As Introduced                            1            

123rd General Assembly                                             4            

   Regular Session                                  S. B. No. 345  5            

      1999-2000                                                    6            


                      SENATORS GARDNER-CUPP                        8            


_________________________________________________________________   10           

                          A   B I L L                                           

             To amend sections 3315.17, 3315.18, 3316.03,          12           

                3316.04, 3316.06, 3316.20, 5705.13, 5705.29, and   13           

                5705.38 and to enact sections 3316.031 and                      

                3316.061 of the Revised Code to address certain    14           

                school district mandates and to establish                       

                additional procedures for avoiding fiscal          15           

                problems in school districts.                      16           




BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:        17           

      Section 1.  That sections 3315.17, 3315.18, 3316.03,         19           

3316.04, 3316.06, 3316.20, 5705.13, 5705.29, and 5705.38 be        20           

amended and sections 3316.031 and 3316.061 of the Revised Code be  21           

enacted to read as follows:                                                     

      Sec. 3315.17.  (A)  The board of education of each city,     31           

exempted village, local, and joint vocational school district      32           

shall establish a textbook and instructional materials fund and.   33           

EACH BOARD ANNUALLY shall deposit into that fund four per cent,    35           

or another percentage if established in rules adopted under        36           

division (C) of this section, of all AN AMOUNT DERIVED FROM        37           

revenues received by the district for operating expenses THAT IS   40           

EQUAL TO THREE PER CENT OF THE FORMULA AMOUNT FOR THE CURRENT      41           

FISCAL YEAR, AS DEFINED IN SECTION 3317.02 OF THE REVISED CODE,                 

MULTIPLIED BY THE DISTRICT'S FORMULA ADM FOR THAT FISCAL YEAR, AS  42           

DEFINED IN THAT SECTION.  Money in the fund shall be used solely   44           

for textbooks, instructional software, and instructional           45           

materials, supplies, and equipment.  Any money in the fund that    46           

is not used in any fiscal year shall carry forward to the next     47           

                                                          2      


                                                                 
fiscal year.                                                       48           

      (B)  Notwithstanding division (A) of this section, if in a   50           

fiscal year a district board deposits in the textbook and          52           

instructional materials fund an amount of money greater than the   53           

amount required to be deposited by this section or the rules       54           

adopted under division (C) of this section, the board may deduct   55           

the excess amount of money from the amount of money required to    56           

be deposited in succeeding fiscal years.                           57           

      (C)  The state superintendent of public instruction and the  60           

auditor of state jointly shall adopt rules in accordance with      61           

Chapter 119. of the Revised Code defining what constitutes         63           

textbooks, instructional software, and instructional materials,    64           

supplies, and equipment for which money in a school district's     65           

textbook and instructional materials fund may be used.  The        66           

jointly adopted rules also may designate a percentage, other than  68           

four per cent, of district operating revenues that must be                      

deposited into the fund.  The auditor of state shall adopt rules   70           

under section 117.20 of the Revised Code authorizing up to a       72           

three-year phase-in period for district boards to meet the                      

percentage requirements of division (A) of this section, and       74           

specifying the manner in which district boards may deduct from a   75           

required deposit an excess amount deposited into the textbook and  76           

instructional materials fund in a prior fiscal year.                            

      (D)  Notwithstanding division (A) of this section, a         79           

district board of education in any fiscal year may appropriate     80           

money in the district textbook and instructional materials fund    81           

for purposes other than those permitted by that division if both   82           

of the following occur during that fiscal year:                    83           

      (1)  All of the following certify to the district board in   85           

writing that the district has sufficient textbooks, instructional  86           

software, and instructional materials, supplies, and equipment to  88           

ensure a thorough and efficient education within the district:     89           

      (a)  The district superintendent;                            91           

      (b)  In districts required to have a business advisory       93           

                                                          3      


                                                                 
council, a person designated by vote of the business advisory      94           

council;                                                                        

      (c)  If the district teachers are represented by an          96           

exclusive bargaining representative for purposes of Chapter 4117.  98           

of the Revised Code, the president of that organization or the     101          

president's designee.                                                           

      (2)  The district board adopts, by unanimous vote of all     103          

members of the board, a resolution stating that the district has   104          

sufficient textbooks, instructional software, and instructional    105          

materials, supplies, and equipment to ensure a thorough and        106          

efficient education within the district.                           107          

      (E)(D)  Notwithstanding any provision to the contrary in     109          

Chapter 4117. of the Revised Code, the requirements of this        110          

section prevail over any conflicting provisions of agreements      112          

between employee organizations and public employers entered into   113          

on or after November 21, 1997.                                     114          

      Sec. 3315.18.  (A)  The board of education of each city,     123          

exempted village, local, and joint vocational school district      124          

shall establish a capital and maintenance fund and.  EACH BOARD    126          

ANNUALLY shall deposit into that fund four per cent, or another    127          

percentage if established in rules adopted under division (B) of   128          

this section, of all AN AMOUNT DERIVED FROM revenues received by   129          

the district that would otherwise have been deposited in the       131          

general fund THAT IS EQUAL TO THREE PER CENT OF THE FORMULA        132          

AMOUNT FOR THE CURRENT FISCAL YEAR, AS DEFINED IN SECTION 3317.02  133          

OF THE REVISED CODE, MULTIPLIED BY THE DISTRICT'S FORMULA ADM FOR  134          

THAT FISCAL YEAR, AS DEFINED IN THAT SECTION, except that money    136          

received from a permanent improvement levy authorized by section   137          

5705.21 of the Revised Code may replace general revenue moneys in  138          

meeting the requirements of this section.  Money in the fund       139          

shall be used solely for acquisition, replacement, enhancement,    140          

maintenance, or repair of permanent improvements, as that term is  141          

defined in section 5705.01 of the Revised Code.  Any money in the  142          

fund that is not used in any fiscal year shall carry forward to    143          

                                                          4      


                                                                 
the next fiscal year.                                              144          

      (B)  The state superintendent of public instruction and the  147          

auditor of state jointly shall adopt rules in accordance with      148          

Chapter 119. of the Revised Code defining what constitutes                      

expenditures permitted by division (A) of this section and may     149          

designate a percentage, other than four per cent, of district      150          

operating revenues that must be deposited into the fund.  The      152          

auditor of state shall adopt rules under section 117.20 of the                  

Revised Code authorizing up to a three-year phase-in period for    154          

district boards to meet the percentage requirements of division    155          

(A) of this section.                                               156          

      (C)  Notwithstanding any provision to the contrary in        158          

Chapter 4117. of the Revised Code, the requirements of this        159          

section prevail over any conflicting provisions of agreements      160          

between employee organizations and public employers entered into   161          

after the effective date of this section NOVEMBER 21, 1997.        162          

      Sec. 3316.03.  (A)  The existence of a fiscal watch shall    172          

be determined DECLARED by the auditor of state.  The auditor of    174          

state may make the A determination on the auditor of state's       175          

initiative, or upon receipt of a written request for such a        176          

determination, which may be filed by the governor, the             177          

superintendent of public instruction, or a majority of the         178          

members of the board of education of the school district.  The     180          

auditor of state shall declare a school district to be in a state  181          

of fiscal watch if the auditor of state determines that division   182          

(A)(1), (2), or (3) of this section applies to the school          183          

district:                                                                       

      (1)  All of the following conditions are satisfied with      185          

respect to the school district:                                    186          

      (a)  An operating deficit has been certified for the         188          

current fiscal year by the auditor of state, and the certified     189          

operating deficit exceeds eight TWO per cent of the school         190          

district's general fund revenue for the preceding fiscal year,     192          

UNLESS THE AUDITOR OF STATE, IN CONSULTATION WITH THE                           

                                                          5      


                                                                 
SUPERINTENDENT OF PUBLIC INSTRUCTION, FINDS THAT THERE IS          193          

REASONABLE CAUSE FOR THE DEFICIT BUT IN NO CASE MAY THE AUDITOR    194          

OF STATE EXCUSE ANY DEFICIT OF FIVE PER CENT OR GREATER;           195          

      (b)  The unencumbered cash balance in the school district's  198          

general fund at the close of the preceding fiscal year, less any   199          

advances of property taxes, was less than eight per cent THE SAME  200          

PERCENTAGE of the expenditures made from the general fund for the  201          

preceding fiscal year AS THE PERCENTAGE THE DEFICIT CERTIFIED IN   202          

DIVISION (A)(1)(a) OF THIS SECTION IS OF THE DISTRICT'S GENERAL    204          

FUND REVENUE FOR THE PRECEDING FISCAL YEAR;                                     

      (c)  A majority of the voting electors have not voted in     206          

favor of levying a tax under section 5705.194 or 5705.21 or        208          

Chapter 5748. of the Revised Code that the auditor of state        209          

expects will raise enough additional revenue in the next           210          

succeeding fiscal year that divisions (A)(1)(a) and (b) of this    211          

section will not apply to the district in such next succeeding     212          

fiscal year.                                                                    

      (2)  The school district has outstanding securities issued   214          

under division (A)(4) of section 3316.06 of the Revised Code, and  215          

its financial planning and supervision commission has been         217          

terminated under section 3316.16 of the Revised Code.              218          

      (3)  The school district has received an advancement under   220          

section 3316.20 of the Revised Code. BOTH OF THE FOLLOWING         221          

CONDITIONS ARE SATISFIED:                                          222          

      (a)  THE SUPERINTENDENT OF PUBLIC INSTRUCTION HAS DECLARED   224          

THE DISTRICT UNDER SECTION 3316.031 OF THE REVISED CODE TO BE      225          

UNDER A FISCAL CAUTION, HAS FOUND THAT THE DISTRICT HAS NOT OR     226          

WILL NOT COMPLY WITH THE RECOMMENDATIONS THE SUPERINTENDENT        227          

PROVIDED UNDER THAT SECTION, AND HAS NOTIFIED THE AUDITOR OF       228          

STATE TO DECLARE A STATE OF FISCAL WATCH FOR THE DISTRICT.                      

      (b)  THE AUDITOR OF STATE DETERMINES THAT THE DECISION OF    231          

THE SUPERINTENDENT IS NOT ARBITRARY OR CAPRICIOUS.                              

      (B)  The auditor of state, after consulting with the         233          

superintendent of public instruction, shall issue an order         234          

                                                          6      


                                                                 
declaring a school district to be in a state of fiscal emergency   236          

if the auditor of state determines that division (B)(1), (2),      237          

(3), or (4) of this section applies to the school district:        238          

      (1)  All BOTH of the following conditions are satisfied      240          

with respect to the school district:                               242          

      (a)  The board of education of the school district is not    244          

able to demonstrate, to the auditor of state's satisfaction, the   245          

district's ability to repay outstanding loans received pursuant    246          

to section 3313.483 of the Revised Code or to repay securities     247          

issued pursuant to section 133.301 of the Revised Code in          248          

accordance with applicable repayment schedules unless the board    249          

requests additional loans under section 133.301 of the Revised     251          

Code in an aggregate principal amount exceeding fifty per cent of  252          

the sum of the following:                                          253          

      (i)  The aggregate original principal amount of loans        256          

received in the preceding fiscal year under section 3313.483 of    257          

the Revised Code;                                                               

      (ii)  The aggregate amount borrowed by the district under    259          

section 133.301 of the Revised Code, excluding any additional      261          

amount borrowed as authorized under division (C) of that section.  262          

      (b)  An operating deficit has been certified for the         264          

current fiscal year by the auditor of state, and the certified     265          

operating deficit exceeds fifteen FIVE per cent of the school      266          

district's general fund revenue for the preceding fiscal year,     267          

UNLESS THE AUDITOR OF STATE, IN CONSULTATION WITH THE              268          

SUPERINTENDENT OF PUBLIC INSTRUCTION FINDS THAT THERE IS           269          

REASONABLE CAUSE FOR THE DEFICIT BUT IN NO CASE MAY THE AUDITOR    270          

OF STATE EXCUSE ANY DEFICIT OF EIGHT PER CENT OR GREATER.  In      272          

determining the amount of an operating deficit under division                   

(B)(1)(b) of this section, the auditor of state shall credit       274          

toward the amount of that deficit only the amount that may be      275          

borrowed from the spending reserve balance as determined under     276          

section 133.301 and division (F) of section 5705.29 of the         277          

Revised Code.                                                                   

                                                          7      


                                                                 
      (c)(b)  A majority of the voting electors have not voted in  279          

favor of levying a tax under section 5705.194 or 5705.21 or        281          

Chapter 5748. of the Revised Code that the auditor of state        282          

expects will raise enough additional revenue in the next           283          

succeeding fiscal year that divisions DIVISION (A)(1)(a) and (b)   284          

of this section will not apply to the district in such next        285          

succeeding fiscal year.                                                         

      (d)  The school district is one that, at the time of the     287          

auditor of state's determination under this section, had a total   289          

student count of more than ten thousand students as most recently  290          

determined by the department of education pursuant to section      292          

3317.03 of the Revised Code.                                       293          

      (2)  The school district board fails, pursuant to section    296          

3316.04 of the Revised Code, to submit a plan acceptable to the    297          

state superintendent of public instruction within one hundred      298          

twenty days of the auditor of state's declaration under division   299          

(A) of this section;                                               300          

      (3)  BOTH OF THE FOLLOWING CONDITIONS ARE SATISFIED:         303          

      (a)  THE SUPERINTENDENT OF PUBLIC INSTRUCTION HAS            305          

DETERMINED AND REPORTED TO THE AUDITOR OF STATE THAT THE DISTRICT  307          

HAS NOT SUBMITTED UNDER SECTION 3316.04 OF THE REVISED CODE A      308          

FINANCIAL PLAN THAT IS ACCEPTABLE TO THE SUPERINTENDENT OR IS NOT  309          

MATERIALLY COMPLYING WITH THE PROVISIONS OF THE PLAN AS APPROVED   310          

BY THE STATE SUPERINTENDENT UNDER THAT SECTION.                    311          

      (b)  THE AUDITOR OF STATE FINDS THAT THE DETERMINATION OF    314          

THE SUPERINTENDENT IS NOT ARBITRARY OR CAPRICIOUS.                 315          

      (4)  A declaration of fiscal emergency is required by        318          

division (D) of section 3316.04 of the Revised Code;               319          

      (4)(5)  The school district has received more than one ANY   322          

advancement THAT REQUIRES REPAYMENT under section 3316.20 of the   323          

Revised Code within a two-year period, or has received only one    325          

such advancement but also has an operating deficit as described                 

in division (B)(1)(b) of this section.                             326          

      (C)  In making the determinations under this section, the    328          

                                                          8      


                                                                 
auditor of state may use financial reports required under section  329          

117.43 of the Revised Code; tax budgets, certificates of           331          

estimated resources and amendments thereof, annual appropriating   332          

measures and spending plans, and any other documents or            333          

information prepared pursuant to Chapter 5705. of the Revised      334          

Code; and any other documents, records, or information available   335          

to the auditor of state that indicate the conditions described in  336          

divisions (A) and (B) of this section.                                          

      (D)  The auditor of state shall certify the action taken     338          

under division (A) or (B) of this section to the board of          339          

education of the school district, the director of budget and       340          

management, the mayor or county auditor who could be required to   341          

act pursuant to division (B)(1) of section 3316.05 of the Revised               

Code, and to the superintendent of public instruction.             342          

      (E)  A determination by the auditor of state under this      344          

section that a fiscal emergency condition does not exist is final  345          

and conclusive and not appealable.  A determination by the         346          

auditor of state under this section that a fiscal emergency        347          

exists is final, except that the board of education of the school  348          

district affected by such a determination may appeal the                        

determination of the existence of a fiscal emergency condition to  349          

the court of appeals having territorial jurisdiction over the      350          

school district.  The appeal shall be heard expeditiously by the   351          

court of appeals and for good cause shown shall take precedence    352          

over all other civil matters except earlier matters of the same    353          

character.  Notice of such appeal must be filed with the auditor                

of state and such court within thirty days after certification by  354          

the auditor of state to the board of education of the school       355          

district provided for in division (D) of this section.  In such    356          

appeal, determinations of the auditor of state shall be presumed   357          

to be valid and the board of education shall have the burden of    358          

proving, by clear and convincing evidence, that each of the        359          

determinations made by the auditor of state as to the existence                 

of a fiscal emergency condition under this section was in error.   360          

                                                          9      


                                                                 
If the board of education fails, upon presentation of its case,    361          

to prove by clear and convincing evidence that each such           362          

determination by the auditor of state was in error, the court      363          

shall dismiss the appeal.  The board of education and the auditor  364          

of state may introduce any evidence relevant to the existence or                

nonexistence of such fiscal emergency conditions.  The pendency    365          

of any such appeal shall not affect or impede the operations of    366          

this chapter; no restraining order, temporary injunction, or       367          

other similar restraint upon actions consistent with this chapter  368          

shall be imposed by the court or any court pending determination   369          

of such appeal; and all things may be done under this chapter      370          

that may be done regardless of the pendency of any such appeal.                 

Any action taken or contract executed pursuant to this chapter     371          

during the pendency of such appeal is valid and enforceable among  372          

all parties, notwithstanding the decision in such appeal.  If the  373          

court of appeals reverses the determination of the existence of a  374          

fiscal emergency condition by the auditor of state, the            375          

determination no longer has any effect, and any procedures         376          

undertaken as a result of the determination shall be terminated.   377          

      Sec. 3316.031.  THE STATE SUPERINTENDENT OF PUBLIC           379          

INSTRUCTION, IN CONSULTATION WITH THE AUDITOR OF STATE, SHALL      380          

DEVELOP GUIDELINES FOR IDENTIFYING FISCAL PRACTICES AND BUDGETARY  381          

CONDITIONS THAT, IF UNCORRECTED, COULD RESULT IN A FUTURE          383          

DECLARATION OF A FISCAL WATCH OR FISCAL EMERGENCY WITHIN A SCHOOL  384          

DISTRICT.                                                                       

      IF THE STATE SUPERINTENDENT DETERMINES FROM A SCHOOL         386          

DISTRICT'S FIVE YEAR FORECAST SUBMITTED UNDER SECTION 5705.391 OF  387          

THE REVISED CODE THAT A DISTRICT IS ENGAGING IN ANY OF THOSE       388          

PRACTICES OR THAT ANY OF THOSE CONDITIONS EXIST WITHIN THE         389          

DISTRICT, THE STATE SUPERINTENDENT MAY DECLARE THE DISTRICT TO BE  390          

UNDER A FISCAL CAUTION.  IF THE AUDITOR OF STATE FINDS THAT A      391          

DISTRICT IS ENGAGING IN ANY OF THOSE PRACTICES OR THAT ANY OF      392          

THOSE CONDITIONS EXIST WITHIN THE DISTRICT, THE AUDITOR OF STATE   393          

SHALL REPORT THAT FINDING TO THE STATE SUPERINTENDENT AND THE      394          

                                                          10     


                                                                 
STATE SUPERINTENDENT MAY DECLARE THE DISTRICT TO BE UNDER A        395          

FISCAL CAUTION.                                                                 

      WHEN THE STATE SUPERINTENDENT DECLARES A DISTRICT TO BE      397          

UNDER FISCAL CAUTION, THE STATE SUPERINTENDENT SHALL PROMPTLY      398          

NOTIFY THE DISTRICT BOARD OF EDUCATION OF THAT DECLARATION AND     399          

SHALL PROVIDE THE BOARD WITH WRITTEN RECOMMENDATIONS FOR           400          

DISCONTINUING OR CORRECTING THE FISCAL PRACTICES OR BUDGETARY      401          

CONDITIONS THAT PROMPTED THE DECLARATION AND FOR PREVENTING THE    402          

DISTRICT FROM EXPERIENCING FURTHER FISCAL DIFFICULTIES THAT COULD  403          

RESULT IN THE DISTRICT BEING DECLARED TO BE IN A STATE OF FISCAL   404          

WATCH OR FISCAL EMERGENCY.                                                      

      THE STATE SUPERINTENDENT MAY APPOINT A MONITOR TO INSPECT    406          

AND VISIT ANY DISTRICT THAT IS DECLARED TO BE UNDER A FISCAL       407          

CAUTION.  THE MONITOR SHALL REVIEW THE RECOMMENDATIONS PROVIDED    408          

TO THE DISTRICT BOARD TO DISCONTINUE OR CORRECT THE FISCAL         409          

PRACTICES OR BUDGETARY CONDITIONS, SHALL PROVIDE ASSISTANCE TO     410          

THE BOARD IN COMPLYING WITH THE RECOMMENDATIONS, SHALL MONITOR     411          

THE DISTRICT'S PROGRESS IN COMPLYING WITH THE RECOMMENDATIONS,     412          

AND SHALL REPORT THE DISTRICT'S PROGRESS TO THE STATE              413          

SUPERINTENDENT.                                                                 

      IF THE STATE SUPERINTENDENT FINDS THAT A SCHOOL DISTRICT     415          

DECLARED TO BE UNDER A FISCAL CAUTION HAS NOT OR WILL NOT COMPLY   416          

WITH THE STATE SUPERINTENDENT'S RECOMMENDATIONS FOR DISCONTINUING  417          

OR CORRECTING THE FISCAL PRACTICES OR BUDGETARY CONDITIONS, AND    418          

IF THE STATE SUPERINTENDENT CONSIDERS IT NECESSARY TO AVOID        419          

FURTHER FISCAL DECLINE, THE STATE SUPERINTENDENT MAY DETERMINE     421          

THAT THE DISTRICT SHOULD BE IN A STATE OF FISCAL WATCH.  THE       422          

AUDITOR OF STATE SHALL DECLARE THE DISTRICT IN A STATE OF FISCAL   423          

WATCH UNLESS THE AUDITOR FINDS THE SUPERINTENDENT'S DETERMINATION  424          

TO BE ARBITRARY AND CAPRICIOUS.                                                 

      Sec. 3316.04.  (A)  Within sixty days of the auditor's       433          

declaration under division (A) of section 3316.03 of the Revised   435          

Code, the board of education of the school district shall prepare  436          

and submit to the superintendent of public instruction a           437          

                                                          11     


                                                                 
financial plan delineating the steps the board will take to                     

eliminate the district's current operating deficit and avoid       438          

incurring operating deficits in ensuing years, including the       439          

implementation of spending reductions.  The superintendent of      440          

public instruction shall evaluate the initial financial plan, and  441          

either approve or disapprove it within thirty calendar days from   442          

the date of its submission.  If the initial financial plan is      443          

disapproved, the state superintendent shall recommend                           

modifications that will render the financial plan acceptable.  No  444          

school district board shall implement a financial plan submitted   445          

to the superintendent of public instruction under this section     446          

unless the superintendent has approved the plan.                   447          

      IF A DISTRICT FAILS TO SUBMIT A FINANCIAL PLAN UNDER THIS    449          

SECTION THAT IS ACCEPTABLE TO THE STATE SUPERINTENDENT OR IF THE   450          

STATE SUPERINTENDENT FINDS THAT THE DISTRICT IS NOT MATERIALLY     451          

COMPLYING WITH THE PROVISIONS OF THE PLAN AS APPROVED BY THE       452          

STATE SUPERINTENDENT, AND IF THE STATE SUPERINTENDENT CONSIDERS    453          

IT APPROPRIATE, THE STATE SUPERINTENDENT MAY DETERMINE THAT THE    455          

DISTRICT SHOULD BE DECLARED TO BE IN A STATE OF FISCAL EMERGENCY.  456          

THE AUDITOR OF STATE SHALL DECLARE THE DISTRICT IN A STATE OF                   

FISCAL EMERGENCY UNLESS THE AUDITOR FINDS THE SUPERINTENDENT'S     457          

DECISION TO BE ARBITRARY AND CAPRICIOUS.                           458          

      (B)  Upon request of the board of education of a school      460          

district declared to be in a state of fiscal watch, the auditor    462          

of state and superintendent of public instruction shall provide    463          

technical assistance to the board in resolving the fiscal          464          

problems that gave rise to the declaration, including assistance                

in drafting the board's financial plan.                            465          

      (C)  A financial plan adopted under this section may be      467          

amended at any time with the approval of the superintendent.  The  469          

board of education of the school district shall submit an updated  470          

financial plan to the superintendent, for the superintendent's     471          

approval, every year that the district is in a state of fiscal     472          

watch.  The updated plan shall be submitted in a form acceptable   473          

                                                          12     


                                                                 
to the superintendent.  The superintendent shall approve or                     

disapprove each updated plan no later than the anniversary of the  474          

date on which the first such plan was approved.                    476          

      (D)  A school district that has restructured or refinanced   479          

a loan under section 3316.041 of the Revised Code shall be         481          

declared to be in a state of fiscal emergency if any of the        482          

following occurs:                                                  483          

      (1)  An operating deficit is certified for the district      485          

under section 3313.483 of the Revised Code for any year prior to   488          

the repayment of the restructured or refinanced loan;              489          

      (2)  The superintendent determines, in consultation with     492          

the auditor of state, that the school district is not                           

satisfactorily complying with the terms of the financial plan      493          

required by this section;                                          494          

      (3)  The board of education of the school district fails to  497          

submit an updated plan that is acceptable to the superintendent    498          

under division (C) of this section.                                499          

      Sec. 3316.06.  (A)  Within one hundred twenty days after     508          

the first meeting of a school district financial planning and      509          

supervision commission, the commission shall adopt a financial     510          

recovery plan regarding the school district for which the          511          

commission was created.  During the formulation of the plan, the   512          

commission shall seek appropriate input from the school district   513          

board and from the community.  This plan shall contain the                      

following:                                                                      

      (1)  Actions to be taken to:                                 515          

      (a)  Eliminate all fiscal emergency conditions declared to   518          

exist pursuant to division (B) of section 3316.03 of the Revised                

Code;                                                                           

      (b)  Satisfy any judgments, past-due accounts payable, and   520          

all past-due and payable payroll and fringe benefits;              521          

      (c)  Eliminate the deficits in all deficit funds;            523          

      (d)  Restore to special funds any moneys from such funds     525          

that were used for purposes not within the purposes of such        527          

                                                          13     


                                                                 
funds, or borrowed from such funds by the purchase of debt         528          

obligations of the school district with the moneys of such funds,  529          

or missing from the special funds and not accounted for, if any;   530          

      (e)  Balance the budget, avoid future deficits in any        532          

funds, and maintain on a current basis payments of payroll,        533          

fringe benefits, and all accounts;                                 534          

      (f)  Avoid any fiscal emergency condition in the future;     536          

      (g)  Restore the ability of the school district to market    538          

long-term general obligation bonds under provisions of law         539          

applicable to school districts generally.                          540          

      (2)  The management structure that will enable the school    542          

district to take the actions enumerated in division (A)(1) of      543          

this section.  The plan shall specify the level of fiscal and      544          

management control that the commission will exercise within the    545          

school district during the period of fiscal emergency, and shall   546          

enumerate respectively, the powers and duties of the commission    547          

and the powers and duties of the school board during that period.  548          

The commission may elect to assume any of the powers and duties                 

of the school board it considers necessary, including all powers   549          

related to personnel, curriculum, and legal issues in order to     550          

successfully implement the actions described in division (A)(1)    551          

of this section.                                                                

      (3)  The target dates for the commencement, progress upon,   554          

and completion of the actions enumerated in division (A)(1) of     555          

this section and a reasonable period of time expected to be        556          

required to implement the plan.  The commission shall prepare a                 

reasonable time schedule for progress toward and achievement of    558          

the requirements for the plan, and the plan shall be consistent    559          

with that time schedule.                                                        

      (4)  The amount and purpose of any issue of debt             561          

obligations that will be issued, together with assurances that     562          

any such debt obligations that will be issued will not exceed      563          

debt limits supported by appropriate certifications by the fiscal  564          

officer of the school district and the county auditor.  Debt       565          

                                                          14     


                                                                 
obligations issued pursuant to section 133.301 of the Revised      566          

Code shall include assurances that such debt shall be in an        567          

amount not to exceed the amount certified under division (B) of    568          

such section.  If the commission considers it necessary in order   571          

to maintain or improve educational opportunities of pupils in the  572          

school district, the plan may include a proposal to restructure                 

or refinance outstanding debt obligations incurred by the board    573          

under section 3313.483 of the Revised Code contingent upon the     575          

approval, during the period of the fiscal emergency, by district                

voters of a tax levied under section 718.09, 718.10, 5705.194,     576          

5705.21, 5748.02, or 5748.08 of the Revised Code, that is not a    578          

renewal or replacement levy and that will provide new operating    579          

revenue.  Notwithstanding any provision of Chapter 133. or         581          

sections 3313.483 to 3313.4811 of the Revised Code, following the  582          

required approval of the district voters and with the approval of  583          

the commission, the school district may issue securities to        584          

evidence the restructuring or refinancing.  Those securities may   585          

extend the original period for repayment, not to exceed ten        586          

years, and may alter the frequency and amount of repayments,       588          

interest or other financing charges, and other terms of            589          

agreements under which the debt originally was contracted, at the  590          

discretion of the commission, provided that any loans received     591          

pursuant to section 3313.483 of the Revised Code shall be paid     592          

from funds the district would otherwise receive under sections                  

3317.022 to 3317.025 of the Revised Code, as required under        593          

division (E)(3) of section 3313.483 of the Revised Code.  The      594          

securities issued for the purpose of restructuring or refinancing  595          

the debt shall be repaid in equal payments and at equal intervals  596          

over the term of the debt and are not eligible to be included in   597          

any subsequent proposal for the purpose of restructuring or                     

refinancing debt under this section.                               598          

      (B)  Any financial recovery plan may be amended subsequent   600          

to its adoption.  Each financial recovery plan shall be updated    601          

annually.                                                                       

                                                          15     


                                                                 
      (C)  EACH SCHOOL DISTRICT FINANCIAL PLANNING AND             603          

SUPERVISION COMMISSION SHALL SUBMIT THE FINANCIAL RECOVERY PLAN    604          

IT ADOPTS OR UPDATES UNDER THIS SECTION TO THE STATE               605          

SUPERINTENDENT OF PUBLIC INSTRUCTION FOR APPROVAL IMMEDIATELY      606          

FOLLOWING ITS ADOPTION OR UPDATING.  THE STATE SUPERINTENDENT      607          

SHALL EVALUATE THE PLAN AND EITHER APPROVE OR DISAPPROVE IT        608          

WITHIN THIRTY CALENDAR DAYS FROM THE DATE OF ITS SUBMISSION.  IF   609          

THE PLAN IS DISAPPROVED, THE STATE SUPERINTENDENT SHALL RECOMMEND  610          

MODIFICATIONS THAT WILL RENDER IT ACCEPTABLE.  NO FINANCIAL        611          

PLANNING AND SUPERVISION COMMISSION SHALL IMPLEMENT A FINANCIAL    612          

RECOVERY PLAN THAT IS ADOPTED OR UPDATED ON OR AFTER THE           613          

EFFECTIVE DATE OF THIS AMENDMENT UNLESS THE STATE SUPERINTENDENT   614          

HAS APPROVED IT.                                                   615          

      Sec. 3316.061.  IF ANY SCHOOL DISTRICT FINANCIAL PLANNING    617          

AND SUPERVISION COMMISSION FAILS TO SUBMIT TO THE STATE            618          

SUPERINTENDENT OF PUBLIC INSTRUCTION UNDER SECTION 3316.06 OF THE  619          

REVISED CODE A FINANCIAL RECOVERY PLAN THAT IS ACCEPTABLE TO THE   621          

STATE SUPERINTENDENT OR IF THE STATE SUPERINTENDENT AND THE        622          

AUDITOR OF STATE FIND THAT A COMMISSION IS NOT MATERIALLY          624          

COMPLYING WITH THE PROVISIONS OF ITS FINANCIAL RECOVERY PLAN, THE  625          

STATE SUPERINTENDENT AND THE AUDITOR OF STATE MAY JOINTLY          627          

DISSOLVE THE FINANCIAL PLANNING AND SUPERVISION COMMISSION AND     628          

JOINTLY APPOINT AN INDIVIDUAL TO ACT AS THE FISCAL ARBITRATOR OF   629          

THE DISTRICT.                                                                   

      WHEN A FINANCIAL PLANNING AND SUPERVISION COMMISSION IS      632          

DISSOLVED UNDER THIS SECTION, THE COMMISSION CEASES TO EXIST AND   633          

THE APPOINTED FISCAL ARBITRATOR BECOMES THE SUCCESSOR TO THE       634          

COMMISSION.  A FISCAL ARBITRATOR APPOINTED UNDER THIS SECTION HAS  635          

ALL OF THE RIGHTS, POWERS, AND DUTIES GIVEN BY THIS CHAPTER TO     636          

THE COMMISSION THAT THE ARBITRATOR SUCCEEDS.  A REFERENCE IN ANY   637          

STATUTE, RULE, CONTRACT, OR OTHER DOCUMENT TO A SCHOOL DISTRICT    638          

FINANCIAL PLANNING AND SUPERVISION COMMISSION IS DEEMED TO REFER   639          

TO A FISCAL ARBITRATOR APPOINTED UNDER THIS SECTION.               640          

      BUSINESS COMMENCED BUT NOT COMPLETED BY A COMMISSION WHEN    642          

                                                          16     


                                                                 
IT IS DISSOLVED UNDER THIS SECTION SHALL BE COMPLETED BY THE       643          

APPOINTED FISCAL ARBITRATOR WITH THE SAME EFFECT AS IF COMPLETED   644          

BY THE COMMISSION.  NO VALIDATION, CURE, RIGHT, PRIVILEGE,         645          

REMEDY, OBLIGATION, OR LIABILITY IS LOST OR IMPAIRED BY REASON OF  646          

THE DISSOLUTION OF THE COMMISSION AND APPOINTMENT OF A FISCAL      647          

ARBITRATOR, BUT SHALL BE ADMINISTERED BY THE ARBITRATOR.           648          

      Sec. 3316.20.  (A)(1)  The school district solvency          657          

assistance fund is hereby created in the state treasury, to        658          

consist of such amounts designated for the purposes of the fund    659          

by the general assembly.  The fund shall be used to make           660          

advancements AND GRANTS to school districts to enable them to                   

remain solvent and to pay unforseeable expenses of a temporary or  662          

emergency nature that they are unable to pay from existing         663          

resources.                                                                      

      Advancements AND GRANTS shall be made from the fund by the   665          

superintendent of public instruction in accordance with rules      667          

jointly adopted by the superintendent and the auditor of state     668          

specifying advancement approval criteria and procedures necessary  669          

for administering the fund.                                                     

      (2)  THERE IS HEREBY CREATED WITHIN THE FUND AN ACCOUNT      671          

KNOWN AS THE SCHOOL DISTRICT SHARED RESOURCE ACCOUNT, WHICH SHALL  672          

CONSIST OF MONEY APPROPRIATED TO IT BY THE GENERAL ASSEMBLY.  THE  673          

MONEY IN THE ACCOUNT SHALL BE USED SOLELY FOR ADVANCEMENTS TO      674          

SCHOOL DISTRICTS.                                                  675          

      (3)  THERE IS HEREBY CREATED WITHIN THE FUND AN ACCOUNT      677          

KNOWN AS THE CATASTROPHIC EXPENDITURES ACCOUNT, WHICH SHALL        678          

CONSIST OF MONEY APPROPRIATED TO THE ACCOUNT BY THE GENERAL        679          

ASSEMBLY PLUS ALL INVESTMENT EARNINGS OF THE FUND.  MONEY IN THE   680          

ACCOUNT SHALL BE USED SOLELY FOR ADVANCEMENTS TO SCHOOL DISTRICTS  681          

IN THE EVENT THAT ALL MONEY IN THE SHARED RESOURCE ACCOUNT IS      682          

UTILIZED FOR ADVANCEMENTS OR FOR GRANTS TO SCHOOL DISTRICTS UNDER  684          

DIVISION (B) OF THIS SECTION.                                                   

      (4)  The fund shall be reimbursed for any amounts advanced   686          

not later than the end of the second fiscal year following the     688          

                                                          17     


                                                                 
fiscal year in which the advancement was made.  If not made        689          

directly by the school district, such reimbursement shall be made  691          

by the director of budget and management from the amounts the      693          

school district would otherwise receive pursuant to sections       694          

3317.022 to 3317.025 of the Revised Code, or from any other funds  696          

appropriated for the district by the general assembly.             697          

REIMBURSEMENTS SHALL BE CREDITED TO THE RESPECTIVE ACCOUNT FROM                 

WHICH THE ADVANCEMENT PAID TO THE DISTRICT WAS DEDUCTED.           698          

      (B)  THE SUPERINTENDENT OF PUBLIC INSTRUCTION AND THE        700          

DIRECTOR OF BUDGET AND MANAGEMENT, WITH THE APPROVAL OF THE        701          

CONTROLLING BOARD, JOINTLY MAY GRANT MONEY FROM THE CATASTROPHIC   702          

EXPENDITURES ACCOUNT TO ANY SCHOOL DISTRICT THAT SUFFERS AN        703          

UNPLANNED CATASTROPHIC EVENT THAT SEVERELY DEPLETES THE            704          

DISTRICT'S FINANCIAL RESOURCES AS DETERMINED BY THE                705          

SUPERINTENDENT AND DIRECTOR.  A SCHOOL DISTRICT SHALL NOT BE       706          

REQUIRED TO REPAY ANY GRANT AWARDED TO THE DISTRICT UNDER THIS     707          

DIVISION UNLESS THE DISTRICT RECEIVES MONEY FROM A THIRD PARTY,    708          

INCLUDING AN AGENCY OF THE GOVERNMENT OF THE UNITED STATES,        709          

SPECIFICALLY FOR THE PURPOSE OF COMPENSATING THE DISTRICT FOR      710          

EXPENSES INCURRED AS A RESULT OF THE UNPLANNED CATASTROPHIC        711          

EVENT.                                                                          

      Sec. 5705.13.  (A)  Except as otherwise provided for a       720          

board of education under division (H) of section 5705.29 of the    721          

Revised Code, a A taxing authority of a subdivision, by            723          

resolution or ordinance, may establish a reserve balance account   725          

to accumulate currently available resources for any of the         726          

following purposes:                                                             

      (1)  To stabilize subdivision budgets against cyclical       728          

changes in revenues and expenditures;                              729          

      (2)  Except as otherwise provided by this section, to        731          

provide for the payment of claims under a self-insurance program   732          

for the subdivision, if the subdivision is permitted by law to     733          

establish such a program;                                                       

      (3)  To provide for the payment of claims under a            735          

                                                          18     


                                                                 
retrospective ratings plan for workers' compensation.              736          

      The ordinance or resolution establishing a reserve balance   738          

account shall state the purpose for which the reserve balance      739          

account is established, the fund in which the account is to be     740          

established, and the total amount of money to be reserved in the   741          

account.                                                                        

      A subdivision that participates in a risk-sharing pool, by   743          

which governments pool risks and funds and share in the costs of   744          

losses, shall not establish a reserve balance account to provide   745          

self-insurance for the subdivision.                                746          

      A taxing authority of a subdivision shall not have more      748          

than three reserve balance accounts at any time.  Not more than    750          

one reserve balance account may be established for each of the     751          

purposes permitted under this section.  Money to the credit of a   752          

reserve balance account may be expended only for the purpose for   753          

which the account was established.                                              

      A reserve balance account established for the purpose        755          

described in division (A)(1) of this section shall be established  756          

in the general fund of the subdivision, and the amount of money    757          

to be reserved in that account in any fiscal year shall not        758          

exceed five per cent of the general fund revenue for the           759          

preceding fiscal year.  Subject to division (G) of section         760          

5705.29 of the Revised Code, any reserve balance in an account     761          

established under division (A)(1) of this section shall not be     762          

considered part of the unencumbered balance or revenue of the      763          

subdivision under division (A) of section 5705.35 or division      764          

(A)(1) of section 5705.36 of the Revised Code.                     765          

      At any time, a taxing authority of a subdivision, by         767          

resolution or ordinance, may reduce or eliminate the reserve       769          

balance in a reserve balance account established for the purpose   770          

described in division (A)(1) of this section.                      771          

      A reserve balance account established for the purpose        773          

described in division (A)(2) or (3) of this section shall be       774          

established in the general fund of the subdivision or by the       776          

                                                          19     


                                                                 
establishment of a separate internal service fund established to   777          

account for the operation of the self-insurance or retrospective   778          

ratings plan program, and shall be based on sound actuarial        779          

principles.  The total amount of money in a reserve balance        780          

account for self-insurance may be expressed in dollars or as the   781          

amount determined to represent an adequate reserve according to    782          

sound actuarial principles.                                        783          

      A taxing authority of a subdivision, by resolution or        785          

ordinance, may rescind a reserve balance account established       786          

under this division.  If a reserve balance account is rescinded,   787          

money that has accumulated in the account shall be transferred to  788          

the fund or funds from which the money originally was              789          

transferred.                                                                    

      (B)  A taxing authority of a subdivision, by resolution or   791          

ordinance, may establish a special revenue fund for the purpose    792          

of accumulating resources for the payment of accumulated sick      793          

leave and vacation leave, and for payments in lieu of taking       794          

compensatory time off, upon the termination of employment or the   795          

retirement of officers and employees of the subdivision.  The      796          

special revenue fund may also accumulate resources for payment of  797          

salaries during any fiscal year when the number of pay periods                  

exceeds the usual and customary number of pay periods.             798          

Notwithstanding sections 5705.14, 5705.15, and 5705.16 of the      799          

Revised Code, the taxing authority, by resolution or ordinance,    800          

may transfer money to the special revenue fund from any other      802          

fund of the subdivision from which such payments may lawfully be   803          

made.  The taxing authority, by resolution or ordinance, may       804          

rescind a special revenue fund established under this division.                 

If a special revenue fund is rescinded, money that has             805          

accumulated in the fund shall be transferred to the fund or funds  806          

from which the money originally was transferred.                   807          

      (C)  A taxing authority of a subdivision, by resolution or   809          

ordinance, may establish a capital projects fund for the purpose   810          

of accumulating resources for the acquisition, construction, or    811          

                                                          20     


                                                                 
improvement of fixed assets of the subdivision.  For the purposes  812          

of this section, "fixed assets" includes motor vehicles.  More     813          

than one capital projects fund may be established and may exist    814          

at any time.  The ordinance or resolution shall identify the       815          

source of the money to be used to acquire, construct, or improve                

the fixed assets identified in the resolution or ordinance, the    816          

amount of money to be accumulated for that purpose, the period of  817          

time over which that amount is to be accumulated, and the fixed    818          

assets that the taxing authority intends to acquire, construct,    819          

or improve with the money to be accumulated in the fund.           820          

      A taxing authority of a subdivision shall not accumulate     822          

money in a capital projects fund for more than five years after    824          

the resolution or ordinance establishing the fund is adopted.  If  825          

the subdivision has not entered into a contract for the            826          

acquisition, construction, or improvement of fixed assets for      827          

which money was accumulated in such a fund before the end of that  828          

five-year period, the fiscal officer of the subdivision shall      829          

transfer all money in the fund to the fund or funds from which                  

that money originally was transferred or the fund that originally  830          

was intended to receive the money.                                 831          

      A taxing authority of a subdivision, by resolution or        833          

ordinance, may rescind a capital projects fund.  If a capital      835          

projects fund is rescinded, money that has accumulated in the      836          

fund shall be transferred to the fund or funds from which the      837          

money originally was transferred.                                               

      Notwithstanding sections 5705.14, 5705.15, and 5705.16 of    839          

the Revised Code, the taxing authority of a subdivision, by        840          

resolution or ordinance, may transfer money to the capital         842          

projects fund from any other fund of the subdivision that may                   

lawfully be used for the purpose of acquiring, constructing, or    844          

improving the fixed assets identified in the resolution or         845          

ordinance.                                                                      

      Sec. 5705.29.  The tax budget shall present the following    854          

information in such detail as is prescribed by the auditor of      855          

                                                          21     


                                                                 
state, unless an alternative form of the budget is permitted       856          

under section 5705.281 of the Revised Code:                        857          

      (A)(1)  A statement of the necessary current operating       859          

expenses for the ensuing fiscal year for each department and       860          

division of the subdivision, classified as to personal services    861          

and other expenses, and the fund from which such expenditures are  862          

to be made.  Except in the case of a school district, this         863          

estimate may include a contingent expense not designated for any   864          

particular purpose, and not to exceed three per cent of the total  865          

amount of appropriations for current expenses.  In the case of a   866          

school district, this estimate may include a contingent expense    867          

not designated for any particular purpose and not to exceed        868          

thirteen per cent of the total amount of appropriations for        869          

current expenses.                                                  870          

      (2)  A statement of the expenditures for the ensuing fiscal  872          

year necessary for permanent improvements, exclusive of any        873          

expense to be paid from bond issues, classified as to the          874          

improvements contemplated by the subdivision and the fund from     875          

which such expenditures are to be made;                            876          

      (3)  The amounts required for the payment of final           878          

judgments;                                                         879          

      (4)  A statement of expenditures for the ensuing fiscal      881          

year necessary for any purpose for which a special levy is         882          

authorized, and the fund from which such expenditures are to be    883          

made;                                                              884          

      (5)  Comparative statements, so far as possible, in          886          

parallel columns of corresponding items of expenditures for the    887          

current fiscal year and the two preceding fiscal years.            888          

      (B)(1)  An estimate of receipts from other sources than the  890          

general property tax during the ensuing fiscal year, which shall   891          

include an estimate of unencumbered balances at the end of the     892          

current fiscal year, and the funds to which such estimated         893          

receipts are credited;                                             894          

      (2)  The amount each fund requires from the general          896          

                                                          22     


                                                                 
property tax, which shall be the difference between the            897          

contemplated expenditure from the fund and the estimated           898          

receipts, as provided in this section.  The section of the         899          

Revised Code under which the tax is authorized shall be set        900          

forth.                                                             901          

      (3)  Comparative statements, so far as possible, in          903          

parallel columns of taxes and other revenues for the current       904          

fiscal year and the two preceding fiscal years.                    905          

      (C)(1)  The amount required for debt charges;                907          

      (2)  The estimated receipts from sources other than the tax  909          

levy for payment of such debt charges, including the proceeds of   910          

refunding bonds to be issued to refund bonds maturing in the next  911          

succeeding fiscal year;                                            912          

      (3)  The net amount for which a tax levy shall be made,      914          

classified as to bonds authorized and issued prior to January 1,   915          

1922, and those authorized and issued subsequent to such date,     916          

and as to what portion of the levy will be within and what in      917          

excess of the ten-mill limitation.                                 918          

      (D)  An estimate of amounts from taxes authorized to be      920          

levied in excess of the ten-mill limitation on the tax rate, and   921          

the fund to which such amounts will be credited, together with     922          

the sections of the Revised Code under which each such tax is      923          

exempted from all limitations on the tax rate.                     924          

      (E)(1)  A board of education may include in its budget for   926          

the fiscal year in which a levy proposed under section 5705.194,   927          

5705.21, or 5705.213, or the original levy under section 5705.212  928          

of the Revised Code is first extended on the tax list and          929          

duplicate an estimate of expenditures to be known as a voluntary   930          

contingency reserve balance, which shall not be greater than       931          

twenty-five per cent of the total amount of the levy estimated to  932          

be available for appropriation in such year.                       933          

      (2)  A board of education may include in its budget for the  935          

fiscal year following the year in which a levy proposed under      936          

section 5705.194, 5705.21, or 5705.213, or the original levy       937          

                                                          23     


                                                                 
under section 5705.212 of the Revised Code is first extended on    938          

the tax list and duplicate an estimate of expenditures to be       939          

known as a voluntary contingency reserve balance, which shall not  940          

be greater than twenty per cent of the amount of the levy          941          

estimated to be available for appropriation in such year.          942          

      (3)  Except as provided in division (E)(4) of this section,  944          

the full amount of any reserve balance the board includes in its   945          

budget shall be retained by the county auditor and county          946          

treasurer out of the first semiannual settlement of taxes until    947          

the beginning of the next succeeding fiscal year, and thereupon,   948          

with the depository interest apportioned thereto, it shall be      949          

turned over to the board of education, to be used for the          950          

purposes of such fiscal year.                                      951          

      (4)  A board of education, by a two-thirds vote of all       953          

members of the board, may appropriate any amount withheld as a     954          

voluntary contingency reserve balance during the fiscal year for   955          

any lawful purpose, provided that prior to such appropriation the  956          

board of education has authorized the expenditure of all amounts   957          

appropriated for contingencies under section 5705.40 of the        958          

Revised Code.  Upon request by the board of education, the county  959          

auditor shall draw a warrant on the district's account in the      960          

county treasury payable to the district in the amount requested.   961          

      (F)(1)  A board of education may include a spending reserve  963          

in its budget for fiscal years ending on or before June 30, 2002.  965          

The spending reserve shall consist of an estimate of expenditures  966          

not to exceed the district's spending reserve balance.  A          967          

district's spending reserve balance is the amount by which the     968          

designated percentage of the district's estimated personal         969          

property taxes to be settled during the calendar year in which     970          

the fiscal year ends exceeds the estimated amount of personal      971          

property taxes to be so settled and received by the district       972          

during that fiscal year.  Moneys from a spending reserve shall be  973          

appropriated in accordance with section 133.301 of the Revised     974          

Code.                                                              975          

                                                          24     


                                                                 
      (2)  For the purposes of computing a school district's       977          

spending reserve balance for a fiscal year, the designated         978          

percentage shall be as follows:                                    979          

    Fiscal year ending in:             Designated percentage       982          

             1998                               50%                984          

             1999                               40%                985          

             2000                               30%                986          

             2001                               20%                987          

             2002                               10%                988          

      (G)  Except as otherwise provided in this division, the      991          

county budget commission shall not reduce the taxing authority of  992          

a subdivision as a result of the creation of a reserve balance     993          

account.  Except as otherwise provided in this division, the       994          

county budget commission shall not consider the amount in a        995          

reserve balance account of a township, county, or municipal        996          

corporation as an unencumbered balance or as revenue for the       997          

purposes of division (E)(3) or (4) of section 5747.51 or division  998          

(E)(3) or (4) of section 5747.62 of the Revised Code.  The county  999          

budget commission may require documentation of the reasonableness  1,000        

of the reserve balance held in any reserve balance account.  The   1,001        

commission shall consider any amount in a reserve balance account  1,002        

that it determines to be unreasonable as unencumbered and as       1,003        

revenue for the purposes of sections 5747.51 and 5747.62 of the                 

Revised Code and may take such amounts into consideration when     1,005        

determining whether to reduce the taxing authority of a                         

subdivision.                                                                    

      (H)(1)  Each board of education shall include in its tax     1,007        

budget and shall establish a reserve balance account to            1,009        

accumulate currently available resources to stabilize the school                

district's budget against cyclical changes in revenues and         1,010        

expenditures.  The balance in the reserve balance account shall    1,011        

not at any time be less than five per cent of general fund         1,013        

revenues for the most recently concluded fiscal year, except as    1,014        

provided in division (H)(2) or (3) of this section, and except     1,015        

                                                          25     


                                                                 
for deficiencies arising from the appropriation of money from the  1,016        

account for unanticipated deficiencies in revenue or other         1,018        

emergencies pursuant to a resolution adopted by two-thirds of the  1,019        

membership of the board of education specifying the reason for     1,020        

the appropriation.  The auditor of state and the superintendent                 

of public instruction jointly shall adopt rules governing          1,021        

conditions that constitute unanticipated deficiencies in revenue   1,022        

or emergencies for which appropriations may be made from a         1,023        

reserve balance account.  The rules also shall provide that a      1,024        

board of education that borrows against its spending reserve       1,026        

established in its tax budget for a fiscal year under division     1,027        

(F) of this section is not subject to division (H)(2) of this      1,028        

section for that fiscal year.  A board of education shall not      1,029        

appropriate money from a reserve balance account without filing a  1,031        

schedule for replenishing the account with the superintendent of   1,032        

public instruction and receiving approval of the schedule from     1,033        

the superintendent of public instruction.                          1,034        

      (2)(a)  Beginning with the fiscal year ending in 1999 and    1,036        

continuing each fiscal year until the balance in the reserve       1,037        

balance account equals five per cent of the district's revenues    1,039        

received for current expenses for the preceding fiscal year, if    1,040        

the growth in a district's total revenues received for current                  

expenses from one fiscal year to the next is at least three per    1,041        

cent, the board of education shall credit to its reserve balance   1,043        

account, from the general fund or from other sources that may      1,045        

lawfully be credited to the general fund, an amount that, when     1,046        

added to the account balance, is not less than:                    1,047        

      (i)  One per cent of revenues received for current expenses  1,049        

for the prior fiscal year; plus                                    1,050        

      (ii)  The sum of the amounts credited under this section     1,052        

for all fiscal years that amounts were required to be credited     1,053        

under this section.                                                             

      Each board shall maintain the balance in the district's      1,055        

reserve balance account at not less than five per cent of the      1,056        

                                                          26     


                                                                 
district's revenues received for current expenses for the          1,057        

preceding fiscal year, except as otherwise authorized under        1,058        

division (H) of this section.                                                   

      (b)  Notwithstanding division (H)(2)(a) of this section, in  1,061        

no year shall a board be required to credit to its reserve         1,062        

balance account more than one per cent of revenues received for                 

current expenses for the prior fiscal year.                        1,063        

      (3)  The balance in the reserve balance account of a school  1,066        

district may be less than five per cent of the general fund        1,067        

revenue for the most recently concluded fiscal year in any fiscal  1,068        

year in which the school district is in a state of fiscal watch    1,069        

or fiscal emergency pursuant to section 3316.03 of the Revised     1,070        

Code.                                                                           

      (4)  Notwithstanding any provision to the contrary in        1,072        

Chapter 4117. of the Revised Code, the requirements of division    1,073        

(H) of this section prevail over any conflicting provisions of     1,075        

agreements between employee organizations and public employers     1,076        

entered into after November 21, 1997.                              1,077        

      (5)  Notwithstanding division (H)(2) of this section, a      1,079        

school district may, pursuant to rules adopted by the auditor of   1,080        

state, credit less than one per cent of its prior year's revenue   1,081        

received for current expenses into its reserve balance account.    1,082        

      (6)  A school district board may apply to the state          1,084        

superintendent of public instruction for a one-time waiver of the  1,085        

deposit requirements of division (H)(2) of this section when it    1,087        

determines that meeting the requirements in the current or next    1,088        

fiscal year would cause the district to significantly reduce or    1,089        

eliminate important educational services.  The district shall      1,090        

apply in the form and manner required by the state                 1,091        

superintendent, and the application may request a waiver of all    1,092        

or part of the deposit required for the current or next fiscal     1,093        

year.  The state superintendent may grant a waiver if the state    1,094        

superintendent and the auditor of state determine that meeting     1,095        

the requirement in the current or next fiscal year would cause                  

                                                          27     


                                                                 
the school district to significantly reduce or eliminate           1,097        

important educational services.  A waiver may entirely exempt the               

district from making any deposit into its reserve balance account  1,099        

during the current or next fiscal year or, regardless of whether   1,100        

the district board applied for a waiver of the entire deposit,     1,101        

may simply reduce the amount of the deposit otherwise required                  

during the current or next fiscal year by division (H)(2) of this  1,102        

section.  A waiver is valid for one fiscal year:  either the       1,103        

fiscal year in which the district board applied for it or the      1,104        

immediately following fiscal year.  A district board may receive   1,105        

only one waiver under division (H)(6) of this section.             1,106        

      (I)  Notwithstanding division (H)(2) of this section,        1,108        

whenever a city, local, exempted village, or joint vocational      1,109        

school district receives from the bureau of workers' compensation  1,110        

a refund or other reimbursement of money that the district         1,111        

previously paid to the bureau, the district shall deposit the      1,112        

full amount of the refund or other reimbursement into the          1,113        

district's reserve balance account, unless the account already     1,114        

contains five per cent of the district's revenues received for     1,115        

current expenses for the preceding year as prescribed in division  1,116        

(H)(2)(a) of this section.  A district may credit any amount it    1,117        

deposits into that account under this division toward any minimum  1,118        

deposit required for the account in that fiscal year.              1,119        

      Sec. 5705.38.  (A)  This division does not apply to school   1,129        

district appropriation measures.  On or about the first day of     1,130        

each year, the taxing authority of each subdivision or other       1,131        

taxing unit shall pass an appropriation measure, and thereafter    1,132        

during the year it may pass any supplemental appropriation         1,133        

measures as it finds necessary, based on the revised tax budget    1,134        

and the official certificate of estimated resources or amendments  1,135        

of the certificate.  If adoption of a tax budget was waived under  1,136        

section 5705.281 of the Revised Code, appropriation measures       1,137        

shall be based on the official certificate of estimated            1,138        

resources.  If it desires to postpone the passage of the annual    1,139        

                                                          28     


                                                                 
appropriation measure until an amended certificate is received     1,140        

based on the actual balances, it may pass a temporary                           

appropriation measure for meeting the ordinary expenses of the     1,141        

taxing unit until no later than the first day of April of the      1,142        

current year, and the appropriations made in the temporary         1,143        

measure shall be chargeable to the appropriations in the annual    1,144        

appropriation measure for that fiscal year when passed.            1,145        

      (B)  A board of education shall pass its annual              1,147        

appropriation measure by the first day of October.  If, by the     1,148        

first day of October, a board has not received either the amended  1,149        

certificates of estimated resources required by division (B) of    1,150        

section 5705.36 of the Revised Code or certifications that no      1,151        

amended certificates need be issued, the adoption of the annual    1,152        

appropriation measure shall be delayed until the amended           1,153        

certificates or certifications are received.  Prior to the         1,154        

passage of the annual appropriation measure, the board may pass a  1,155        

temporary appropriation measure for meeting the ordinary expenses  1,156        

of the district until it passes an annual appropriation measure,   1,157        

and appropriations made in the temporary measure shall be          1,158        

chargeable to the appropriations in the annual appropriation       1,159        

measure for that fiscal year when passed.  During the fiscal year  1,160        

and after the passage of the annual appropriation measure, a       1,161        

district may pass any supplemental appropriation measures as it    1,162        

finds necessary, based on the revised tax budget and the official  1,163        

certificate of estimated resources or amendments of the            1,164        

certificate.  The annual appropriation measure, and any temporary  1,165        

or supplemental appropriation measure, shall provide for the       1,166        

reservation of a sufficient amount of money for the budget         1,167        

reserve fund as required under division (H) of section 5705.29 of  1,168        

the Revised Code. School district appropriation measures shall be  1,169        

in the form as the auditor of state, after consultation with the   1,170        

tax commissioner, prescribes.                                      1,171        

      (C)  Appropriation measures shall be classified so as to     1,173        

set forth separately the amounts appropriated for each office,     1,174        

                                                          29     


                                                                 
department, and division, and, within each, the amount             1,175        

appropriated for personal services.  In the case of a municipal    1,176        

university, the board of directors of which have assumed, in the   1,177        

manner provided by law, custody and control of the funds of the    1,178        

university, funds shall be appropriated as a lump sum for the use  1,179        

of the university.                                                 1,180        

      Section 2.  That existing sections 3315.17, 3315.18,         1,182        

3316.03, 3316.04, 3316.06, 3316.20, 5705.13, 5705.29, and 5705.38  1,183        

of the Revised Code are hereby repealed.                           1,184        

      Section 3.  After the effective date of this section, no     1,186        

board of education of any school district shall be required to     1,187        

establish and maintain a budget reserve account as previously      1,188        

required under divisions (H) and (I) of section 5705.29 of the     1,189        

Revised Code as that section existed prior to the effective date   1,190        

of this section.  Any money on hand in a school district's budget  1,191        

reserve account established and maintained under those divisions   1,192        

on the effective date of this section may at the discretion of     1,193        

the district board of education be returned to the district's      1,194        

general fund or may be left in the account and may be used by the  1,195        

district board to offset any budget deficit the district may       1,196        

experience in future fiscal years.  However, any portion of that   1,197        

money consisting of refunds or rebates from the Bureau of          1,198        

Workers' Compensation that was required to be deposited in the     1,199        

fund under Section 39 of Am. Sub. H.B. 770 of the 122nd General    1,200        

Assembly or division (I) of section 5705.29 of the Revised Code    1,201        

as it existed prior to the effective date of this section may be   1,202        

used solely to offset a budget deficit or for school facility                   

construction, renovation, or repair; textbooks or instructional    1,204        

materials, including science equipment or laboratories; or         1,205        

professional development of teachers.                              1,206        

      This section does not affect a district board's authority    1,208        

to establish a reserve balance account under section 5705.13 of    1,209        

the Revised Code as that section exists after the effective date   1,210        

of this section.                                                   1,211        

                                                          30     


                                                                 
      Section 4.  Sections 3315.17 and 3315.18 of the Revised      1,213        

Code, which were enacted by Sub. H.B. 412 of the 122nd General     1,214        

Assembly, required school districts to set aside percentages of    1,215        

their general operating funds for textbooks and instructional      1,216        

materials and for capital and maintenance costs.  Section          1,217        

3313.603 of the Revised Code, enacted by Am. Sub. S.B. 55 of the   1,218        

122nd General Assembly, increased from eighteen to twenty-one the  1,219        

minimum number of academic units required for students graduating  1,220        

from high school in this state after September 15, 2001.  The      1,221        

Ohio Supreme Court, in DeRolph v. State (2000), 89 Ohio St. 3d,    1,222        

concluded that all of these requirements impermissibly imposed     1,224        

unfunded mandates upon school districts.                                        

      The General Assembly finds that the costs of the set-aside   1,226        

requirements of sections 3315.17 and 3315.18 are not unfunded to   1,227        

the extent the required set-asides are percentages of the base     1,228        

cost formula amount.  Since fiscal year 1999, these set-asides     1,229        

have been included within the base cost formula amounts            1,230        

prescribed by section 3317.012 of the Revised Code, which was      1,231        

enacted by Am. Sub. H.B. 650 of the 122nd General Assembly.  The   1,232        

General Assembly has reanalyzed fiscal year 1996 fiscal data of    1,233        

the one hundred three model effective school districts, described  1,234        

in section 3317.012 of the Revised Code, which served as the       1,235        

basis for the fiscal policies contained in Am. Sub. H.B. 650.      1,236        

This analysis is based on testimony and evidence presented in      1,237        

2000 before the Joint Committee to Examine the Base Cost of an     1,238        

Adequate Education, which clearly demonstrated that in fiscal      1,239        

year 1996, the model school districts spent at least the           1,240        

percentages prescribed in sections 3315.17 and 3315.18 of the      1,241        

Revised Code for textbooks and instructional materials and         1,242        

capital and maintenance costs as those percentages were adjusted   1,243        

by the auditor of state under those sections.  The base cost       1,245        

formula amount enacted in Am. Sub. H.B. 650 was derived from       1,246        

these districts' costs, which include their expenditures for                    

textbooks and instructional materials and capital and maintenance  1,247        

                                                          31     


                                                                 
costs.  The base cost formula amount therefore includes an amount  1,248        

adequate for school districts to meet the requirements of          1,249        

sections 3315.17 and 3315.18 provided that the required            1,250        

set-asides are percentages of the base cost amount and not of      1,251        

school district total revenues, accordingly, this act amends the   1,253        

set-aside requirements to reflect this finding.                                 

      Other evidence submitted to the Joint Committee              1,255        

demonstrated that in fiscal year 1996 the average minimum number   1,256        

of academic units required to graduate from high school in the     1,257        

model school districts was nineteen and six-tenths, but that many  1,258        

students in those districts graduated with credits exceeding the   1,259        

minimum.  The General Assembly therefore finds that the base cost  1,260        

formula amount reflects the cost of providing nineteen and         1,261        

six-tenths high school academic units.  The General Assembly       1,262        

intends to increase the base cost formula amount in future         1,263        

education funding legislation to close the gap between the model   1,264        

districts' average of nineteen and six-tenths units and the        1,265        

required minimum of twenty-one units imposed by section 3313.603   1,266        

of the Revised Code.