some school districts may not be able to find 18 adequate funding. 19 (2) The tax burden of the citizens of Pennsylvania is 20 already at a very high level of their incomes. 21 (3) As the economy expands, and school enrollments 22 stabilize or are reduced, the taxing authority of school 23 districts will be adequate to meet future expenses. 24 (4) The Commonwealth has a strong responsibility to 25 assist financially hard-pressed school districts in order to 26 promote the educational opportunities of all of its citizens. 27 The Commonwealth recognizes its obligation to assist these 28 school districts to restore financial stability by providing 29 the guidance of the Secretary of Education and paying the 30 school districts for some of the costs associated with 19770H1075B1251 - 3 -
1 restoring their financial health. 2 (5) The Commonwealth has a responsibility to promote 3 educational opportunities by assisting school districts to 4 plan for long-term financial stability. 5 (6) Therefore, it is hereby declared to be the policy of 6 this Commonwealth to create an authority to issue bonds and 7 to enact a program to: 8 (i) Loan money to or purchase school buildings from 9 school districts for the purpose of assisting them in 10 achieving and maintaining fiscal stability; 11 (ii) Require the preparation of a financial plan by 12 school districts from which school buildings are 13 purchased or qualify and apply for such loans; 14 (iii) Empower the Secretary of Education to monitor 15 the finances of those school districts which qualify and 16 file financial plans and receive loans or from which 17 school buildings are to be purchased; 18 (iv) Authorize the Secretary of Education to apply 19 sanctions to any school district participating in the 20 loan program, or from which school buildings are 21 purchased, which fails to comply with its approved 22 financial plan. 23 Section 103. Definitions. 24 The following words and phrases when used in this act shall 25 have, unless the context clearly indicates otherwise, the 26 meanings given to them in this section: 27 "Authority." The body politic and corporate created by this 28 act. 29 "Bond" or Bonds." Notes, or any renewals thereof, bonds, 30 refunding bonds and other evidences of indebtedness or 19770H1075B1251 - 4 -
1 obligations of the authority. 2 "Department." The Department of Education. 3 "School building." Includes, but shall not be limited to, 4 any structure used or useful for schools and playgrounds, 5 including facilities for physical education. 6 "School district." A school district as defined in the act 7 of March 10, 1949 (P.L.30, No.14), known as the "Public School 8 Code of 1949." 9 "Secretary." The Secretary of Education. 10 "Unfunded debt of a school district." Its obligations of the 11 same or a prior year, properly contracted for current expenses 12 (including tax anticipation notes) due and owing, which taxes 13 and other revenues of the school district remaining to be 14 collected in the fiscal year and funds on hand will not be 15 sufficient to pay without a curtailment of school district 16 services to an extent which endangers the proper education of 17 school children. 18 CHAPTER 2 19 PUBLIC SCHOOL FINANCE ASSISTANCE AUTHORITY 20 Section 201. Creation of authority. 21 (a) Members.--The Governor, the State Treasurer, the Auditor 22 General, the Secretary of Education, the Secretary of General 23 Services, the President pro tempore of the Senate, the Speaker 24 of the House of Representatives, the minority leader of the 25 Senate, the minority leader of the House of Representatives, and 26 their respective successors in office are hereby created a body 27 corporate and politic, constituting a public corporation and 28 government instrumentality by the name of the "Public School 29 Finance Assistance Authority." The President pro tempore of the 30 Senate and minority leader of the Senate and the Speaker of the 19770H1075B1251 - 5 -
1 House of Representatives and minority leader of the House or 2 Representatives may designate any member of the Senate or House, 3 respectively, to act in their stead to serve at the discretion 4 of the respective President pro tempore or minority leader and 5 Speaker of the House of Representatives or minority leader. Such 6 designees, if any, shall be the same persons designated under 7 the "State Public School Building Authority Act." Said members 8 of the authority shall be entitled to no compensation for their 9 services as members but shall be entitled to reimbursement for 10 all necessary expenses incurred in connection with the 11 performance of their duties as members. 12 (b) Term for members of General Assembly.--The President pro 13 tempore of the Senate and the Speaker of the House of 14 Representatives, the minority leader of the Senate and the 15 minority leader of the House of Representatives, shall continue 16 as members of the authority until their respective successors in 17 office assume such office, regardless of whether or not they 18 shall have ceased to be members of the Senate or the House of 19 Representatives. 20 (c) Deputy permitted.--The member of the authority may 21 authorize by written proxy or authorization a personal deputy to 22 appear and act for them at a meeting and for the purposes 23 specified in such written proxy or authorization, provided that 24 a separate written authorization or proxy shall be required for 25 each separate meeting. 26 Section 202. General powers. 27 The authority is hereby granted and shall have and may 28 exercise all the powers necessary or convenient for the carrying 29 out of the aforesaid purposes, including but without limiting 30 the generality of the foregoing, the following rights and 19770H1075B1251 - 6 -
1 powers: 2 (1) To have perpetual existence as a corporation; 3 (2) To sue and be sued, implead and be impleaded, 4 complain and defend, in all courts; 5 (3) To adopt, use and alter at will a corporate seal; 6 use any property real, personal or mixed, tangible or 7 intangible, or any interest therein (necessary or desirable) 8 for carrying out the purpose of the authority, and to sell, 9 lease, transfer and dispose of any property or any interest 10 therein at any time acquired by it; 11 (4) To make bylaws for the management and regulation of 12 its affairs; 13 (5) To obtain from the State Public School Building 14 Authority, for a fee, those executive, fiscal and 15 administrative services, as may be required to carry out the 16 functions of the authority under this act; 17 (6) To fix, alter, charge and collect rentals, and other 18 charges for the use of the facilities of, or for the services 19 rendered by the authority, at reasonable rates to be 20 determined by it for the purpose of providing for the payment 21 of the expenses of the authority, not provided for by 22 appropriation by the Commonwealth, or otherwise, the 23 construction, improvement, repair, equipping and furnishing, 24 maintenance and operation of its facilities and properties, 25 the payment of the principal of, and interest on, its 26 obligations, and to fulfill the terms and provisions of any 27 agreements made with the purchasers or holders of any such 28 obligations; 29 (7) To borrow money for the purposes of making loans to 30 school districts and purchasing public school buildings; 19770H1075B1251 - 7 -
1 (8) To make loans to school districts in accordance with 2 this act on such terms and conditions as it deems desirable 3 subject to the approval of the secretary. 4 (9) To make and issue bonds and to secure the payment of 5 all such bonds and to make such agreements with the 6 purchasers or holders of all such bonds, or with others in 7 connection with all such bonds, whether issued or to be 8 issued as the authority shall deem advisable, and in general 9 to provide for the security for all such bonds and the rights 10 of the holders thereof; and in connection therewith to enter 11 into a trust indenture, deed of trust, mortgage, or other 12 similar security instrument with any bank or trust company as 13 indenture trustee, trustee, mortgage or equivalent: Provided, 14 however, That each separate issue of bonds shall be issued 15 pursuant to a trust indenture, deed of trust, mortgage or 16 other similar security instrument, separate, distinct and 17 apart from that of each and every other issue of bonds: 18 Provided further, That a particular bank or trust company may 19 be designated by the authority as indenture trustee with 20 respect to more than one trust indenture. 21 (10) Without limitation of the foregoing, to borrow 22 money, and accept grants from, and to enter into contracts, 23 leases or other transactions with any Federal agency; 24 (11) To pledge, hypothecate, mortgage or otherwise 25 encumber, all or any of the school buildings, revenues or 26 receipts of the authority as security for all, or any of the 27 obligations of the authority; 28 (12) To do all acts and things necessary or convenient 29 to carry out the powers granted to it by this act or any 30 other acts. 19770H1075B1251 - 8 -
1 Section 203. Limitation on contracts. 2 No contract for the purchase, sale or lease of school 3 buildings or for the loan of money, or for any other purpose, 4 shall be executed between the authority and school districts or 5 municipality authorities created by school districts without 6 specific prior written approval of the secretary. 7 Section 204. Leases, loans and transfer of buildings. 8 (a) Authorization to lease.--Any school district or 9 districts within the Commonwealth shall have power and authority 10 to lease as lessee from the authority any school building, and 11 the furnishings and equipment thereof for a term, with respect 12 to each not exceeding 40 years, at such rental or rentals as may 13 be determined by the authority. 14 (b) Authorization to borrow money.--Any school district or 15 districts within the Commonwealth shall have the power and 16 authority to borrow money from the authority and to transfer 17 title of school buildings to the authority as part of such loan 18 transaction. 19 (c) Conveyance of lands.-- Any school district shall have 20 the power and authority, with the approval of the Secretary of 21 Education, to grant, assign and convey to the authority, with or 22 without consideration, any lands, easements or rights in lands 23 together with any improvements, school buildings or structures 24 therein or thereon, now owned by such school district or 25 hereafter acquired by it, needed or convenient to carry out the 26 purposes of this act, as well as furnishings and equipment for 27 school buildings. 28 (d) Reconveyance by authority.-- When the authority shall 29 have finally paid and discharged all bonds, including refunding 30 bonds, together with all interest due thereon, which were issued 19770H1075B1251 - 9 -
1 for the purposes of this act and shall have paid any and all 2 other charges and obligations incurred, the authority may 3 reconvey such school buildings conveyed to it in connection with 4 the issuance of such bonds to the school district to which such 5 buildings were leased. 6 CHAPTER 3 7 BONDS; NOTES; OBLIGATIONS OF THE AUTHORITY 8 Section 301. Issuance of bonds and notes. 9 (a) Power to issue bonds.-- The authority shall have the 10 power and is hereby authorized from time to time to issue its 11 bonds, either as serial bonds, maturing in annual installments 12 or as term bonds, or any combination thereof, in such principal 13 amount as in the opinion of the authority shall be necessary to 14 provide sufficient funds for achieving its corporate purposes, 15 including but not limited to the payment of interest on bonds of 16 the authority, establishment of reserves to secure such bonds 17 and all other expenditures of the authority incident to and 18 necessary or convenient to carry out its corporate purposes and 19 powers. The authority shall have power, from time to time, to 20 issue bonds to pay notes and whenever it deems refunding 21 expedient to refund any or all bonds by the issuance of new 22 bonds, whether the bonds to be refunded have or have not 23 matured, and to issue bonds partly to refund bonds then 24 outstanding and partly for any other purpose. The proceeds of 25 the refunding bonds shall be applied to the purchase, redemption 26 or payment of the bonds to be refunded, all as authorized by the 27 authority. 28 (b) Form of bonds.-- The bonds shall be authorized by 29 resolution of the authority, shall bear such date or dates, and 30 shall mature at such time or times, not exceeding 40 years from 19770H1075B1251 - 10 -
1 the date of issue, as such resolution or resolutions may 2 provide. The bonds shall bear interest at such rate or rates, be 3 in such denominations, be in such form, either coupon or 4 registered, carry such registration privileges, contain such 5 terms and provisions relating to, but not limited to, pledges of 6 the assets, setting aside of reserves, limitations or additional 7 bonds, and such other matters as may affect the security or 8 protection of the bonds, be executed in such manner, be payable 9 in such medium of payment, at such place or places and be 10 subject to such terms of redemption as such resolution or 11 resolutions may provide. The bonds of the authority may be sold 12 at public or private sale, at such price or prices as the 13 authority shall determine. 14 (c) Liability for bonds.-- Neither the members of the 15 authority nor any person executing the bonds shall be liable 16 personally on the bonds or be subject to any personal liability 17 or accountability by reason of the issuance thereof. 18 (d) Repurchase of bonds.-- The authority, subject to such 19 agreement with bondholders as may then exist, shall have the 20 power out of any funds available therefor to purchase its bonds, 21 which shall thereupon be cancelled, at a price not exceeding: 22 (1) if the bonds are then redeemable, the redemption 23 price then applicable plus accrued interest to the next 24 interest payment date thereupon, or 25 (2) if the bonds are not then redeemable, the redemption 26 price applicable on the first date after such purchase upon 27 which the bonds become subject to redemption plus accrued 28 interest to such date. 29 Section 302. Credit of Commonwealth or any subdivision not 30 pledged. 19770H1075B1251 - 11 -
1 Except as may otherwise be expressly provided by the 2 authority, its bonds shall be general obligations of the 3 authority payable out of any moneys or revenues of the 4 authority, including rental payments, the proceeds of loans made 5 under this act, reserve funds created therefor by the authority, 6 and other money lawfully available to the authority, subject 7 only to any agreements with holders of the bonds pledging any 8 moneys or revenues. Bonds of the authority issued under the 9 provisions of this act shall not be deemed to constitute a debt 10 of the Commonwealth or of any political subdivision thereof or a 11 pledge of the faith and credit of the Commonwealth or of any 12 such political subdivision thereof or a pledge of the faith and 13 credit of the Commonwealth or of any such political subdivision. 14 All such bonds shall contain on the face thereof a statement to 15 the effect that neither the Commonwealth nor any political 16 subdivision thereof shall be obligated to pay the same or the 17 interest thereon and that neither the faith and credit nor the 18 taxing power of the Commonwealth nor any political subdivision 19 thereof is pledged to the payment of the principal of or the 20 interest thereon. 21 Section 303. Moneys of the authority. 22 All moneys of the authority from whatever source derived 23 shall be paid to the treasurer of the authority and shall be by 24 him invested in United States Treasury obligations, obligations 25 of agencies and instrumentalities of the United States, or 26 obligations of this Commonwealth, or deposited in one or more 27 banks or trust companies, in one or more special accounts until 28 required to be transferred to one or more sinking funds or 29 analogous funds in order to make payment of interest or 30 principal on bonds of the authority. Each deposit shall be 19770H1075B1251 - 12 -
1 continuously secured by pledge of direct obligations of the 2 United States of America or of this Commonwealth, bonds of the 3 agency, of other authorities of this Commonwealth, or of 4 agencies and instrumentalities of the United States, having an 5 aggregate market value, exclusive of accrued interest, at all 6 times, at least equal to the balance on deposit in the account. 7 The security shall be either deposited with the treasurer or 8 held by a trustee or agent satisfactory to the authority. All 9 banks and trust companies are authorized to give the security 10 required. The treasurer shall make reasonable efforts to obtain 11 the highest available yield on the investments or deposits. 12 Interest or other income earned on the investments or deposits 13 shall be used for debt service reduction, administrative 14 expenses or for such other purposes as the authority may from 15 time to time determine. The moneys of the authority shall be 16 paid out on the warrant or other order of the treasurer of the 17 authority or of another person authorized by the authority to 18 execute warrants or orders. Moneys held in trust or otherwise to 19 secure the payment of bonds or notes shall be secured in the 20 same manner as moneys of the authority and all banks and trust 21 companies are authorized to give security for such deposits. 22 Notwithstanding the provisions of this section, the authority 23 shall have power to contract with the holders of any of its 24 bonds or notes as the custody, security, investment and payment 25 of any moneys of the authority or any moneys held in trust or 26 otherwise to secure the payment of bonds or notes. Any 27 provisions with respect to custody, security, investment or 28 payment of moneys of the authority shall not become effective 29 until the resolution or trust indenture containing such contract 30 with bondholders or noteholders shall have been approved in 19770H1075B1251 - 13 -
1 writing by the Governor. 2 Section 304. Annual report, books and records of the 3 authority. 4 The authority shall file an annual report with the Department 5 of Community Affairs. The authority shall have its books, 6 accounts and records audited annually by a certified public 7 accountant and a copy of this audit shall be attached to and be 8 made a part of the aforesaid annual report. A concise financial 9 statement shall be published annually by the authority and shall 10 be available for public inspection at the office of the 11 authority. The Auditor General shall have the right to examine 12 the books, accounts and records of the authority. 13 Section 305. Exemptions from taxation. 14 (a) Public purpose of authority.-- The creation of the 15 authority is in all respects for the benefit of the people of 16 the Commonwealth and for the improvement of their health, 17 safety, welfare, comfort and security, and its purposes are 18 public purposes and the authority will be performing an 19 essential governmental function. 20 (b) Interest free of certain taxes.--The Commonwealth 21 covenants with the purchasers and all subsequent holders and 22 transferees of the bonds issued by the authority in 23 consideration of the acceptance of any payment for the bonds, 24 that the bonds of the authority issued pursuant to this act and 25 the income therefrom shall at all times be free from taxation or 26 assessment of every kind and nature except for inheritance, 27 estate, gift and transfer taxes. 28 (c) Authority exempt from taxation.-- The authority shall be 29 exempt from payment of any taxes or assessments upon any 30 property acquired, held, owned, leased or used by it. The income 19770H1075B1251 - 14 -
1 and revenues of the authority shall likewise be free from 2 taxation. 3 Section 306. Bonds as legal investments. 4 The bonds of the authority are securities in which all public 5 officers and bonders of the Commonwealth and all municipalities 6 and municipal subdivisions, all insurance companies and 7 associations, and other persons carrying on a insurance 8 business, all banks, trust companies, savings banks and savings 9 associations, investment companies, all administrators, 10 guardians, executors, trustees and other fiduciaries, and all 11 other persons whatsoever who are now or may hereafter be 12 authorized to invest in bonds or other obligations of the 13 Commonwealth, may properly and legally invest funds, including 14 capital, in their control or belonging to them. 15 Section 307. Covenant by Commonwealth not to limit or alter 16 powers vested in authority. 17 The Commonwealth does hereby pledge and covenant and agree 18 with the holders of any bonds issued pursuant to the authority 19 of this act that the Commonwealth will not limit or alter the 20 rights or powers hereby vested in the authority to perform and 21 fulfill the terms of any agreement made with the holders of such 22 bonds or in any way impair the rights or remedies of such 23 holders, until such bonds, together with interest thereon, with 24 interest on any unpaid installments of interest, and all costs 25 and expenses in connection with any action or proceedings by or 26 in behalf of such holders, are fully met and discharged or 27 provided for. The authority may include this pledge and 28 agreement of the Commonwealth in any agreement with the holders 29 of bonds issued by the authority. 30 CHAPTER 4 19770H1075B1251 - 15 -
1 POWERS AND DUTIES OF THE SECRETARY OF EDUCATION 2 Section 401. Application. 3 Any school district may apply and be considered for 4 authorization to participate in the program provided by this act 5 by filing an application with the secretary. Applications shall 6 be submitted by the board of school directors in such form as 7 the secretary may require. 8 Section 402. Requirements for application. 9 Each application shall state, and be supported by such 10 adequate documentation as the secretary may require: 11 (1) that the school district has unfunded debt; 12 (2) that the board of school directors is taxing real 13 estate at the maximum rate set by statute or that the board 14 of school directors has levied real estate taxes such that 15 the district is making a local real estate tax effort greater 16 than 85% of the school districts in the Commonwealth and is 17 taxing earned income at the maximum rate permitted under the 18 act of December 31, 1965 (P.L.1257, No.511), known as "The 19 Local Tax Enabling act." As used in this section, local tax 20 effort means that figure determined by the secretary to be 21 the mill equivalent of all taxes on equalized value; and 22 (3) that the school district would experience 23 substantial financial benefits through participation in the 24 programs provided by this act in addition to those benefits 25 due to receipt of subsidies as provided for in section 415. 26 Section 403. Initial review by secretary. 27 (a) Review.--Upon receipt of an application the secretary 28 shall review the statements and documentation submitted by the 29 school district and shall determine whether or not the applicant 30 meets the requirements set forth in section 402. 19770H1075B1251 - 16 -
1 (b) Procedure on approval.--If the secretary determines that 2 an applicant meets the requirements set forth in section 402, 3 and if he finds that the school district's participation in the 4 programs provided by this act are in the best interests of the 5 school district, he shall authorize the school district to file 6 the financial schedule and agreements required by sections 404 7 and 405 and to apply to and begin negotiations with the 8 authority so that the school district may participate in the 9 programs provided in this act. 10 Section 404. Financial schedule. 11 (a) Filing of schedule.--As a condition for receiving final 12 approval to participate in the programs provided by this act, 13 each school district authorized to negotiate with the authority 14 pursuant to section 403, shall file with the secretary, for his 15 approval, a financial schedule. 16 (b) Content of schedule.--The financial schedule shall set 17 forth in detail: 18 (1) The budgets of the school district for the current 19 and preceding year. 20 (2) A complete statement of all current obligations 21 whether funded or unfunded. 22 (3) The schedules of all outstanding debts and lease 23 rental obligations and the projects to which they are 24 related. 25 (4) Copies of all current collective bargaining 26 agreements. 27 (5) A five-year detailed estimate of all receipts and 28 expenditures, including the proposed proceeds from the sale 29 of school buildings and the obligations to the authority 30 incurred by the sale of school buildings. 19770H1075B1251 - 17 -
1 (6) Such other information or matters as the secretary 2 shall determine. 3 (c) Review of schedule.--The secretary shall review the 4 financial schedule and may, in his sole discretion, require that 5 it be supplemented or amended. 6 (d) Approval of schedule.--When the financial schedule is in 7 a form acceptable to the secretary, he may approve it and if 8 approved shall so inform the authority. 9 Section 405. Agreements. 10 (a) Contents of agreements.--As a condition for receiving 11 approval to participate in the programs provided by this act, 12 each school district shall agree with the secretary, in a form 13 acceptable to him, that for the period covered by the financial 14 schedule: 15 (1) The school district will incur no unfunded debt. 16 (2) The school district will not incur any debt except 17 in accordance with the approved financial schedule. 18 (3) The school district shall adhere to the detailed 19 financial schedule filed in accordance with section 404 or as 20 amended in accordance with section 408. 21 (b) Legal effect of agreements.--These agreements shall 22 become legally binding upon the school district in accordance 23 with section 407 and the secretary is authorized to take all 24 appropriate legal actions to enforce these agreements. 25 Section 406. Approval of agreements. 26 Each school district authorized under section 403 (b) to 27 negotiate with the authority shall submit to the secretary any 28 proposed agreement pursuant to section 204 between the school 29 district and the authority. The secretary may approve such 30 proposed agreements only if the school district has submitted an 19770H1075B1251 - 18 -
1 approved financial schedule and approved proposed agreements 2 with the secretary, provided that the secretary shall not 3 approve any such proposed agreements pursuant to which 4 obligations of a school district to the authority would result 5 in payments pursuant to section 415 which would exceed without 6 proration appropriations for such purposes. 7 Section 407. Closing. 8 Upon approval of the proposed agreements by the secretary, 9 the school directors shall enter into such agreements with the 10 authority. The agreements made by the school district and the 11 authority in accordance with section 405 shall become legally 12 binding on the parties thereto at the time of closing. 13 Section 408. Amendments to financial schedule. 14 The school district may, subject to the approval of the 15 secretary, amend and revise its financial schedule. The 16 secretary shall not approve an amendment to increase 17 expenditures unless the proposed amendment includes at least an 18 equal increase in revenue. 19 Section 409. Investigation and audits by the department. 20 The department may at any time make such investigations and 21 audits of financial records that it deems appropriate to assure 22 compliance with the financial schedule approved by the secretary 23 and agreements with the secretary made by the district. 24 Section 410. Noncompliance by school district. 25 (a) Determination.--Whenever the secretary, after 26 investigation, determines that a district is in noncompliance 27 with the approved financial schedule and agreements with the 28 secretary required by this act, he shall so notify the school 29 district in writing, citing the specific facts and circumstances 30 which have resulted in the determination. 19770H1075B1251 - 19 -
1 (b) Financial review board.--Upon making a determination of 2 noncompliance, the secretary may call for the establishment of a 3 financial review board to make recommendations regarding the 4 school district's finances. When a financial review board is 5 called for it shall be established as follows: 6 (1) For school districts of the first class the 7 financial review board shall consist of seven members 8 appointed as follows: 9 (i) One resident elector of the city who shall hold 10 no public office or public employment shall be appointed 11 by the secretary to serve as chairman. 12 (ii) Two resident electors shall be appointed each 13 by the school board, the mayor of the city and the city 14 council of the city. At least one of each appointing 15 agencies' appointments shall hold no public office or 16 public employment. 17 (iii) As used in this subsection city means a city 18 which is coterminous with the boundaries of the school 19 district. 20 (2) For school districts other than districts of the 21 first class the financial review board shall consist of five 22 members appointed as follows: 23 (i) One resident elector of the school district who 24 shall hold no public office or public employment shall be 25 appointed by the secretary to serve as chairman. 26 (ii) Two resident electors of the school district 27 shall be appointed each by the board of school directors 28 and by the intermediate unit board of school directors of 29 the intermediate unit to which the school district is 30 assigned. At least one of each appointing agencies' 19770H1075B1251 - 20 -
1 appointments shall hold no public office or public 2 employment. 3 (c) Powers.--The financial review board shall review the 4 facts related to the secretary's determination of noncompliance, 5 the school district's budget and the approved financial schedule 6 and agreements with the secretary submitted pursuant to this act 7 and, within 30 days of the secretary's call for its 8 establishment, the board shall make a written report to the 9 school district with a copy to the secretary and, in the case of 10 a school district of the first class, to the mayor and city 11 council of the city whose political boundaries are coterminous 12 with those of the school district. The report shall contain 13 recommendations for adjusting revenues and expenditures of the 14 school district to bring it into compliance with the approved 15 financial schedule. 16 (d) Conduct of business.--The business of the financial 17 review board shall be conducted in accordance with the act of 18 July 19, 1974 (P.L.486, No.175), referred to as the Public 19 Agency Open Meeting Law, by majority vote of those present and 20 voting provided that a majority of the legally qualified members 21 are present. 22 (e) Distressed district.--The secretary shall review the 23 status of the school district 65 days after the call for the 24 establishment of a financial review board, and if he determines 25 that the district remains in noncompliance with the approved 26 financial schedule and agreements, he shall declare the school 27 district to be distressed. If he determines that the school 28 district is in compliance with the approved financial schedule 29 and agreements, he shall discharge the financial review board. 30 Section 411. Special board of control; petition, 19770H1075B1251 - 21 -
1 appointments. 2 Whenever on the basis of an investigation as herein provided 3 for, the secretary has declared any school district to be a 4 distressed school district he or his designated representative 5 shall petition the court of common pleas of the county in which 6 such district, or the largest part in area, is located to 7 appoint two citizens who shall be qualified electors and 8 taxpayers in the county in which the school district is located. 9 School directors and employees of any such school district shall 10 be ineligible for appointment by the court. Within 10 days after 11 the presentation of said petition, the court shall make the 12 appointments herein provided and the appointees, together with 13 the secretary or his designated representative, shall constitute 14 a special board of control. Vacancies occurring because of death 15 or resignation of appointed members of the board shall be filled 16 by the court. The special board of control shall assume control 17 of the affairs of the district and operate it in the place of 18 the school directors during the period necessary to reestablish 19 a sound financial structure in the district. The costs of the 20 court proceedings shall be paid by the department. 21 Section 412. Powers of the special board of control. 22 When the special board of control assumes control of a 23 distressed school district, it shall have power and is hereby 24 authorized to exercise all the rights, powers, privileges, 25 prerogatives and duties imposed or conferred by law on the board 26 of school directors of the distressed district, and the board of 27 school directors shall have no power to act without the approval 28 of the special board of control. In addition thereto, the 29 special board of control shall have power to require the board 30 of directors within 60 days to revise the district's budget for 19770H1075B1251 - 22 -
1 the purpose of effecting such economies as it deems necessary to 2 improve the district's financial condition. To this end the 3 special board of control may require the board: 4 (1) To cancel or to renegotiate any contract other than 5 teachers' contracts to which the board or the school district 6 is a party, if such cancellation or renegotiation of contract 7 will effect needed economies in the operation of the 8 district's schools. 9 (2) To increase tax levies in such amounts and at such 10 times as is permitted by the act of March 10, 1949 (P.L.30, 11 No.14), known as the "Public School Code of 1949." 12 (3) To appoint a special collector of delinquent taxes 13 for the district who need not be a resident of the school 14 district. Such special tax collector shall exercise all the 15 rights and perform all the duties imposed by law on tax 16 collectors for school districts. The superseded tax collector 17 shall not be entitled to any commissions on the taxes 18 collected by the special collector of delinquent taxes. 19 (4) To direct the special school auditors of the 20 department or to appoint a competent independent public 21 accountant to audit the accounts of the distressed school 22 districts. 23 (5) To dispense with the services of such 24 nonprofessional employees as in his judgment are not actually 25 needed for the economical operation of the school system. 26 (6) To suspend, in accordance with the provisions of the 27 act of March 10, 1949 (P.L.30, No.14), known as the "Public 28 School Code of 1949," such number of professional and 29 temporary professional employees as may be necessary to 30 maintain a pupil-teacher ratio of not less than 26 pupils per 19770H1075B1251 - 23 -
1 teacher for the combined elementary and secondary school 2 enrollments. 3 Section 413. Additional tax. 4 When the operation of a distressed school district has been 5 assumed by the special board of control, the board of school 6 directors of the district shall, upon the recommendation and 7 with the approval of the special board of control, levy an 8 additional tax or taxes sufficient to pay the indebtedness of 9 the district including that for the authority: Provided, That 10 when such school directors fail to levy such additional taxes 11 within a reasonable time, the special board of control may 12 petition the court of common pleas of the county in which such 13 district or the largest part in area is located to issue a writ 14 of mandamus requiring the board to levy such additional tax or 15 taxes. In no case shall taxes levied under this section produce 16 revenues greater than 120% of revenues raised by all local taxes 17 levied for school district purposes in the current fiscal year. 18 The subjects of taxation shall be limited to persons, 19 transactions, occupations, privileges, subjects and real and 20 personal property which may now or hereafter be taxable by the 21 school district for school district purposes. 22 Section 414. School directors to remain in office; elections. 23 The school directors of a distressed district may not resign 24 their offices, except with the unanimous consent of the special 25 board of control and shall continue in office, unless removed 26 from office for neglect of duty under the provisions of the act 27 of March 10, 1949 (P.L.30, No.14), known as the "Public School 28 Code of 1949," set by the court of common pleas of the county in 29 which such district or the largest part in area is located, or 30 unless any of such directors are elected to another position not 19770H1075B1251 - 24 -
1 compatible with the position of school director or are appointed 2 to any position for which there is a requirement that said 3 appointee shall hold no elective office, for the remainder of 4 their terms during the time the district is operated by the 5 special board of control and shall perform any duties delegated 6 to them by it. The assumption of control of a distressed school 7 district by the special board of control shall in no way 8 interfere with the regular election or reelection of school 9 directors for the district. 10 Section 415. Payments to school districts. 11 (a) Appropriations.--From appropriations specifically made 12 for this purpose, the department shall pay school districts for 13 the amounts required to be paid to the authority by the school 14 districts pursuant to agreements entered into in accordance with 15 section 204. The amount of such payments to each school district 16 shall not in any year exceed the amount of interest accrued or 17 to accrue that year on the principal amount of the authority's 18 outstanding bonds or notes, the proceeds of which were used to 19 make a loan to or to finance the purchase of the school 20 buildings, of the respective school districts. 21 (b) Certification of interest.--The authority shall certify 22 the secretary as to each school district, the amount of such 23 interest, for each school district. 24 (c) Pro rata payments.--In the event an appropriation 25 specifically for each such payment is not adequate to fund the 26 aggregate of all such payments certified by the authority, the 27 secretary shall make pro rata payments. 28 (d) Payments to be additional.--Payments under this act 29 shall be in addition to all other funds, subsidies and 30 reimbursements made available to school districts under any law 19770H1075B1251 - 25 -
1 now in effect or as may be henceforth enacted, including sinking 2 fund and lease rental reimbursements to be extent and for the 3 period currently committed. 4 Section 416. Withholding Commonwealth funds for unpaid 5 indebtedness. 6 In all cases in which the board of school directors fails to 7 pay or to provide for the payment of rental or rentals or loan 8 repayments due the authority for any period in accordance with 9 the terms of any lease or loan agreement entered into in 10 accordance with the provisions of this act, the authority shall 11 notify the secretary and the department shall withhold out of 12 any moneys which may be or have been appropriated by the 13 Commonwealth and which are due such school district an amount 14 equal to the sum of the rental or rentals or loan payments owing 15 by such school district to the authority, and shall pay over the 16 amount so withheld to the authority. 17 CHAPTER 5 18 RULES AND REGULATIONS 19 EFFECTIVE DATE 20 Section 501. Rules and regulations. 21 The authority, the secretary, and the department shall have 22 the power to promulgate rules and regulations as are necessary 23 and appropriate and as are consistent with the intent and 24 purpose of this act. 25 Section 502. Secretary. 26 The secretary is authorized to employ the staff necessary to 27 administer this act. Persons so employed shall not be subject to 28 the provisions of the act of August 5, 1941 (P.L.752, No.286), 29 known as the "Civil Service Act." 30 Section 503. Severability. 19770H1075B1251 - 26 -
1 The provisions of this statute shall be severable. If any 2 provision of this statute or the application thereof of any 3 person or circumstance is held invalid, the remainder of the 4 statute, and the application of such provision to other persons 5 or circumstances, shall not be affected thereby, unless the 6 court finds that the valid provisions of the statute are so 7 essentially and inseparably connected with, and so depend upon, 8 the void provision or application, that it cannot be presumed 9 the General Assembly would have enacted the remaining valid 10 provisions without the void one; or unless the court finds that 11 the remaining valid provisions, standing alone, are incomplete 12 and are incapable of being executed in accordance with 13 legislative intent. 14 Section 504. Authorized investments for school district funds. 15 Authorized types of investments of proceeds from the 16 authority shall be limited to: 17 (1) United States treasury bills. 18 (2) Direct obligations of the United States Government 19 and its agencies. 20 (3) Deposits in time accounts, open time accounts, share 21 accounts and all other investments in authorized depositories 22 for which collateral is secured by the pledging of assets in 23 accordance with the act of August 6, 1971 (P.L.281, No.72), 24 relating to pledges of assets to secure deposits of public 25 funds. 26 Section 505. Effective date. 27 This act shall take effect immediately. D26L54JKD/19770H1075B1251 - 27 -