To amend sections 118.27, 5705.13, and 5705.39, to enact sections 117.54, 118.40, 171.20, 171.21, and 5705.413, and to repeal section 733.33 of the Revised Code to revise budgeting requirements that apply to local governments, mandate that certain actuarial standards be applied in political subdivisions that have independent retirement systems, and authorize the Auditor of State to impose sanctions on local governments that fail to comply with budget, debt, or pension requirements under state law.

Section 1.  That sections 118.27, 5705.13, and 5705.39 be amended and sections 117.54, 118.40, 171.20, 171.21, and 5705.413 of the Revised Code be enacted to read as follows:

Sec. 117.54.  If a county, township, or municipal corporation fails to comply with section 133.03, 133.05, 133.07, 133.09, 5705.13, or 5705.39 of the Revised Code or with any provision of Chapter 118. of the Revised Code, the auditor of state may notify the director of budget and management. Upon receiving such a notification, the director shall suspend the payment of all state funding for that county, township, or municipal corporation, other than benefit assistance to individuals, until subsequent notification from the auditor to the director that the political subdivision has achieved substantial compliance with such sections and chapter. Upon receipt of the subsequent notification, the director of budget and management shall release all funds withheld from the political subdivision under this section.

As used in this section, "state funding" means any state revenue transferred to a county, township, or municipal corporation including, but not limited to, local government fund allocations under section 5747.50 of the Revised Code, tangible personal property tax replacement payments under section 5727.86 or 5751.22 of the Revised Code, and property tax reduction reimbursement payments under section 321.24, 323.156, or 4503.068 of the Revised Code. "State funding" does not include any appropriations for current expenses or any funds provided pursuant to a contract, including those funds provided under Section 6 of Article 15, Ohio Constitution.

Sec. 118.27.  (A) A financial planning and supervision commission with respect to a municipal corporation, county, or township, and its functions under this chapter, shall continue in existence until such time as a determination is made pursuant to division (B) of this section that of one of the following:

(1) In the case of a village, the village has dissolved and wound up its affairs in accordance with section 118.31, 703.20, or 703.201 and section 703.21 of the Revised Code.

(2) In the case of a township, the township has dissolved pursuant to section 118.31 of the Revised Code and wound up its affairs in accordance with sections 503.02 and 503.17 to 503.21 of the Revised Code.

(3) In the case of a municipal corporation, county, or township, the municipal corporation, county, or township has done all of the following:

(1)(a) Planned, and is in the process of good faith implementation of, an effective financial accounting and reporting system in accordance with section 118.10 of the Revised Code, and it is reasonably expected that such implementation will be completed within two years;

(2)(b) Corrected and eliminated or has planned and is in the process of good faith implementation of correcting and eliminating all of the fiscal emergency conditions determined pursuant to section 118.04 of the Revised Code, and no new fiscal emergency conditions have occurred. The auditor of state shall monitor the progress of the municipal corporation, county, or township in its plan of good faith implementation of correcting and eliminating all the fiscal emergency conditions. This monitoring is to secure full implementation at the earliest time feasible but within two years from such termination. If after a two-year period, the municipal corporation, county, or township has failed to secure full implementation, the auditor of state may redeclare the municipal corporation, county, or township to be in a fiscal emergency.

(3)(c) Met the objectives of the financial plan described in section 118.06 of the Revised Code;

(4)(d) The municipal corporation, county, or township prepares a financial forecast for a five-year period in accordance with the standards issued by the auditor of state. An opinion must be rendered by the auditor of state that the financial forecast is considered to be nonadverse.

(B) The determination that all of such the conditions for the termination of the existence of the commission and its functions exist may be made either by the auditor of state or by the commission and shall be certified to the commission, the auditor of state, the governor, and the budget commission, whereupon such commission and its functions under this chapter shall terminate. Such determination shall be made by the auditor of state upon the filing with the auditor of state of a written request for such determination by the municipal corporation, county, or township, the governor, or the commission, or may be made by the auditor of state upon the auditor of state's own initiative.

(C) The commission shall prepare and submit with such certification a final report of its activities, in such form as is appropriate for the purpose of providing a record of its activities and assisting other commissions created under this chapter in the conduct of their functions. All of the books and records of the commission shall be delivered to the auditor of state for retention and safekeeping.

(D) Upon receipt of the certification provided for in division (B) of this section, the director shall follow the procedures set forth in section 126.29 of the Revised Code.

(E) If, at the time of termination of the commission, an effective financial accounting and reporting system has not been fully implemented, the auditor of state shall monitor the progress of implementation and shall exercise authority under Chapter 117. and section 118.10 of the Revised Code to secure full implementation at the earliest time feasible but within two years from such termination.

Sec. 118.40.  Any municipal corporation, county, or township that is declared to be under a fiscal watch or fiscal emergency shall notify the auditor of state before selling or encumbering any real or tangible personal property fully or partially owned by the county, township, or municipal corporation for consideration greater than five hundred thousand dollars. The auditor may issue an order prohibiting the sale or encumbrance of the property if the auditor determines that the sale or encumbrance is not in the best long-term financial interest of the political subdivision. The auditor shall not issue such an order respecting a sale or encumbrance of property approved by vote of a financial planning and supervision commission established pursuant to section 118.05 of the Revised Code. An order by the auditor prohibiting a sale or encumbrance of property by a political subdivision under a fiscal emergency may be overruled by majority vote of a financial planning and supervision commission. An order by the auditor prohibiting the sale or encumbrance of property by a subdivision under fiscal watch is final and may not be appealed.

Sec. 171.20.  (A) As used in this section and section 171.21 of the Revised Code, "political subdivision" means a county, township, municipal corporation, or any other body corporate and politic that is responsible for government activities in a geographic area smaller than that of the state.

(B) The governing authority of a retirement system of a political subdivision shall have prepared annually by or under the supervision of an actuary an actuarial valuation of the pension assets, liabilities, and funding requirements of the retirement system. The actuary shall complete the valuation in accordance with actuarial standards of practice promulgated by the actuarial standards board of the American academy of actuaries and prepare a report of the valuation. The report shall include all of the following:

(1) A summary of the benefit provisions evaluated;

(2) A summary of the census data and financial information used in the valuation;

(3) A description of the actuarial assumptions, actuarial cost method, and asset valuation method used in the valuation, including a statement of the assumed rate of payroll growth and assumed rate of growth or decline in the number of members contributing to the retirement system;

(4) A summary of findings that includes a statement of the actuarial accrued pension liabilities and unfunded actuarial accrued pension liabilities;

(5) A schedule showing the effect of any changes in the benefit provisions, actuarial assumptions, or cost methods since the last annual actuarial valuation;

(6) A statement of whether contributions to the retirement system are expected to be sufficient to satisfy the funding objectives established by the board.

(C) The governing authority shall submit the report to the Ohio retirement study council and the auditor of state not later than the first day of September following the year for which the valuation was made.

Sec. 171.21.  (A) The governing authority of a retirement system of a political subdivision shall establish a period of not more than thirty years to amortize the retirement system's unfunded actuarial accrued pension liability. If in any year the period necessary to amortize the unfunded actuarial accrued pension liability exceeds thirty years, as determined by the annual actuarial valuation required by section 171.20 of the Revised Code, the governing authority, not later than one hundred eighty days after receipt of the valuation, shall prepare and submit to the Ohio retirement study council and the auditor of state a report that includes the following information:

(1) The number of years needed to amortize the unfunded actuarial accrued pension liability as determined by the annual actuarial valuation;

(2) A plan approved by the governing authority that indicates how the governing authority will reduce the amortization period of unfunded actuarial accrued pension liability to not more than thirty years.

(B) The council shall determine whether the plan is reasonable in comparison to plans established by the other retirement systems. The auditor of state shall determine whether the plan is fiscally reasonable with respect to any other financial obligations of the political subdivision. The legislative authority of the political subdivision shall adopt a plan only if the plan is approved by both the council and the auditor of state.

(C) No political subdivision shall fail to substantially comply with a plan adopted pursuant to division (B) of this section.

(D) If a political subdivision fails to adopt a plan as required under division (B) of this section, or fails to substantially comply with an approved plan, upon certification of the auditor of state, the auditor of state shall notify the office of budget and management and all state funding, as defined in section 117.54 of the Revised Code, for that political subdivision other than benefit assistance to individuals shall be withheld until subsequent notification from the auditor of state to the office of budget and management that a plan has been adopted or substantial compliance with the plan has been achieved, as the case may be. Upon receipt of the subsequent notification, the office of budget and management shall release all funds withheld from the political subdivision under this section.

(E) Division (D) of this section does not apply to a political subdivision in which all of the following apply:

(1) The legislative authority of the political subdivision adopts an approved plan in accordance with this section.

(2) The adopted plan becomes the subject of a resolution for a referendum vote on the plan.

(3) A majority of the electors voting on the question disapprove the plan.

Sec. 5705.13.  (A) A taxing authority of a subdivision, by resolution or ordinance, may establish reserve balance accounts to accumulate currently available resources for the following purposes:

(1) To stabilize subdivision budgets against cyclical changes in revenues and expenditures;

(2) Except as otherwise provided by this section, to provide for the payment of claims and deductibles under an individual or joint self-insurance program for the subdivision, if the subdivision is permitted by law to establish such a program;

(3) To provide for the payment of claims, assessments, and deductibles under a self-insurance program, individual retrospective ratings plan, group rating plan, group retrospective rating plan, medical only program, deductible plan, or large deductible plan for workers' compensation.

The ordinance or resolution establishing a reserve balance account shall state the purpose for which the account is established, the fund in which the account is to be established, and the total amount of money to be reserved in the account.

Not more than one reserve balance account may be established for each of the purposes permitted under divisions (A)(2) and (3) of this section. Money to the credit of a reserve balance account may be expended only for the purpose for which the account was established.

A reserve balance account established for the purpose described in division (A)(1) of this section may be established in the general fund or in one or more special funds for operating purposes of the subdivision. The amount of money to be reserved in such an account in any fiscal year shall not exceed five per cent of the revenue credited in the preceding fiscal year to the fund in which the account is established, or, in the case of a reserve balance account of a county or of a township, the greater of that amount or one-sixth of the expenditures during the preceding fiscal year from the fund in which the account is established. Subject It is the intent of the general assembly that each county, township, and municipal corporation maintain a reserve account in its general fund for the purpose described in division (A)(1) of this section and that the reserve account consist of an amount of money equal to approximately five per cent of the revenue credited to the general fund in the preceding fiscal year.

Subject to division (G) of section 5705.29 of the Revised Code, any reserve balance in an account established under division (A)(1) of this section shall not be considered part of the unencumbered balance or revenue of the subdivision under division (A) of section 5705.35 or division (A)(1) of section 5705.36 of the Revised Code.

At any time, a taxing authority of a subdivision, by resolution or ordinance, may reduce or eliminate the reserve balance in a reserve balance account established for the purpose described in division (A)(1) of this section.

A reserve balance account established for the purpose described in division (A)(2) or (3) of this section shall be established in the general fund of the subdivision or by the establishment of a separate internal service fund established to account for the operation of an individual or joint self-insurance program described in division (A)(2) of this section or a workers' compensation program or plan described in division (A)(3) of this section, and shall be based on sound actuarial principles. The total amount of money in a reserve balance account for self-insurance may be expressed in dollars or as the amount determined to represent an adequate reserve according to sound actuarial principles.

A taxing authority of a subdivision, by resolution or ordinance, may rescind a reserve balance account established under this division. If a reserve balance account is rescinded, money that has accumulated in the account shall be transferred to the fund or funds from which the money originally was transferred.

(B) A taxing authority of a subdivision, by resolution or ordinance, may establish a special revenue fund for the purpose of accumulating resources for the payment of accumulated sick leave and vacation leave, and for payments in lieu of taking compensatory time off, upon the termination of employment or the retirement of officers and employees of the subdivision. The special revenue fund may also accumulate resources for payment of salaries during any fiscal year when the number of pay periods exceeds the usual and customary number of pay periods. Notwithstanding sections 5705.14, 5705.15, and 5705.16 of the Revised Code, the taxing authority, by resolution or ordinance, may transfer money to the special revenue fund from any other fund of the subdivision from which such payments may lawfully be made. The taxing authority, by resolution or ordinance, may rescind a special revenue fund established under this division. If a special revenue fund is rescinded, money that has accumulated in the fund shall be transferred to the fund or funds from which the money originally was transferred.

(C) A taxing authority of a subdivision, by resolution or ordinance, may establish a capital projects fund for the purpose of accumulating resources for the acquisition, construction, or improvement of fixed assets of the subdivision. For the purposes of this section, "fixed assets" includes motor vehicles. More than one capital projects fund may be established and may exist at any time. The ordinance or resolution shall identify the source of the money to be used to acquire, construct, or improve the fixed assets identified in the resolution or ordinance, the amount of money to be accumulated for that purpose, the period of time over which that amount is to be accumulated, and the fixed assets that the taxing authority intends to acquire, construct, or improve with the money to be accumulated in the fund.

A taxing authority of a subdivision shall not accumulate money in a capital projects fund for more than ten years after the resolution or ordinance establishing the fund is adopted. If the subdivision has not entered into a contract for the acquisition, construction, or improvement of fixed assets for which money was accumulated in such a fund before the end of that ten-year period, the fiscal officer of the subdivision shall transfer all money in the fund to the fund or funds from which that money originally was transferred or the fund that originally was intended to receive the money.

A taxing authority of a subdivision, by resolution or ordinance, may rescind a capital projects fund. If a capital projects fund is rescinded, money that has accumulated in the fund shall be transferred to the fund or funds from which the money originally was transferred.

Notwithstanding sections 5705.14, 5705.15, and 5705.16 of the Revised Code, the taxing authority of a subdivision, by resolution or ordinance, may transfer money to the capital projects fund from any other fund of the subdivision that may lawfully be used for the purpose of acquiring, constructing, or improving the fixed assets identified in the resolution or ordinance.

Sec. 5705.39.  The total appropriations from each fund shall not exceed the total of the estimated revenue available for expenditure therefrom, as certified by the budget commission, or in case of appeal, by the board of tax appeals. No appropriation measure shall become effective until the county auditor files with the appropriating authority a certificate that the total appropriations from each fund, taken together with all other outstanding appropriations, do not exceed such official estimate or amended official estimate. When the appropriation does not exceed such official estimate, the county auditor shall give such certificate forthwith upon receiving from the appropriating authority a certified copy of the appropriation measure. Appropriations shall be made from each fund only for the purposes for which such fund is established.

A board of county commissioners, board of township trustees, or legislative authority of a municipal corporation may establish limits on the negative cash balance of the general fund of the county, township, or municipal corporation, but in no case shall the negative cash balance of the general fund of a county, township, or municipal corporation exceed ten per cent of the total revenue of the general fund in the preceding fiscal year.

Sec. 5705.413.  (A) As used in this section, "expenditures and incurred obligations" includes all moneys expended or obligated pursuant to appropriations by the legislative authority of a county, township, or municipal corporation.

(B)(1) The fiscal officer of a municipal corporation shall furnish a monthly statement to the chief executive officer and the legislative authority of the municipal corporation showing the condition of the general fund. The statements shall provide a summary of the status of appropriations to enable the chief executive officer and the legislative authority to exercise and maintain effective supervision and control over the expenditures of the municipal corporation. Upon the request of the chief executive officer or the legislative authority, the fiscal officer also shall furnish statements showing the condition of any other fund.

(2) If the chief executive officer or the legislative authority ascertains that the available revenue receipts and balances for the general fund for the current fiscal year will in all probability be less than the appropriations for the year, the chief executive officer or the legislative authority shall take such actions as will prevent the expenditures and incurred obligations of the municipal corporation from exceeding such revenue receipts and balances.

(3) If the chief executive officer or the legislative authority ascertains that the available revenue receipts and balances for any fund other than the general fund for the current fiscal year will in all probability be less than the appropriations from that fund for the year, the chief executive officer or the legislative authority shall take such actions as will prevent the expenditures and incurred obligations of the municipal corporation from exceeding such revenue receipts and balances.

(4) If the chief executive officer or the legislative authority determines that the available revenue receipts and balances in any fund or across all funds will likely be less than the appropriations for the year, the chief executive officer or the legislative authority may issue orders or pass an ordinance or resolution to reduce expenditures or implement personnel actions including, but not limited to, mandatory cost savings days similar to those described in section 124.392 of the Revised Code.

(5) The requirements and authorizations imposed on the chief executive officer by division (B) of this section are subject to any limitations on the scope of the officer's authority pursuant to the municipal charter, if any, and ordinances. No order may be issued by an officer pursuant to division (B) of this section except in accordance with the authority granted to the officer by a municipal charter or ordinances.

(C)(1) The fiscal officer of a county or township shall furnish a monthly statement to the board of county commissioners or board of township trustees showing the condition of the county or township general fund. The statements shall provide a summary of the status of appropriations to enable the board to exercise and maintain effective supervision and control over the expenditures of the county or township. Upon the request of the board of county commissioners or board of township trustees, the fiscal officer also shall furnish statements showing the condition of any other fund.

(2) If the board of county commissioners or board of township trustees ascertains that the available revenue receipts and balances for the general fund for the current fiscal year will in all probability be less than the appropriations for the year, the board shall take such actions as will prevent the expenditures and incurred obligations of the county or township from exceeding such revenue receipts and balances.

(3) If the board of county commissioners or board of township trustees ascertains that the available revenue receipts and balances for any fund other than the general fund for the current fiscal year will in all probability be less than the appropriations from that fund for the year, the board shall take such actions as will prevent the expenditures and incurred obligations of the county or township from exceeding such revenue receipts and balances.

(4) If the board of county commissioners or board of township trustees determines that the available revenue receipts and balances in any fund or across all funds will likely be less than the appropriations for the year, the board may pass an ordinance or resolution to reduce expenditures or implement personnel actions including, but not limited to, mandatory cost savings days similar to those described in section 124.392 of the Revised Code.

Section 2.  That existing sections 118.27, 5705.13, and 5705.39 and section 733.33 of the Revised Code are hereby repealed.