PRIOR PRINTER'S NOS. 1251,1308 PRINTER'S NO. 1637
No. 1075 Session of 1977
INTRODUCED BY MESSRS. PIEVSKY, JOHNSON, COHEN, RIEGER, OLIVER, MRS. SCANLON, MESSRS. GIAMMARCO, JONES, BORSKI, McINTYRE, WIGGINS, DUMAS, BARBER, GREENFIELD, WHITE, MRS. HARPER, MESSRS. CIANCIULLI AND RICHARDSON, APRIL 27, 1977
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES, JUNE 21, 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.
1 Section 302. Credit of Commonwealth or any subdivision 2 not pledged. 3 Section 303. Moneys of the authority. 4 Section 304. Annual report, books and records of the 5 authority. 6 Section 305. Exemptions from taxation. 7 Section 306. Bonds as legal investments. 8 Section 307. Covenant by Commonwealth not to limit or 9 alter powers vested in authority. 10 Chapter 4. Powers and Duties of the Secretary of Education 11 Section 401. Application. 12 Section 402. Requirements for application. 13 Section 403. Initial review by secretary. 14 Section 404. Financial schedule. 15 Section 405. Agreements. 16 Section 406. Approval of agreements. 17 Section 407. Closing. 18 Section 408. Amendments to financial schedule. 19 Section 409. Investigation and audits by the department. 20 Section 410. Noncompliance by school district. 21 Section 411. Special board of control; petition, 22 appointments. 23 Section 412. Powers of the special board of control. 24 Section 413. Additional tax. 25 Section 414. School directors to remain in 26 office; elections. 27 Section 415. Payments to school districts. 28 Section 416. Withholding Commonwealth funds for unpaid 29 indebtedness. 30 Chapter 5. Rules and Regulations; Effective Date 19770H1075B1637 - 2 -
1 Section 501. Rules and regulations. 2 Section 502. Secretary. 3 Section 503. Severability. 4 Section 504. Authorized investments for school district 5 funds. 6 Section 505. Effective date. 7 The General Assembly of the Commonwealth of Pennsylvania 8 hereby enacts as follows: 9 CHAPTER 1 10 GENERAL PROVISIONS 11 Section 101. Short title. 12 This act shall be known and may be cited as the "Public 13 School Finance Assistance Act." 14 Section 102. Legislative findings and determination of policy. 15 It is hereby determined and declared as a matter of 16 legislative finding that: 17 (1) The welfare of the Commonwealth is threatened by the 18 fact that some school districts may not be able to find 19 adequate funding. 20 (2) The tax burden of the citizens of Pennsylvania is 21 already at a very high level of their incomes. 22 (3) As the economy expands, and school enrollments 23 stabilize or are reduced, the taxing authority of school 24 districts will be adequate to meet future expenses. 25 (4) The Commonwealth has a strong responsibility to 26 assist financially hard-pressed school districts in order to 27 promote the educational opportunities of all of its citizens. 28 The Commonwealth recognizes its obligation to assist these 29 school districts to restore financial stability by providing 30 the guidance of the Secretary of Education and paying the 19770H1075B1637 - 3 -
1 school districts for some of the costs associated with 2 restoring their financial health. 3 (5) The Commonwealth has a responsibility to promote 4 educational opportunities by assisting school districts to 5 plan for long-term financial stability. 6 (6) Therefore, it is hereby declared to be the policy of 7 this Commonwealth to create an authority to issue bonds and 8 to enact a program to: 9 (i) Loan money to or purchase school buildings from 10 school districts for the purpose of assisting them in 11 achieving and maintaining fiscal stability; 12 (ii) Require the preparation of a financial plan by 13 school districts from which school buildings are 14 purchased or qualify and apply for such loans; 15 (iii) Empower the Secretary of Education to monitor 16 the finances of those school districts which qualify and 17 file financial plans and receive loans or from which 18 school buildings are to be purchased; 19 (iv) Authorize the Secretary of Education to apply 20 sanctions to any school district participating in the 21 loan program, or from which school buildings are 22 purchased, which fails to comply with its approved 23 financial plan. 24 Section 103. Definitions. 25 The following words and phrases when used in this act shall 26 have, unless the context clearly indicates otherwise, the 27 meanings given to them in this section: 28 "Authority." The body politic and corporate created by this 29 act. 30 "Bond" or "bonds." Notes, or any renewals thereof, bonds, 19770H1075B1637 - 4 -
1 refunding bonds and other evidences of indebtedness or
2 obligations of the authority.
3 "Department." The Department of Education.
4 "School building." Includes, but shall not be limited to,
5 any structure used or useful for schools and playgrounds,
6 including facilities for physical education.
7 "School district." A school district as defined in the act
8 of March 10, 1949 (P.L.30, No.14), known as the "Public School
9 Code of 1949."
10 "Secretary." The Secretary of Education.
11 "Unfunded debt of a school district." Its obligations ANY <--
12 OBLIGATION OF A SCHOOL DISTRICT of the same or a prior year,
13 properly contracted for current expenses (including tax
14 anticipation notes) due and owing, which taxes and other
15 revenues of the school district remaining to be collected in the
16 fiscal year and funds on hand will not be sufficient to pay
17 without a curtailment of school district services to an extent
18 which endangers the proper education of school children.
19 CHAPTER 2
20 PUBLIC SCHOOL FINANCE ASSISTANCE AUTHORITY
21 Section 201. Creation of authority.
22 (a) Members.--The Governor, the State Treasurer, the Auditor
23 General, the Secretary of Education, the Secretary of General
24 Services, the President pro tempore of the Senate, the Speaker
25 of the House of Representatives, the minority leader of the
26 Senate, the minority leader of the House of Representatives, and
27 their respective successors in office are hereby created a body
28 corporate and politic, constituting a public corporation and
29 government instrumentality by the name of the "Public School
30 Finance Assistance Authority." The President pro tempore of the
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1 Senate and minority leader of the Senate and the Speaker of the 2 House of Representatives and minority leader of the House or OF <-- 3 Representatives may designate any member of the Senate or House, 4 respectively, to act in their stead to serve at the discretion 5 of the respective President pro tempore or minority leader and 6 Speaker of the House of Representatives or minority leader. Such 7 designees, if any, shall be the same persons designated under 8 the "State Public School Building Authority Act." Said members 9 of the authority shall be entitled to no compensation for their 10 services as members but shall be entitled to reimbursement for 11 all necessary expenses incurred in connection with the 12 performance of their duties as members. 13 (b) Term for members of General Assembly.--The President pro 14 tempore of the Senate and the Speaker of the House of 15 Representatives, the minority leader of the Senate and the 16 minority leader of the House of Representatives, shall continue 17 as members of the authority until their respective successors in 18 office assume such office, regardless of whether or not they 19 shall have ceased to be members of the Senate or the House of 20 Representatives. 21 (c) Deputy permitted.--The member MEMBERS of the authority <-- 22 may authorize by written proxy or authorization a personal 23 deputy to appear and act for them at a meeting and for the 24 purposes specified in such written proxy or authorization, 25 provided that a separate written authorization or proxy shall be 26 required for each separate meeting. 27 Section 202. General powers. 28 The authority is hereby granted and shall have and may 29 exercise all the powers necessary or convenient for the carrying 30 out of the aforesaid purposes, including but without limiting 19770H1075B1637 - 6 -
1 the generality of the foregoing, the following rights and 2 powers: 3 (1) To have perpetual existence as a corporation; 4 (2) To sue and be sued, implead and be impleaded, 5 complain and defend, in all courts; 6 (3) To adopt, use and alter at will a corporate seal; 7 use any property real, personal or mixed, tangible or <-- 8 (4) TO ACQUIRE, PURCHASE, HOLD, LEASE AS LESSEE AND USE <-- 9 ANY PROPERTY, REAL, PERSONAL OR MIXED, TANGIBLE OR 10 intangible, or any interest therein (necessary or desirable) 11 for carrying out the purpose of the authority, and to sell, 12 lease AS LESSOR, transfer and dispose of any property or any <-- 13 interest therein at any time acquired by it; 14 (4) (5) To make bylaws for the management and regulation <-- 15 of its affairs; 16 (5) (6) To obtain only from the State Public School <-- 17 Building Authority OR THE DEPARTMENT OF EDUCATION, for a fee, <-- 18 those executive, fiscal and administrative services, as may 19 be required to carry out the functions of the authority under 20 this act; 21 (6) (7) To ACQUIRE AND LEASE SCHOOL BUILDINGS AND TO <-- 22 fix, alter, charge and collect rentals, and other charges for 23 the use of the facilities of, or for the services rendered by 24 the authority, at reasonable rates to be determined by it for 25 the purpose of providing for the payment of the expenses of 26 the authority, not provided for by appropriation by the 27 Commonwealth, or otherwise, the construction, improvement, 28 repair, equipping and furnishing, maintenance and operation 29 of its facilities and properties, the payment of the 30 principal of, and interest on, its obligations, and to 19770H1075B1637 - 7 -
1 fulfill the terms and provisions of any agreements made with 2 the purchasers or holders of any such obligations OR <-- 3 AGREEMENTS MADE WITH ANY SCHOOL DISTRICT AS PROVIDED FOR IN 4 THIS ACT; 5 (7) (8) To borrow money for the purposes of making loans <-- 6 to school districts and purchasing public school buildings; 7 (8) (9) To make loans to school districts in accordance <-- 8 with this act on such THE terms and conditions as it deems <-- 9 desirable OF THIS ACT subject to the approval of the <-- 10 secretary; 11 (9) (10) To make and issue bonds and to secure the <-- 12 payment of all such bonds and to make such agreements with 13 the purchasers or holders of all such bonds, or with others 14 in connection with all such bonds, whether issued or to be 15 issued as the authority shall deem advisable, and in general 16 to provide for the security for all such bonds and the rights 17 of the holders thereof; and in connection therewith to enter 18 into a trust indenture, deed of trust, mortgage, or other 19 similar security instrument with any bank or trust company as 20 indenture trustee, trustee, mortgage MORTGAGEE or equivalent: <-- 21 Provided, however, That each separate issue of bonds shall be 22 issued pursuant to a trust indenture, deed of trust, mortgage 23 or other similar security instrument, separate, distinct and 24 apart from that of each and every other issue of bonds: 25 Provided further, That a particular bank or trust company may 26 be designated by the authority as indenture trustee with 27 respect to more than one trust indenture; 28 (10) (11) Without limitation of the foregoing, to borrow <-- 29 money, and accept grants from, and to enter into contracts, 30 leases or other transactions with any Federal agency; 19770H1075B1637 - 8 -
1 (11) (12) To pledge, hypothecate, mortgage or otherwise <-- 2 encumber, all or any of the school buildings, revenues or 3 receipts of the authority as security for all, or any of the 4 obligations of the authority; 5 (13) TO CONDUCT A DESK AUDIT AND A PRE-AUDIT BY THE <-- 6 STATE TREASURER IMMEDIATELY TO DETERMINE THE FISCAL POSITION 7 OF THE PHILADELPHIA SCHOOL DISTRICT, ADDITIONALLY A PRE-AUDIT 8 SHOULD BE CONDUCTED ANNUALLY THEREAFTER TO ASSURE FISCAL 9 ACCOUNTABILITY; 10 (12) (14) To do all acts and things necessary or <-- 11 convenient to carry out the powers granted to it by this act. 12 or any other acts. <-- 13 Section 203. Limitation on contracts. 14 No contract for the purchase, sale or lease of school 15 buildings or for the loan of money, or for any other purpose, 16 shall be executed between the authority and school districts or 17 municipality authorities created by school districts without 18 specific prior written approval of the secretary. 19 Section 204. Leases, loans and transfer of buildings. 20 (a) Authorization to lease.--Any school district or 21 districts within the Commonwealth shall have power and authority 22 to lease as lessee from the authority any school building, and 23 the furnishings and equipment thereof for a term, with respect 24 to each not exceeding 40 years, at such rental or rentals as may 25 be determined by the authority. THE RENTAL OR RENTALS SHALL BE <-- 26 AMORTIZED OVER THE PERIOD OF THE LEASE, BUT THE SCHOOL 27 DISTRICT'S ANNUAL RENTAL PAYMENT FIXED BY THE AUTHORITY IN SUCH 28 LEASE SHALL BE OF SUFFICIENT AMOUNT AS TO REIMBURSE THE 29 AUTHORITY FOR THE AMOUNT OF PRINCIPAL AND THE INTEREST ACCRUED 30 OR TO ACCRUE ANNUALLY ON THE OUTSTANDING BONDS AND NOTES AND 19770H1075B1637 - 9 -
1 SUCH OTHER COSTS OF THE AUTHORITY, AS SHALL BE PRORATED AND 2 ALLOCATED BY THE AUTHORITY AS ANNUAL PAYMENT FROM SUCH SCHOOL 3 DISTRICT. 4 (b) Authorization to borrow money.--Any school district or 5 districts within the Commonwealth shall have the power and 6 authority to borrow money from the authority and to transfer 7 title of school buildings to the authority as part of such loan 8 transaction. THE LOAN SHALL BE AMORTIZED OVER THE PERIOD OF THE <-- 9 LOAN AGREEMENT BUT THE ANNUAL PAYMENT FIXED BY THE AUTHORITY IN 10 THE SCHOOL DISTRICT'S LOAN AGREEMENT SHALL BE OF SUFFICIENT 11 AMOUNT TO REIMBURSE THE AUTHORITY FOR THE PRINCIPAL AND INTEREST 12 ACCRUED OR TO ACCRUE ANNUALLY ON THE OUTSTANDING BONDS OR NOTES 13 AND SUCH OTHER ANNUAL COSTS OF THE AUTHORITY AS SHALL BE 14 PRORATED AND ALLOCATED BY THE AUTHORITY AS ANNUAL PAYMENT FROM 15 SUCH SCHOOL DISTRICT. 16 (c) Conveyance of lands.-- Any school district shall have 17 the power and authority, with the approval of the Secretary of 18 Education, to grant, assign and convey to the authority, with or 19 without consideration, any lands, easements or rights in lands 20 together with any improvements, school buildings or structures 21 therein or thereon, now owned by such school district or 22 hereafter acquired by it, needed or convenient to carry out the 23 purposes of this act, as well as furnishings and equipment for 24 school buildings. 25 (d) Reconveyance by authority.-- When the authority shall 26 have finally paid and discharged all bonds, including refunding 27 bonds, together with all interest due thereon, which were issued 28 for the purposes of this act and shall have paid any and all 29 other charges and obligations incurred, the authority may 30 reconvey such school buildings conveyed to it in connection with 19770H1075B1637 - 10 -
1 the issuance of such bonds to the school district to which such 2 buildings were leased. 3 CHAPTER 3 4 BONDS; NOTES; OBLIGATIONS OF THE AUTHORITY 5 Section 301. Issuance of bonds and notes. 6 (a) Power to issue bonds.-- The authority shall have the 7 power and is hereby authorized from time to time to issue its 8 bonds, either as serial bonds, maturing in annual installments 9 or as term bonds, or any combination thereof, in such principal 10 amount as in the opinion of the authority shall be necessary to 11 provide sufficient funds for achieving its corporate purposes, 12 including but not limited to the payment of interest on bonds of 13 the authority, establishment of reserves to secure such bonds 14 and all other expenditures of the authority incident to and 15 necessary or convenient to carry out its corporate purposes and 16 powers. The authority shall have power, from time to time, to 17 issue bonds to pay notes and whenever it deems refunding 18 expedient to refund any or all bonds by the issuance of new 19 bonds, whether the bonds to be refunded have or have not 20 matured, and to issue bonds partly to refund bonds then 21 outstanding and partly for any other purpose. The proceeds of 22 the refunding bonds shall be applied to the purchase, redemption 23 or payment of the bonds to be refunded, all as authorized by the 24 authority. 25 (b) Form of bonds.-- The bonds shall be authorized by 26 resolution of the authority, shall bear such date or dates, and 27 shall mature at such time or times, not exceeding 40 years from 28 the date of issue, as such resolution or resolutions may 29 provide. The bonds shall bear interest at such rate or rates, be 30 in such denominations, be in such form, either coupon or 19770H1075B1637 - 11 -
1 registered, carry such registration privileges, contain such
2 terms and provisions relating to, but not limited to, pledges of
3 the assets, setting aside of reserves, limitations or ON <--
4 additional bonds, and such other matters as may affect the
5 security or protection of the bonds, be executed in such manner,
6 be payable in such medium of payment, at such place or places
7 and be subject to such terms of redemption as such resolution or
8 resolutions may provide. The bonds of the authority may be sold
9 at public or private sale, at such price or prices as the
10 authority shall determine.
11 (c) Liability for bonds.-- Neither the members of the
12 authority nor any person executing the bonds shall be liable
13 personally on the bonds or be subject to any personal liability
14 or accountability by reason of the issuance thereof.
15 (d) Repurchase of bonds.-- The authority, subject to such
16 agreement with bondholders as may then exist, shall have the
17 power out of any funds available therefor to purchase its bonds,
18 which shall thereupon be cancelled, at a price not exceeding:
19 (1) if the bonds are then redeemable, the redemption
20 price then applicable plus accrued interest to the next
21 interest payment date thereupon, or
22 (2) if the bonds are not then redeemable, the redemption
23 price applicable on the first date after such purchase upon
24 which the bonds become subject to redemption plus accrued
25 interest to such date.
26 Section 302. Credit of Commonwealth or any subdivision not
27 pledged.
28 Except as may otherwise be expressly provided by the
29 authority, its bonds shall be general obligations of the
30 authority payable out of any moneys or revenues of the
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1 authority, including rental payments, the proceeds of loans made 2 under this act, reserve funds created therefor by the authority, 3 and other money lawfully available to the authority, subject 4 only to any agreements with holders of the bonds pledging any 5 moneys or revenues. Bonds of the authority issued under the 6 provisions of this act shall not be deemed to constitute a debt 7 of the Commonwealth or of any political subdivision thereof or a 8 pledge of the faith and credit of the Commonwealth or of any 9 such political subdivision thereof. or a pledge of the faith <-- 10 and credit of the Commonwealth or of any such political 11 subdivision. All such bonds shall contain on the face thereof a 12 statement to the effect that neither the Commonwealth nor any 13 political subdivision thereof shall be obligated to pay the same 14 or the interest thereon and that neither the faith and credit 15 nor the taxing power of the Commonwealth nor any political 16 subdivision thereof is pledged to the payment of the principal 17 of or the interest thereon. 18 Section 303. Moneys of the authority. 19 All moneys of the authority from whatever source derived 20 shall be paid to the treasurer of the authority and shall be by 21 him invested in United States Treasury obligations, obligations 22 of agencies and instrumentalities of the United States, or 23 obligations of this Commonwealth, or deposited in one or more 24 banks or trust companies, AS EVIDENCED BY CERTIFICATES OF <-- 25 DEPOSIT OR OTHERWISE, in one or more special accounts until 26 required to be transferred to one or more sinking funds or 27 analogous funds in order to make payment of interest or 28 principal on bonds of the authority. Each deposit shall be 29 continuously secured by pledge of direct obligations of the 30 United States of America or of this Commonwealth, bonds of the 19770H1075B1637 - 13 -
1 agency, AUTHORITY, of other authorities of this Commonwealth, or <-- 2 of agencies and instrumentalities of the United States, having 3 an aggregate market value, exclusive of accrued interest, at all 4 times, at least equal to the balance on deposit in the account. 5 The security shall be either deposited with the treasurer or 6 held by a trustee or agent satisfactory to the authority. All 7 banks and trust companies are authorized to give the security 8 required. The treasurer shall make reasonable efforts to obtain 9 the highest available yield on the investments or deposits. 10 Interest or other income earned on the investments or deposits 11 shall be used for debt service reduction, administrative 12 expenses or for such other purposes as the authority may from 13 time to time determine. The moneys of the authority shall be 14 paid out on the warrant or other order of the treasurer of the 15 authority or of another person authorized by the authority to 16 execute warrants or orders. Moneys held in trust or otherwise to 17 secure the payment of bonds or notes shall be secured in the 18 same manner as moneys of the authority and all banks and trust 19 companies are authorized to give security for such deposits. 20 Notwithstanding the provisions of this section, the authority 21 shall have power to contract with the holders of any of its 22 bonds or notes as WITH RESPECT TO the custody, security, <-- 23 investment and payment of any moneys of the authority or any 24 moneys held in trust or otherwise to secure the payment of bonds 25 or notes. Any provisions with respect to custody, security, 26 investment or payment of moneys of the authority shall not 27 become effective until the resolution or trust indenture 28 containing such contract with bondholders or noteholders shall 29 have been approved in writing by the Governor. 30 Section 304. Annual report, books and records of the 19770H1075B1637 - 14 -
1 authority.
2 The authority shall file an annual report with the Department
3 of Community Affairs. OF EDUCATION AND THE GENERAL ASSEMBLY. The <--
4 authority shall have its books, accounts and records audited
5 annually by a certified public accountant and a copy of this
6 audit shall be attached to and be made a part of the aforesaid
7 annual report. A concise financial statement shall be published
8 annually by the authority and shall be available for public
9 inspection at the office of the authority. The Auditor General
10 shall have the right to examine the books, accounts and records
11 of the authority.
12 Section 305. Exemptions from taxation.
13 (a) Public purpose of authority.-- The creation of the
14 authority is in all respects for the benefit of the people of
15 the Commonwealth and for the improvement of their health,
16 safety, welfare, comfort and security, and its purposes are
17 public purposes and the authority will be performing an
18 essential governmental function.
19 (b) Interest free of certain taxes.--The Commonwealth
20 covenants with the purchasers and all subsequent holders and
21 transferees of the bonds issued by the authority in
22 consideration of the acceptance of any payment for the bonds,
23 that the bonds of the authority issued pursuant to this act and
24 the income therefrom shall at all times be free from taxation or
25 assessment of every kind and nature except for inheritance,
26 estate, gift and transfer taxes.
27 (c) Authority exempt from taxation.-- The authority shall be
28 exempt from payment of any taxes or assessments upon any
29 property acquired, held, owned, leased or used by it. The income
30 and revenues of the authority shall likewise be free from
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1 taxation. 2 Section 306. Bonds as legal investments. 3 The bonds of the authority are securities in which all public 4 officers and bonders of the Commonwealth and all municipalities 5 and municipal subdivisions, all insurance companies and 6 associations, and other persons carrying on an insurance 7 business, all banks, trust companies, savings banks and savings 8 associations, investment companies, all administrators, 9 guardians, executors, trustees and other fiduciaries, and all 10 other persons whatsoever who are now or may hereafter be 11 authorized to invest in bonds or other obligations of the 12 Commonwealth, may properly and legally invest funds, including 13 capital, in their control or belonging to them. 14 Section 307. Covenant by Commonwealth not to limit or alter 15 powers vested in authority. 16 The Commonwealth does hereby pledge and covenant and agree 17 with the holders of any bonds issued pursuant to the authority 18 of this act that the Commonwealth will not limit or alter the 19 rights or powers hereby vested in the authority to perform and 20 fulfill the terms of any agreement made with the holders of such 21 bonds or in any way impair the rights or remedies of such 22 holders, until such bonds, together with interest thereon, with 23 interest on any unpaid installments of interest, and all costs 24 and expenses in connection with any action or proceedings by or 25 in behalf of such holders, are fully met and discharged or 26 provided for. The authority may include this pledge and 27 agreement of the Commonwealth in any agreement with the holders 28 of bonds issued by the authority. 29 CHAPTER 4 30 POWERS AND DUTIES OF THE SECRETARY OF EDUCATION 19770H1075B1637 - 16 -
1 Section 401. Application. 2 Any school district may apply and be considered for 3 authorization to participate in the program provided by this act 4 by filing an application with the secretary. Applications shall 5 be submitted by the board of school directors in such form as 6 the secretary may require. 7 Section 402. Requirements for application. 8 Each application shall state, and be supported by such 9 adequate documentation as the secretary may require: 10 (1) that the school district has unfunded debt; 11 (2) that the board of school directors is taxing real <-- 12 estate at the maximum rate set by statute or that the board 13 (2) (I) THAT THE BOARD OF SCHOOL DIRECTORS IS TAXING <-- 14 REAL ESTATE AT THE MAXIMUM RATE SET BY STATE STATUTE; OR 15 (II) THAT THE BOARD of school directors has levied 16 real estate taxes such that the district is making a 17 local real estate tax effort greater than 85% of the 18 school districts in the Commonwealth and is taxing earned 19 income at the maximum rate permitted under the act of 20 December 31, 1965 (P.L.1257, No.511), known as "The Local 21 Tax Enabling act." As used in this section, local tax 22 effort means that figure determined by the secretary to 23 be the mill equivalent of all taxes on equalized value; 24 and 25 (3) that the school district would experience <-- 26 substantial financial benefits through participation in the 27 programs provided by this act in addition to those benefits 28 due to receipt of subsidies as provided for in section 415. 29 (3) THAT THE SCHOOL DISTRICT WOULD EXPERIENCE A SEVERE <-- 30 CURTAILMENT OF SCHOOL DISTRICT SERVICES TO AN EXTENT WHICH 19770H1075B1637 - 17 -
1 ENDANGERS THE PROPER EDUCATION OF SCHOOL CHILDREN IF THE 2 SCHOOL DISTRICT DID NOT PARTICIPATE IN THIS ACT. 3 Section 403. Initial review by secretary. 4 (a) Review.--Upon receipt of an application the secretary 5 shall review the statements and documentation submitted by the 6 school district and shall determine whether or not the applicant 7 meets the requirements set forth in section 402. 8 (b) Procedure on approval.--If the secretary determines that 9 an applicant meets the requirements set forth in section 402, 10 and if he finds that the school district's participation in the 11 programs provided by this act are in the best interests of the 12 school district, he shall authorize the school district to file 13 the financial schedule and agreements required by sections 404 14 and 405 and to apply to and begin negotiations with the 15 authority so that the school district may participate in the 16 programs provided in this act. 17 Section 404. Financial schedule. 18 (a) Filing of schedule.--As a condition for receiving final 19 approval to participate in the programs provided by this act, 20 each school district authorized to negotiate with the authority 21 pursuant to section 403, shall file with the secretary, for his 22 approval, a financial schedule. 23 (b) Content of schedule.--The financial schedule shall set 24 forth in detail: 25 (1) The budgets of the school district for the current 26 and preceding year. 27 (2) A complete statement of all current obligations 28 whether funded or unfunded. 29 (3) The schedules of all outstanding debts and lease 30 rental obligations and the projects to which they are 19770H1075B1637 - 18 -
1 related. 2 (4) Copies of all current collective bargaining 3 agreements. 4 (5) A five-year detailed estimate ESTIMATED BUDGET <-- 5 SEGREGATED BY YEARS of all receipts and expenditures, 6 including the proposed proceeds from the sale of school 7 buildings and the obligations to the authority incurred by 8 the sale of school buildings. 9 (6) Such other information or matters as the secretary 10 shall determine. 11 (C) A SCHOOL DISTRICT SHALL FILE A FINANCIAL SCHEDULE FOR <-- 12 EACH YEAR IN WHICH SUCH SCHOOL DISTRICT PARTICIPATES IN PROGRAMS 13 AUTHORIZED UNDER THIS ACT. 14 (c) (D) Review of schedule.--The secretary shall review the <-- 15 financial schedule and may, in his sole discretion, require that 16 it be supplemented or amended. 17 (d) (E) Approval of schedule.--When the financial schedule <-- 18 is in a form acceptable to the secretary, he may approve it and 19 if approved shall so inform the authority. 20 Section 405. Agreements. 21 (a) Contents of agreements.--As a condition for receiving 22 approval to participate in the programs provided by this act, 23 each school district shall agree with the secretary, in a form 24 acceptable to him, that for the period covered by the financial 25 schedule: 26 (1) The school district will incur no unfunded debt. 27 (2) The school district will not incur any debt except 28 in accordance with the approved financial schedule. 29 (3) The school district shall adhere to the detailed 30 financial schedule filed in accordance with section 404 or as 19770H1075B1637 - 19 -
1 amended in accordance with section 408. 2 (4) AS PART OF THE FINANCIAL SCHEDULE AND AS A CONDITION <-- 3 TO PARTICIPATING IN THE PROGRAMS PROVIDED BY THIS ACT, IT 4 SHALL BE THE DUTY OF SUCH SCHOOL DISTRICT TO SET UP IN EACH 5 FISCAL YEAR A RESERVE AMOUNT FROM REVENUES DERIVED SOLELY 6 FROM ANY TAX WHICH THE SCHOOL DISTRICT IS DIRECTLY OR 7 INDIRECTLY AUTHORIZED, BY LAW TO LEVY FOR THE PURPOSE OF 8 REIMBURSING THE AUTHORITY FOR PRINCIPAL, INTEREST, OR OTHER 9 COSTS WHICH ARE TO BE FIXED BY THE AUTHORITY IN THE LEASE OR 10 LOAN AGREEMENT. 11 (5) FAILURE OF ANY SCHOOL DISTRICT TO ADHERE TO THE 12 RESERVE REQUIREMENTS AS SET FORTH IN PARAGRAPH (4) SHALL 13 CONSTITUTE AN "UNFUNDED DEBT" AND NONCOMPLIANCE BY THE SCHOOL 14 DISTRICT WITH THE PROVISIONS OF THIS ACT. AND, IF WITHIN 60 15 DAYS AFTER NOTICE BY THE SECRETARY DIRECTING COMPLIANCE, THE 16 SCHOOL DISTRICT FAILS TO DO SO, THE SCHOOL DISTRICT SHALL BE 17 CONSIDERED A DISTRESS DISTRICT WITHIN THE MEANING OF AND 18 SUBJECT TO THE PROVISIONS OF THIS ACT APPLICABLE TO 19 DISTRESSED SCHOOL DISTRICTS. 20 (b) Legal effect of agreements.--These agreements shall 21 become legally binding upon the school district in accordance 22 with section 407 and the secretary is authorized to take all 23 appropriate legal actions to enforce these agreements. 24 Section 406. Approval of agreements. 25 Each school district authorized under section 403 (b) to 26 negotiate with the authority shall submit to the secretary any 27 proposed agreement pursuant to section 204 between the school 28 district and the authority. The secretary may approve such 29 proposed agreements only if the school district has submitted an 30 approved financial schedule and approved proposed agreements 19770H1075B1637 - 20 -
1 with the secretary, provided that the secretary shall not 2 approve any such proposed agreements pursuant to which 3 obligations of a school district to the authority would result 4 in payments pursuant to section 415 which would exceed without 5 proration appropriations for such purposes. 6 Section 407. Closing. 7 Upon approval of the proposed agreements by the secretary, 8 the school directors shall enter into such agreements with the 9 authority. The agreements made by the school district and the 10 authority in accordance with section 405 shall become legally 11 binding on the parties thereto at the time of closing. 12 Section 408. Amendments to financial schedule. 13 The school district may, subject to the approval of the 14 secretary, amend and revise its financial schedule. The 15 secretary shall not approve an amendment to increase 16 expenditures unless the proposed amendment includes at least an 17 equal increase in revenue. 18 Section 409. Investigation and audits by the department. 19 The department may at any time make such investigations and 20 audits of financial records that it deems appropriate to assure 21 compliance with the financial schedule approved by the secretary 22 and agreements with the secretary made by the district. 23 Section 410. Noncompliance by school district. 24 (a) Determination.--Whenever the secretary, after 25 investigation, determines that a district is in noncompliance 26 with the approved financial schedule and agreements with the 27 secretary required by this act, he shall so notify the school 28 district in writing, citing the specific facts and circumstances 29 which have resulted in the determination. 30 (b) Financial review board.--Upon making a determination of 19770H1075B1637 - 21 -
1 noncompliance, the secretary may call for the establishment of a 2 financial review board to make recommendations regarding the 3 school district's finances. When a financial review board is 4 called for it shall be established as follows: 5 (1) For school districts of the first class the 6 financial review board shall consist of seven members 7 appointed as follows: 8 (i) One resident elector of the city who shall hold 9 no public office or public employment shall be appointed 10 by the secretary to serve as chairman. 11 (ii) Three resident electors shall be appointed each 12 by the Governor and by the authority. At least one of 13 each appointing agency's appointments shall hold no 14 public office or public employment. 15 (iii) As used in this subsection city means a city 16 which is coterminous with the boundaries of the school 17 district. 18 (2) For school districts other than districts of the 19 first class the financial review board shall consist of five 20 members appointed as follows: 21 (i) One resident elector of the school district who 22 shall hold no public office or public employment shall be 23 appointed by the secretary to serve as chairman. 24 (ii) Two resident electors of the school district 25 shall be appointed each by the board of school directors 26 and by the intermediate unit board of school directors of 27 the intermediate unit to which the school district is 28 assigned. At least one of each appointing agencies' 29 appointments shall hold no public office or public 30 employment. 19770H1075B1637 - 22 -
1 (c) Powers.--The financial review board shall review the 2 facts related to the secretary's determination of noncompliance, 3 the school district's budget and the approved financial schedule 4 and agreements with the secretary submitted pursuant to this act 5 and, within 30 days of the secretary's call for its 6 establishment, the board shall make a written report to the 7 school district with a copy to the secretary and, in the case of 8 a school district of the first class, to the mayor and city 9 council of the city whose political boundaries are coterminous 10 with those of the school district. The report shall contain 11 recommendations for adjusting revenues and expenditures of the 12 school district to bring it into compliance with the approved 13 financial schedule. 14 (d) Conduct of business.--The business of the financial 15 review board shall be conducted in accordance with the act of 16 July 19, 1974 (P.L.486, No.175), referred to as the Public 17 Agency Open Meeting Law, by majority vote of those present and 18 voting provided that a majority of the legally qualified members 19 are present. 20 (e) Distressed district.--The secretary shall review the 21 status of the school district 65 days after the call for the 22 establishment of a financial review board, and if he determines 23 that the district remains in noncompliance with the approved 24 financial schedule and agreements, he shall declare the school 25 district to be distressed. If he determines that the school 26 district is in compliance with the approved financial schedule 27 and agreements, he shall discharge the financial review board. 28 Section 411. Special board of control; petition, 29 appointments. 30 Whenever on the basis of an investigation as herein provided 19770H1075B1637 - 23 -
1 for, the secretary has declared any school district to be a 2 distressed school district he or his designated representative 3 shall petition the court of common pleas of the county in which 4 such district, or the largest part in area, is located to 5 appoint two citizens who shall be qualified electors and 6 taxpayers in the county in which the school district is located. 7 School directors and employees of any such school district shall 8 be ineligible for appointment by the court. Within 10 days after 9 the presentation of said petition, the court shall make the 10 appointments herein provided and the appointees, together with 11 the secretary or his designated representative, shall constitute 12 a special board of control. Vacancies occurring because of death 13 or resignation of appointed members of the board shall be filled 14 by the court. The special board of control shall assume control 15 of the affairs of the district and operate it in the place of 16 the school directors during the period necessary to reestablish 17 a sound financial structure in the district. The costs of the 18 court proceedings shall be paid by the department. 19 Section 412. Powers of the special board of control. 20 When the special board of control assumes control of a 21 distressed school district, it shall have power and is hereby 22 authorized to exercise all the rights, powers, privileges, 23 prerogatives and duties imposed or conferred by law on the board 24 of school directors of the distressed district, and the board of 25 school directors shall have no power to act without the approval 26 of the special board of control. In addition thereto, the 27 special board of control shall have power to require the board 28 of directors within 60 days to revise the district's budget for 29 the purpose of effecting such economies as it deems necessary to 30 improve the district's financial condition. To this end the 19770H1075B1637 - 24 -
1 special board of control may require the board: 2 (1) To cancel or to renegotiate any contract other than 3 collective bargaining agreements of school employees, to 4 which the board or the school district is a party, if such 5 cancellation or renegotiation of contract will effect needed 6 economies in the operation of the district's schools. 7 (2) To increase tax levies in such amounts and at such 8 times as is permitted by the act of March 10, 1949 (P.L.30, 9 No.14), known as the "Public School Code of 1949." 10 (3) To appoint a special collector of delinquent taxes 11 for the district who need not be a resident of the school 12 district. Such 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 superseded tax collector 15 shall not be entitled to any commissions on the taxes 16 collected by the special collector of delinquent taxes. 17 (4) To direct the special school auditors of the 18 department or to appoint a competent independent public 19 accountant to audit the accounts of the distressed school 20 districts. 21 (5) To dispense with the services of such 22 nonprofessional employees as in his judgment are not actually 23 needed for the economical operation of the school system. 24 (6) To suspend, in accordance with the provisions of the 25 act of March 10, 1949 (P.L.30, No.14), known as the "Public 26 School Code of 1949," such number of professional and 27 temporary professional employees as may be necessary to 28 maintain a pupil-teacher ratio of not less than 26 pupils per 29 teacher for the combined elementary and secondary school 30 enrollments. 19770H1075B1637 - 25 -
1 Section 413. Additional tax. 2 When the operation of a distressed school district has been 3 assumed by the special board of control, the board of school 4 directors of the district shall, upon the recommendation and 5 with the approval of the special board of control, levy an 6 additional tax or taxes sufficient to pay the indebtedness of 7 the district including that for the authority: Provided, That 8 when such school directors fail to levy such additional taxes 9 within a reasonable time, the special board of control may 10 petition the court of common pleas of the county in which such 11 district or the largest part in area is located to issue a writ 12 of mandamus requiring the board to levy such additional tax or 13 taxes. In no case shall taxes levied under this section produce 14 revenues greater than 120% of revenues raised by all local taxes 15 levied for school district purposes in the current fiscal year. 16 The subjects of taxation shall be limited to persons, 17 transactions, occupations, privileges, subjects and real and 18 personal property which may now or hereafter be taxable by the 19 school district for school district purposes. 20 Section 414. School directors to remain in office; elections. 21 The school directors of a distressed district may not resign 22 their offices, except with the unanimous consent of the special 23 board of control and shall continue in office, unless removed 24 from office for neglect of duty under the provisions of the act 25 of March 10, 1949 (P.L.30, No.14), known as the "Public School 26 Code of 1949," set by the court of common pleas of the county in 27 which such district or the largest part in area is located, or 28 unless any of such directors are elected to another position not 29 compatible with the position of school director or are appointed 30 to any position for which there is a requirement that said 19770H1075B1637 - 26 -
1 appointee shall hold no elective office, for the remainder of 2 their terms during the time the district is operated by the 3 special board of control and shall perform any duties delegated 4 to them by it. The assumption of control of a distressed school 5 district by the special board of control shall in no way 6 interfere with the regular election or reelection of school 7 directors for the district. 8 Section 415. Payments to school districts. 9 (a) Appropriations.--From appropriations specifically made 10 for this purpose, the department shall pay school districts for <-- 11 the amounts required to be paid to the authority by the school 12 districts pursuant to ON ACCOUNT OF LEASE OR LOAN agreements <-- 13 entered into in accordance with section 204. The amount of such 14 payments to each school district shall not in any year exceed 15 the amount of interest accrued or to accrue that year on the 16 principal amount of the authority's outstanding bonds or notes, 17 the proceeds of which were used to make a loan to or to finance 18 the purchase of the school buildings, of the respective school 19 districts. 20 (b) Certification of interest.--The authority shall certify 21 the secretary as to each school district, the amount of such 22 interest, for each school district. 23 (c) Pro rata payments.--In the event an appropriation 24 specifically for each such payment is not adequate to fund the 25 aggregate of all such payments certified by the authority, the 26 secretary shall make pro rata payments. 27 (d) Payments to be additional.--Payments under this act <-- 28 shall be in addition to all other funds, subsidies and 29 reimbursements made available to school districts under any law 30 now in effect or as may be henceforth enacted, including sinking 19770H1075B1637 - 27 -
1 fund and lease rental reimbursements to be extent and for the 2 period currently committed. 3 (D) EFFECT ON OTHER FUNDS, SUBSIDIES AND REIMBURSEMENTS.--NO <-- 4 SCHOOL DISTRICT SHALL RECEIVE ANY SUBSIDY, REIMBURSEMENT, OR 5 OTHER FUNDS UNDER ANY PROVISION OF THE ACT OF MARCH 10, 1949 6 (P.L.30, NO.14), KNOWN AS THE "PUBLIC SCHOOL CODE OF 1949," OR 7 UNDER THE PROVISIONS OF ANY OTHER LAW NOW IN EFFECT OR WHICH MAY 8 BE THEREAFTER ENACTED, THE BASIS OF WHICH SHALL BE THE 9 PARTICIPATION BY SUCH SCHOOL DISTRICT IN ANY PROGRAM AUTHORIZED 10 BY THIS ACT, EXCEPT THAT ANY SUBSIDY, REIMBURSEMENT OR OTHER 11 FUNDS RECEIVED BY A SCHOOL DISTRICT OR TO WHICH A SCHOOL 12 DISTRICT WAS ENTITLED TO RECEIVE UNDER ANY LAW IN EFFECT PRIOR 13 TO THE PARTICIPATION OF SUCH SCHOOL DISTRICT IN ANY PROGRAM 14 UNDER THIS ACT SHALL CONTINUE TO BE RECEIVED BY SUCH SCHOOL 15 DISTRICT. 16 Section 416. Withholding Commonwealth funds for unpaid 17 indebtedness. 18 In all cases in which the board of school directors fails to 19 pay or to provide for the payment of rental or rentals or loan 20 repayments due the authority for any period in accordance with 21 the terms of any lease or loan agreement entered into in 22 accordance with the provisions of this act, the authority shall 23 notify the secretary and the department shall withhold out of 24 any moneys which may be or have been appropriated by the 25 Commonwealth and which are due such school district an amount 26 equal to the sum of the rental or rentals or loan payments owing 27 by such school district to the authority, and shall pay over the 28 amount so withheld to the authority. 29 CHAPTER 5 30 RULES AND REGULATIONS; 19770H1075B1637 - 28 -
1 EFFECTIVE DATE 2 Section 501. Rules and regulations. 3 The authority, the secretary, and the department shall have 4 the power to promulgate rules and regulations as are necessary 5 and appropriate and as are consistent with the intent and 6 purpose of this act. 7 Section 502. Secretary. 8 The secretary is authorized to employ the staff necessary to 9 administer this act. Persons so employed shall not be subject to 10 the provisions of the act of August 5, 1941 (P.L.752, No.286), 11 known as the "Civil Service Act." 12 Section 503. Severability. 13 The provisions of this statute shall be severable. If any 14 provision of this statute or the application thereof of any 15 person or circumstance is held invalid, the remainder of the 16 statute, and the application of such provision to other persons 17 or circumstances, shall not be affected thereby, unless the 18 court finds that the valid provisions of the statute are so 19 essentially and inseparably connected with, and so depend upon, 20 the void provision or application, that it cannot be presumed 21 the General Assembly would have enacted the remaining valid 22 provisions without the void one; or unless the court finds that 23 the remaining valid provisions, standing alone, are incomplete 24 and are incapable of being executed in accordance with 25 legislative intent. 26 Section 504. Authorized investments for school district funds. 27 Authorized types of investments of proceeds from the 28 authority shall be limited to: 29 (1) United States treasury bills. 30 (2) Direct obligations of the United States Government 19770H1075B1637 - 29 -
1 and its agencies. 2 (3) Deposits in time accounts, open time accounts, share 3 accounts and all other investments in authorized depositories 4 for which collateral is secured by the pledging of assets in 5 accordance with the act of August 6, 1971 (P.L.281, No.72), 6 relating to pledges of assets to secure deposits of public 7 funds. 8 Section 505. Effective date. 9 This act shall take effect immediately, UPON THE <-- 10 APPROPRIATION OF THE SUM OF $10,000,000 TO A SCHOOL DISTRICT OF 11 THE FIRST CLASS BY A CITY OF THE FIRST CLASS. D26L54JKD/19770H1075B1637 - 30 -