To amend sections 3311.24 and 3311.38 and to enact section 3311.241 of the Revised Code to forgive a school district's indebtedness to the Solvency Assistance Fund upon its voluntary consolidation with another district if specified conditions are satisfied.

Section 1.  That sections 3311.24 and 3311.38 be amended and section 3311.241 of the Revised Code be enacted to read as follows:

Sec. 3311.24.  (A)(1) Except as provided in division (B) of this section, the board of education of a city, exempted village, or local school district shall file with the state board of education a proposal to transfer territory from such district to an adjoining city, exempted village, or local school district in any of the following circumstances:

(a) The district board deems the transfer advisable and, if the portion of the district proposed to be transferred is five acres or more, the board has obtained written consent to the transfer from seventy-five per cent of the owners of parcels of real property on the tax duplicate within that portion of the district;

(b) A petition, signed by seventy-five per cent of the qualified electors residing within that portion of a city, exempted village, or local school district proposed to be transferred voting at the last general election, requests such a transfer;

(c) If no qualified electors reside in that portion of the district proposed to be transferred, a petition, signed by seventy-five per cent of the owners of parcels of real property on the tax duplicate within that portion of the district, requests such a transfer.

(2) The board of education of the district in which such proposal originates shall file such proposal, together with a map showing the boundaries of the territory proposed to be transferred, with the state board of education prior to the first day of April in any even-numbered year. The state board of education may, if it is advisable, provide for a hearing in any suitable place in any of the school districts affected by such proposed transfer of territory. The state board of education or its representatives shall preside at any such hearing.

(3) A board of education of a city, exempted village, or local school district that receives a petition of transfer signed by electors of the district under division (A)(1)(b) of this section shall cause the board of elections to check the sufficiency of signatures on the petition. A board of education of a city, exempted village, or local school district that receives written consent or a petition of transfer signed by owners of parcels of real property under division (A)(1)(a) or (c) of this section shall cause the county auditor to check the sufficiency of signatures on the consent or petition.

(4) Not later than the first day of September the state board of education shall either approve or disapprove a proposed transfer of territory filed with it as provided by this section and shall notify, in writing, the boards of education of the districts affected by such proposed transfer of territory of its decision.

If the decision of the state board of education is an approval of the proposed transfer of territory then the board of education of the district in which the territory is located shall, within thirty days after receiving the state board of education's decision, adopt a resolution transferring the territory and shall forthwith submit a copy of such resolution to the treasurer of the board of education of the city, exempted village, or local school district to which the territory is transferred. Such transfer shall not be complete however, until:

(a) A resolution accepting the transfer has been passed by a majority vote of the full membership of the board of education of the city, exempted village, or local school district to which the territory is transferred;

(b) An Subject to section 3311.241 of the Revised Code, if applicable, an equitable division of the funds and indebtedness between the districts involved has been made by the board of education making the transfer;

(c) A map showing the boundaries of the territory transferred has been filed, by the board of education accepting the transfer, with the county auditor of each county affected by the transfer.

When such transfer is complete the legal title of the school property in the territory transferred shall be vested in the board of education or governing board of the school district to which the territory is transferred.

(B) Whenever the transfer of territory pursuant to this section is initiated by a board of education, the board shall, before filing a proposal for transfer with the state board of education under this section, make a good faith effort to negotiate the terms of transfer with any other school district whose territory would be affected by the transfer. Before the state board may hold a hearing on the transfer, or approve or disapprove any such transfer, it must receive the following:

(1) A resolution requesting approval of the transfer passed by the school district submitting the proposal and, if applicable, evidence of the consent of affected property owners to the transfer;

(2) Evidence determined to be sufficient by the state board to show that good faith negotiations have taken place or that the district requesting the transfer has made a good faith effort to hold such negotiations;

(3) If any negotiations took place, a statement signed by all boards that participated in the negotiations, listing the terms agreed on and the points on which no agreement could be reached.

Negotiations held pursuant to this section shall be governed by the rules adopted by the state board under division (D) of section 3311.06 of the Revised Code. Districts involved in a transfer under division (B) of this section may agree to share revenues from the property included in the territory to be transferred, establish cooperative programs between the participating districts, and establish mechanisms for the settlement of any future boundary disputes.

Sec. 3311.241.  (A) In the case of a voluntary transfer of the territory of a school district in accordance with section 3311.38 or division (A)(1)(a) of section 3311.24 of the Revised Code, and where the transfer results in the complete consolidation and dissolution of the transferring district, the net indebtedness owed to the solvency assistance fund created under section 3316.20 of the Revised Code by the transferring district shall be canceled, provided that all of the following conditions are satisfied:

(1) The amount owed by the transferring district to the solvency assistance fund is greater than or equal to thirty-three per cent of the transferring school district's operating budget for the current fiscal year, but does not exceed ten million dollars.

(2) The transferring district has remained in a state of fiscal emergency pursuant to section 3316.03 of the Revised Code during the previous two fiscal years.

(3) The acquiring district is in the same county or in a county contiguous to the county in which the transferring district is located.

(4) The acquiring district has voluntarily accepted the transfer.

(5) The acquiring district has submitted to the state board of education a five-year written projection of solvency which takes into account the fiscal effects of acquiring the transferring district.

(B) If the conditions in division (A) of this section are satisfied, the acquiring district shall acquire the transferring district's territory free and clear of any amount owed by the transferring district to the solvency assistance fund. However, the acquiring district shall assume the obligations of all other liens, encumbrances, and debts of the transferring district.

(C) Upon the making of a transfer pursuant to this section, the board of education of the transferring district is thereby abolished, and the district is thereby dissolved.

(D) The director of budget and management may transfer any available moneys from the general revenue fund, appropriated for operating payments to schools, into the solvency assistance fund to replace the amount owed by a transferring school district forgone under division (A) of this section.

Sec. 3311.38.  The state board of education may conduct, or may direct the superintendent of public instruction to conduct, studies where there is evidence of need for transfer of local, exempted village, or city school districts, or parts of any such districts, to contiguous or noncontiguous local, exempted village, or city school districts. Such studies shall include a study of the effect of any proposal upon any portion of a school district remaining after such proposed transfer. The state board, in conducting such studies and in making recommendations as a result thereof, shall consider the possibility of improving school district organization as well as the desires of the residents of the school districts which would be affected.

(A) After the adoption of recommendations growing out of any such study, or upon receipt of a resolution adopted by majority vote of the full membership of the board of any city, local, or exempted village school district requesting that the entire district be transferred to another city, local, or exempted village school district, the state board may propose by resolution the transfer of territory, which may consist of part or all of the territory of a local, exempted village, or city school district to a contiguous local, exempted village, or city school district.

The state board shall thereupon file a copy of such proposal with the board of education of each school district whose boundaries would be altered by the proposal and with the governing board of any educational service center in which such school district is located.

The state board may, not less than thirty days following the adoption of the resolution proposing the transfer of territory, certify the proposal to the board of elections of the county or counties in which any of the territory of the proposed district is located, for the purpose of having the proposal placed on the ballot at the next general election or at a primary election occurring not less than ninety days after the adoption of such resolution.

If any proposal has been previously initiated pursuant to section 3311.22, 3311.231, or 3311.26 of the Revised Code which affects any of the territory affected by the proposal of the state board, the proposal of the state board shall not be placed on the ballot while the previously initiated proposal is subject to an election.

Upon certification of a proposal to the board of elections of any county pursuant to this section, the board of elections of such county shall make the necessary arrangements for the submission of such question to the electors of the county qualified to vote thereon, and the election shall be counted and canvassed and the results shall be certified in the same manner as in regular elections for the election of members of a board of education.

The electors qualified to vote upon a proposal are the electors residing in the local, exempted village, or city school districts, containing territory proposed to be transferred.

If the proposed transfer be approved by a majority of the electors voting on the proposal, the state board, subject to the approval of the board of education of the district to which the territory would be transferred, shall make such transfer prior to the next succeeding July 1.

(B) If a study conducted in accordance with this section involves a school district with less than four thousand dollars of assessed value for each pupil in the total student count determined under section 3317.03 of the Revised Code, the state board of education, with the approval of the educational service center governing board, and upon recommendation by the state superintendent of public instruction, may by resolution transfer all or any part of such a school district to any city, exempted village, or local school district which has more than twenty-five thousand pupils in average daily membership. Such resolution of transfer shall be adopted only after the board of education of the receiving school district has adopted a resolution approving the proposed transfer. For the purposes of this division, the assessed value shall be as certified in accordance with section 3317.021 of the Revised Code.

(C) Upon Subject to section 3311.241 of the Revised Code, if applicable, upon the making of a transfer of an entire school district pursuant to this section, the indebtedness of the district transferred shall be assumed in full by the acquiring district and the funds of the district transferred shall be paid over in full to the acquiring district, except that any indebtedness of the transferred district incurred as a result of a loan made under section 3317.64 of the Revised Code is hereby canceled and shall not be assumed by the acquiring district.

(D) Upon the making of a transfer pursuant to this section, when only part of a district is transferred, the net indebtedness of each original district of which only a part is taken by the acquiring district shall be apportioned between the acquiring district and the original district in the ratio which the assessed valuation of the part taken by the acquiring district bears to the assessed valuation of the original district as of the effective date of the transfer. As used in this section "net indebtedness" means the difference between the par value of the outstanding and unpaid bonds and notes of the school district and the amount held in the sinking fund and other indebtedness retirement funds for their redemption.

(E) Upon the making of a transfer pursuant to this section, when only part of a district is transferred, the funds of the district from which territory was transferred shall be divided equitably by the state board between the acquiring district and that part of the former district remaining after the transfer.

(F) If an entire school district is transferred, the board of education of such district is thereby abolished. If part of a school district is transferred, any member of the board of education who is a legal resident of that part which is transferred shall thereby cease to be a member of that board.

If an entire school district is transferred, foundation program moneys accruing to a district accepting school territory under the provisions of this section shall not be less, in any year during the next succeeding three years following the transfer, than the sum of the amounts received by the districts separately in the year in which the transfer became effective.

Section 2.  That existing sections 3311.24 and 3311.38 of the Revised Code are hereby repealed.