HB-5531, As Passed Senate, March 27, 2008

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5531

A bill to amend 1979 PA 94, entitled

"The state school aid act of 1979,"

by amending sections 11, 11j, 22a, 22b, 22d, 51a, 51c, 56, 62, and

104 (MCL 388.1611, 388.1611j, 388.1622a, 388.1622b, 388.1622d,

388.1651a, 388.1651c, 388.1656, 388.1662, and 388.1704), as amended

by 2007 PA 137, and by adding section 32e.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 11. (1) For the fiscal year ending September 30, 2008,

there is appropriated for the public schools of this state and

certain other state purposes relating to education the sum of

~~$11,493,064,200.00~~ $11,386,686,700.00 from the state school aid

fund established by section 11 of article IX of the state

constitution of 1963 and the sum of $34,909,600.00 from the general

fund. In addition, available federal funds are appropriated for the

fiscal year ending September 30, 2008.

(2) The appropriations under this section shall be allocated

as provided in this act. Money appropriated under this section from

the general fund shall be expended to fund the purposes of this act

before the expenditure of money appropriated under this section

from the state school aid fund. If the maximum amount appropriated

under this section from the state school aid fund for a fiscal year

exceeds the amount necessary to fully fund allocations under this

act from the state school aid fund, that excess amount shall not be

expended in that state fiscal year and shall not lapse to the

general fund, but instead shall be deposited into the school aid

stabilization fund created in section 11a.

(3) If the maximum amount appropriated under this section from

the state school aid fund and the school aid stabilization fund for

a fiscal year exceeds the amount available for expenditure from the

state school aid fund for that fiscal year, payments under sections

11f, 11g, 11j, 22a, 26a, 26b, 31d, 31f, 51a(2), 51a(12), 51c, 53a,

and 56 shall be made in full. In addition, for districts beginning

operations after 1994-95 that qualify for payments under section

22b, payments under section 22b shall be made so that the

qualifying districts receive the lesser of an amount equal to the

1994-95 foundation allowance of the district in which the district

beginning operations after 1994-95 is located or $5,500.00. The

amount of the payment to be made under section 22b for these

qualifying districts shall be as calculated under section 22a, with

the balance of the payment under section 22b being subject to the

proration otherwise provided under this subsection and subsection

(4). If proration is necessary, state payments under each of the

other sections of this act from all state funding sources shall be

prorated in the manner prescribed in subsection (4) as necessary to

reflect the amount available for expenditure from the state school

aid fund for the affected fiscal year. However, if the department

of treasury determines that proration will be required under this

subsection, or if the department of treasury determines that

further proration is required under this subsection after an

initial proration has already been made for a fiscal year, the

department of treasury shall notify the state budget director, and

the state budget director shall notify the legislature at least 30

calendar days or 6 legislative session days, whichever is more,

before the department reduces any payments under this act because

of the proration. During the 30 calendar day or 6 legislative

session day period after that notification by the state budget

director, the department shall not reduce any payments under this

act because of proration under this subsection. The legislature may

prevent proration from occurring by, within the 30 calendar day or

6 legislative session day period after that notification by the

state budget director, enacting legislation appropriating

additional funds from the general fund, countercyclical budget and

economic stabilization fund, state school aid fund balance, or

another source to fund the amount of the projected shortfall.

(4) If proration is necessary under subsection (3), the

department shall calculate the proration in district and

intermediate district payments that is required under subsection

(3) as follows:

(a) The department shall calculate the percentage of total

state school aid allocated under this act for the affected fiscal

year for each of the following:

(i) Districts.

(ii) Intermediate districts.

(iii) Entities other than districts or intermediate districts.

(b) The department shall recover a percentage of the proration

amount required under subsection (3) that is equal to the

percentage calculated under subdivision (a)(i) for districts by

reducing payments to districts. This reduction shall be made by

calculating an equal dollar amount per pupil as necessary to

recover this percentage of the proration amount and reducing each

district's total state school aid from state sources, other than

payments under sections 11f, 11g, 11j, 22a, 26a, 26b, 31d, 31f,

51a(2), 51a(12), 51c, and 53a, by that amount.

amount required under subsection (3) that is equal to the

percentage calculated under subdivision (a)(ii) for intermediate

districts by reducing payments to intermediate districts. This

reduction shall be made by reducing the payments to each

intermediate district, other than payments under sections 11f, 11g,

26a, 26b, 51a(2), 51a(12), 53a, and 56, on an equal percentage

basis.

(d) The department shall recover a percentage of the proration

amount required under subsection (3) that is equal to the

percentage calculated under subdivision (a)(iii) for entities other

than districts and intermediate districts by reducing payments to

these entities. This reduction shall be made by reducing the

payments to each of these entities, other than payments under

sections 11j, 26a, and 26b, on an equal percentage basis.

(5) Except for the allocation under section 26a, any general

fund allocations under this act that are not expended by the end of

the state fiscal year are transferred to the school aid

stabilization fund created under section 11a.

Sec. 11j. From the appropriation in section 11, there is

allocated an amount not to exceed ~~$1,900,000.00~~ $3,900,000.00 for

2007-2008 for payments to the school loan bond redemption fund in

the department of treasury on behalf of districts and intermediate

districts. Notwithstanding section 11 or any other provision of

this act, funds allocated under this section are not subject to

proration and shall be paid in full.

Sec. 22a. (1) From the appropriation in section 11, there is

allocated an amount not to exceed ~~$6,012,000,000.00~~

$5,951,000,000.00 for 2007-2008 for payments to districts,

qualifying university schools, and qualifying public school

academies to guarantee each district, qualifying university school,

and qualifying public school academy an amount equal to its 1994-95

total state and local per pupil revenue for school operating

purposes under section 11 of article IX of the state constitution

of 1963. Pursuant to section 11 of article IX of the state

constitution of 1963, this guarantee does not apply to a district

in a year in which the district levies a millage rate for school

district operating purposes less than it levied in 1994. However,

subsection (2) applies to calculating the payments under this

section. Funds allocated under this section that are not expended

in the state fiscal year for which they were allocated, as

determined by the department, may be used to supplement the

allocations under sections 22b and 51c in order to fully fund those

calculated allocations for the same fiscal year.

(2) To ensure that a district receives an amount equal to the

district's 1994-95 total state and local per pupil revenue for

school operating purposes, there is allocated to each district a

state portion of the district's 1994-95 foundation allowance in an

amount calculated as follows:

(a) Except as otherwise provided in this subsection, the state

portion of a district's 1994-95 foundation allowance is an amount

equal to the district's 1994-95 foundation allowance or $6,500.00,

whichever is less, minus the difference between the product of the

taxable value per membership pupil of all property in the district

that is not a homestead or qualified agricultural property times

the lesser of 18 mills or the number of mills of school operating

taxes levied by the district in 1993-94 and the quotient of the ad

valorem property tax revenue of the district captured under 1975 PA

197, MCL 125.1651 to 125.1681, the tax increment finance authority

act, 1980 PA 450, MCL 125.1801 to 125.1830, the local development

financing act, 1986 PA 281, MCL 125.2151 to 125.2174, the

brownfield redevelopment financing act, 1996 PA 381, MCL 125.2651

to 125.2672, or the corridor improvement authority act, 2005 PA

280, MCL 125.2871 to 125.2899, divided by the district's

membership. For a district that has a millage reduction required

under section 31 of article IX of the state constitution of 1963,

the state portion of the district's foundation allowance shall be

calculated as if that reduction did not occur.

(b) For a district that had a 1994-95 foundation allowance

greater than $6,500.00, the state payment under this subsection

shall be the sum of the amount calculated under subdivision (a)

plus the amount calculated under this subdivision. The amount

calculated under this subdivision shall be equal to the difference

between the district's 1994-95 foundation allowance minus $6,500.00

and the current year hold harmless school operating taxes per

pupil. If the result of the calculation under subdivision (a) is

negative, the negative amount shall be an offset against any state

payment calculated under this subdivision. If the result of a

calculation under this subdivision is negative, there shall not be

a state payment or a deduction under this subdivision. The taxable

values per membership pupil used in the calculations under this

subdivision are as adjusted by ad valorem property tax revenue

captured under 1975 PA 197, MCL 125.1651 to 125.1681, the tax

increment finance authority act, 1980 PA 450, MCL 125.1801 to

125.1830, the local development financing act, 1986 PA 281, MCL

125.2151 to 125.2174, the brownfield redevelopment financing act,

1996 PA 381, MCL 125.2651 to 125.2672, or the corridor improvement

authority act, 2005 PA 280, MCL 125.2871 to 125.2899, divided by

the district's membership.

(3) Beginning in 2003-2004, for pupils in membership in a

qualifying public school academy or qualifying university school,

there is allocated under this section to the authorizing body that

is the fiscal agent for the qualifying public school academy for

forwarding to the qualifying public school academy, or to the board

of the public university operating the qualifying university

school, an amount equal to the 1994-95 per pupil payment to the

qualifying public school academy or qualifying university school

under section 20.

(4) A district, qualifying university school, or qualifying

public school academy may use funds allocated under this section in

conjunction with any federal funds for which the district,

qualifying university school, or qualifying public school academy

otherwise would be eligible.

(5) For a district that is formed or reconfigured after June

1, 2000 by consolidation of 2 or more districts or by annexation,

the resulting district's 1994-95 foundation allowance under this

section beginning after the effective date of the consolidation or

annexation shall be the average of the 1994-95 foundation

allowances of each of the original or affected districts,

calculated as provided in this section, weighted as to the

percentage of pupils in total membership in the resulting district

in the state fiscal year in which the consolidation takes place who

reside in the geographic area of each of the original districts. If

an affected district's 1994-95 foundation allowance is less than

the 1994-95 basic foundation allowance, the amount of that

district's 1994-95 foundation allowance shall be considered for the

purpose of calculations under this subsection to be equal to the

amount of the 1994-95 basic foundation allowance.

(6) As used in this section:

(a) "1994-95 foundation allowance" means a district's 1994-95

foundation allowance calculated and certified by the department of

treasury or the superintendent under former section 20a as enacted

in 1993 PA 336 and as amended by 1994 PA 283.

(b) "Current state fiscal year" means the state fiscal year

for which a particular calculation is made.

pupil" means the per pupil revenue generated by multiplying a

district's 1994-95 hold harmless millage by the district's current

year taxable value per membership pupil.

(d) "Hold harmless millage" means, for a district with a 1994-

95 foundation allowance greater than $6,500.00, the number of mills

by which the exemption from the levy of school operating taxes on a

homestead and qualified agricultural property could be reduced as

provided in section 1211(1) of the revised school code, MCL

380.1211, and the number of mills of school operating taxes that

could be levied on all property as provided in section 1211(2) of

the revised school code, MCL 380.1211, as certified by the

department of treasury for the 1994 tax year.

(e) "Homestead" means that term as defined in section 1211 of

the revised school code, MCL 380.1211.

(f) "Membership" means the definition of that term under

section 6 as in effect for the particular fiscal year for which a

particular calculation is made.

(g) "Qualified agricultural property" means that term as

defined in section 1211 of the revised school code, MCL 380.1211.

(h) "Qualifying public school academy" means a public school

academy that was in operation in the 1994-95 school year and is in

operation in the current state fiscal year.

(i) "Qualifying university school" means a university school

that was in operation in the 1994-95 school year and is in

operation in the current fiscal year.

(j) "School operating taxes" means local ad valorem property

taxes levied under section 1211 of the revised school code, MCL

380.1211, and retained for school operating purposes.

(k) "Taxable value per membership pupil" means each of the

following divided by the district's membership:

(i) For the number of mills by which the exemption from the

levy of school operating taxes on a homestead and qualified

agricultural property may be reduced as provided in section 1211(1)

of the revised school code, MCL 380.1211, the taxable value of

homestead and qualified agricultural property for the calendar year

ending in the current state fiscal year.

(ii) For the number of mills of school operating taxes that may

be levied on all property as provided in section 1211(2) of the

revised school code, MCL 380.1211, the taxable value of all

property for the calendar year ending in the current state fiscal

year.

Sec. 22b. (1) From the appropriation in section 11, there is

allocated an amount not to exceed ~~$3,722,000,000.00~~

$3,683,275,000.00 for 2007-2008 for discretionary nonmandated

payments to districts under this section. Funds allocated under

this section that are not expended in the state fiscal year for

which they were allocated, as determined by the department, may be

used to supplement the allocations under sections 22a and 51c in

order to fully fund those calculated allocations for the same

fiscal year.

(2) Subject to subsection (3) and section 11, the allocation

to a district under this section shall be an amount equal to the

sum of the amounts calculated under sections 20, 20j, 51a(2),

51a(3), and 51a(12), minus the sum of the allocations to the

district under sections 22a and 51c.

(3) In order to receive an allocation under this section, each

district shall do all of the following:

(a) Administer in each grade level that it operates in grades

1 to 5 a standardized assessment approved by the department of

grade-appropriate basic educational skills. A district may use the

Michigan literacy progress profile to satisfy this requirement for

grades 1 to 3. Also, if the revised school code is amended to

require annual assessments at additional grade levels, in order to

receive an allocation under this section each district shall comply

with that requirement.

(b) Comply with sections 1278a and 1278b of the revised school

code, MCL 380.1278a and 380.1278b.

federal law to the center and the department in the form and manner

specified by the center or the department, as applicable.

(d) Comply with section 1230g of the revised school code, MCL

380.1230g.

(4) Districts are encouraged to use funds allocated under this

section for the purchase and support of payroll, human resources,

and other business function software that is compatible with that

of the intermediate district in which the district is located and

with other districts located within that intermediate district.

(5) From the allocation in subsection (1), the department

shall pay up to $1,000,000.00 in litigation costs incurred by this

state associated with lawsuits filed by 1 or more districts or

intermediate districts against this state. If the allocation under

this section is insufficient to fully fund all payments required

under this section, the payments under this subsection shall be

made in full before any proration of remaining payments under this

section.

(6) It is the intent of the legislature that all

constitutional obligations of this state have been fully funded

under sections 22a, 31d, 51a, and 51c. If a claim is made by an

entity receiving funds under this act that challenges the

legislative determination of the adequacy of this funding or

alleges that there exists an unfunded constitutional requirement,

the state budget director may escrow or allocate from the

discretionary funds for nonmandated payments under this section the

amount as may be necessary to satisfy the claim before making any

payments to districts under subsection (2). If funds are escrowed,

the escrowed funds are a work project appropriation and the funds

are carried forward into the following fiscal year. The purpose of

the work project is to provide for any payments that may be awarded

to districts as a result of litigation. The work project shall be

completed upon resolution of the litigation.

(7) If the local claims review board or a court of competent

jurisdiction makes a final determination that this state is in

violation of section 29 of article IX of the state constitution of

1963 regarding state payments to districts, the state budget

director shall use work project funds under subsection (6) or

allocate from the discretionary funds for nonmandated payments

under this section the amount as may be necessary to satisfy the

amount owed to districts before making any payments to districts

under subsection (2).

(8) If a claim is made in court that challenges the

legislative determination of the adequacy of funding for this

state's constitutional obligations or alleges that there exists an

unfunded constitutional requirement, any interested party may seek

an expedited review of the claim by the local claims review board.

If the claim exceeds $10,000,000.00, this state may remove the

action to the court of appeals, and the court of appeals shall have

and shall exercise jurisdiction over the claim.

(9) If payments resulting from a final determination by the

local claims review board or a court of competent jurisdiction that

there has been a violation of section 29 of article IX of the state

constitution of 1963 exceed the amount allocated for discretionary

nonmandated payments under this section, the legislature shall

provide for adequate funding for this state's constitutional

obligations at its next legislative session.

(10) If a lawsuit challenging payments made to districts

related to costs reimbursed by federal title XIX medicaid funds is

filed against this state, then, for the purpose of addressing

potential liability under such a lawsuit, the state budget director

may place funds allocated under this section in escrow or allocate

money from the funds otherwise allocated under this section, up to

a maximum of 50% of the amount allocated in subsection (1). If

funds are placed in escrow under this subsection, those funds are a

work project appropriation and the funds are carried forward into

the following fiscal year. The purpose of the work project is to

provide for any payments that may be awarded to districts as a

result of the litigation. The work project shall be completed upon

resolution of the litigation. In addition, this state reserves the

right to terminate future federal title XIX medicaid reimbursement

payments to districts if the amount or allocation of reimbursed

funds is challenged in the lawsuit. As used in this subsection,

"title XIX" means title XIX of the social security act, 42 USC 1396

to 1396v.

(11) From the allocation in subsection (1), there is allocated

for 2007-2008 only an amount not to exceed $40,000.00 for payment

to a district that meets all of the following:

(a) Had a membership of less than 900 pupils for 2006-2007.

(b) Is located in an intermediate district that had a taxable

value per membership pupil, as defined in section 22a, of greater

than $290,000.00 for 2006-2007.

affirmative on May 8, 2007 to restore a millage reduction required

under section 31 of article IX of the state constitution of 1963,

but the district was later found to have an incorrect millage

reduction fraction as defined in section 34d of the general

property tax act, 1893 PA 206, MCL 211.34d.

Sec. 22d. (1) From the amount allocated under section 22b, an

amount not to exceed ~~$750,000.00~~ $2,025,000.00 is allocated for

2007-2008 for additional payments to small, geographically isolated

districts under this section.

(2) ~~To be eligible for a payment under this section, a~~

~~district shall meet~~ From the allocation under subsection (1), there

is allocated for 2007-2008 an amount not to exceed $750,000.00 for

payments under this subsection to districts that meet all of the

following:

(a) Operates grades K to 12.

(b) Has fewer than 250 pupils in membership.

least 1 of the following:

(i) Is located in the Upper Peninsula at least 30 miles from

any other public school building.

(ii) Is located on an island that is not accessible by bridge.

(3) The amount of the additional funding to each eligible

district under ~~this section~~ subsection (2) shall be determined

under a spending plan developed as provided in this subsection and

approved by the superintendent of public instruction. The spending

plan shall be developed cooperatively by the intermediate

superintendents of each intermediate district in which an eligible

district is located. The intermediate superintendents shall review

the financial situation of each eligible district, determine the

minimum essential financial needs of each eligible district, and

develop and agree on a spending plan that distributes the available

funding under ~~this section~~ subsection (2) to the eligible districts

based on those financial needs. The intermediate superintendents

shall submit the spending plan to the superintendent of public

instruction for approval. Upon approval by the superintendent of

public instruction, the amounts specified for each eligible

district under the spending plan are allocated under ~~this section~~

subsection (2) and shall be paid to the eligible districts in the

same manner as payments under section 22b.

(4) Subject to subsection (6), from the allocation in

subsection (1), there is allocated for 2007-2008 an amount not to

exceed $1,275,000.00 for payments under this subsection to

districts that meet all of the following:

(a) The district has 5.0 or fewer pupils per square mile as

determined by the department.

(b) The district has a total square mileage greater than 200.0

or is 1 of 2 districts that have consolidated transportation

services and have a combined total square mileage greater than

200.0.

(5) The funds allocated under subsection (4) shall be

allocated on an equal per pupil basis.

(6) A district receiving funds allocated under subsection (2)

is not eligible for funding allocated under subsection (4).

Sec. 32e. From the state school aid fund money appropriated

under section 11, there is allocated an amount not to exceed

$4,700,000.00 for 2007-2008 to districts eligible to receive

funding under section 32d. The funding under this section shall be

distributed among districts in decreasing order of concentration of

eligible children as determined by section 38. The amount

distributed to each district under this section shall be an amount

equal to the number of children the district served under section

32d in 2006-2007 or the number of children the district indicates

it will be able to serve under section 37(2)(c) in 2007-2008,

whichever is less, minus the number of children for which the

district has previously received funding in 2007-2008

as determined by the department, multiplied by $3,400.00. However,

a district is not required to return previously allocated funding

to the school aid fund in 2007-2008 as a result of this

calculation.

Sec. 51a. (1) From the appropriation in section 11, there is

allocated for 2007-2008 an amount not to exceed ~~$1,006,483,000.00~~

$990,483,000.00 from state sources and all available federal

funding under sections 611 to 619 of part B of the individuals with

disabilities education act, 20 USC 1411 to 1419, estimated at

$350,700,000.00, plus any carryover federal funds from previous

year appropriations. The allocations under this subsection are for

the purpose of reimbursing districts and intermediate districts for

special education programs, services, and special education

personnel as prescribed in article 3 of the revised school code,

MCL 380.1701 to 380.1766; net tuition payments made by intermediate

districts to the Michigan schools for the deaf and blind; and

special education programs and services for pupils who are eligible

for special education programs and services according to statute or

rule. For meeting the costs of special education programs and

services not reimbursed under this article, a district or

intermediate district may use money in general funds or special

education funds, not otherwise restricted, or contributions from

districts to intermediate districts, tuition payments, gifts and

contributions from individuals, or federal funds that may be

available for this purpose, as determined by the intermediate

district plan prepared pursuant to article 3 of the revised school

code, MCL 380.1701 to 380.1766. All federal funds allocated under

this section in excess of those allocated under this section for

2002-2003 may be distributed in accordance with the flexible

funding provisions of the individuals with disabilities education

act, Public Law 108-446, including, but not limited to, 34 CFR

300.206 and 300.208. Notwithstanding section 17b, payments of

federal funds to districts, intermediate districts, and other

eligible entities under this section shall be paid on a schedule

determined by the department.

(2) From the funds allocated under subsection (1), there is

allocated for 2007-2008 the amount necessary, estimated at

~~$215,900,000.00~~ $216,500,000.00, for payments toward reimbursing

districts and intermediate districts for 28.6138% of total approved

costs of special education, excluding costs reimbursed under

section 53a, and 70.4165% of total approved costs of special

education transportation. Allocations under this subsection shall

be made as follows:

(a) The initial amount allocated to a district under this

subsection toward fulfilling the specified percentages shall be

calculated by multiplying the district's special education pupil

membership, excluding pupils described in subsection (12), times

the sum of the foundation allowance under section 20 of the pupil's

district of residence plus the amount of the district's per pupil

allocation under section 20j(2), not to exceed the basic foundation

allowance under section 20 for the current fiscal year, or, for a

special education pupil in membership in a district that is a

public school academy or university school, times an amount equal

to the amount per membership pupil calculated under section 20(6).

For an intermediate district, the amount allocated under this

subdivision toward fulfilling the specified percentages shall be an

amount per special education membership pupil, excluding pupils

described in subsection (12), and shall be calculated in the same

manner as for a district, using the foundation allowance under

section 20 of the pupil's district of residence, not to exceed the

basic foundation allowance under section 20 for the current fiscal

year, and that district's per pupil allocation under section

20j(2).

(b) After the allocations under subdivision (a), districts and

intermediate districts for which the payments under subdivision (a)

do not fulfill the specified percentages shall be paid the amount

necessary to achieve the specified percentages for the district or

intermediate district.

(3) From the funds allocated under subsection (1), there is

allocated for 2007-2008 the amount necessary, estimated at

$1,500,000.00, to make payments to districts and intermediate

districts under this subsection. If the amount allocated to a

district or intermediate district for a fiscal year under

subsection (2)(b) is less than the sum of the amounts allocated to

the district or intermediate district for 1996-97 under sections 52

and 58, there is allocated to the district or intermediate district

for the fiscal year an amount equal to that difference, adjusted by

applying the same proration factor that was used in the

distribution of funds under section 52 in 1996-97 as adjusted to

the district's or intermediate district's necessary costs of

special education used in calculations for the fiscal year. This

adjustment is to reflect reductions in special education program

operations or services between 1996-97 and subsequent fiscal years.

Adjustments for reductions in special education program operations

or services shall be made in a manner determined by the department

and shall include adjustments for program or service shifts.

(4) If the department determines that the sum of the amounts

allocated for a fiscal year to a district or intermediate district

under subsection (2)(a) and (b) is not sufficient to fulfill the

specified percentages in subsection (2), then the shortfall shall

be paid to the district or intermediate district during the fiscal

year beginning on the October 1 following the determination and

payments under subsection (3) shall be adjusted as necessary. If

the department determines that the sum of the amounts allocated for

a fiscal year to a district or intermediate district under

subsection (2)(a) and (b) exceeds the sum of the amount necessary

to fulfill the specified percentages in subsection (2), then the

department shall deduct the amount of the excess from the

district's or intermediate district's payments under this act for

the fiscal year beginning on the October 1 following the

determination and payments under subsection (3) shall be adjusted

as necessary. However, if the amount allocated under subsection

(2)(a) in itself exceeds the amount necessary to fulfill the

specified percentages in subsection (2), there shall be no

deduction under this subsection.

(5) State funds shall be allocated on a total approved cost

basis. Federal funds shall be allocated under applicable federal

requirements, except that an amount not to exceed $3,500,000.00 may

be allocated by the department for 2007-2008 to districts,

intermediate districts, or other eligible entities on a competitive

grant basis for programs, equipment, and services that the

department determines to be designed to benefit or improve special

education on a statewide scale.

(6) From the amount allocated in subsection (1), there is

allocated an amount not to exceed $2,200,000.00 for 2007-2008 to

reimburse 100% of the net increase in necessary costs incurred by a

district or intermediate district in implementing the revisions in

the administrative rules for special education that became

effective on July 1, 1987. As used in this subsection, "net

increase in necessary costs" means the necessary additional costs

incurred solely because of new or revised requirements in the

administrative rules minus cost savings permitted in implementing

the revised rules. Net increase in necessary costs shall be

determined in a manner specified by the department.

(7) For purposes of this article, all of the following apply:

(a) "Total approved costs of special education" shall be

determined in a manner specified by the department and may include

indirect costs, but shall not exceed 115% of approved direct costs

for section 52 and section 53a programs. The total approved costs

include salary and other compensation for all approved special

education personnel for the program, including payments for social

security and medicare and public school employee retirement system

contributions. The total approved costs do not include salaries or

other compensation paid to administrative personnel who are not

special education personnel as defined in section 6 of the revised

school code, MCL 380.6. Costs reimbursed by federal funds, other

than those federal funds included in the allocation made under this

article, are not included. Special education approved personnel not

utilized full time in the evaluation of students or in the delivery

of special education programs, ancillary, and other related

services shall be reimbursed under this section only for that

portion of time actually spent providing these programs and

services, with the exception of special education programs and

services provided to youth placed in child caring institutions or

juvenile detention programs approved by the department to provide

an on-grounds education program.

(b) Beginning with the 2004-2005 fiscal year, a district or

intermediate district that employed special education support

services staff to provide special education support services in

2003-2004 or in a subsequent fiscal year and that in a fiscal year

after 2003-2004 receives the same type of support services from

another district or intermediate district shall report the cost of

those support services for special education reimbursement purposes

under this act. This subdivision does not prohibit the transfer of

special education classroom teachers and special education

classroom aides if the pupils counted in membership associated with

those special education classroom teachers and special education

classroom aides are transferred and counted in membership in the

other district or intermediate district in conjunction with the

transfer of those teachers and aides.

2007 that the amounts allocated for 2006-2007 under subsections

(2), (3), (6), (8), and (12) and sections 53a, 54, and 56 will

exceed expenditures for 2006-2007 under subsections (2), (3), (6),

(8), and (12) and sections 53a, 54, and 56, then for 2006-2007

only, for a district or intermediate district whose reimbursement

for 2006-2007 would otherwise be affected by subdivision (b),

subdivision (b) does not apply to the calculation of the

reimbursement for that district or intermediate district and

reimbursement for that district or intermediate district shall be

calculated in the same manner as it was for 2003-2004. If the

amount of the excess allocations under subsections (2), (3), (6),

(8), and (12) and sections 53a, 54, and 56 is not sufficient to

fully fund the calculation of reimbursement to those districts and

intermediate districts under this subdivision, then the

calculations and resulting reimbursement under this subdivision

shall be prorated on an equal percentage basis.

(d) Reimbursement for ancillary and other related services, as

defined by R 340.1701c of the Michigan administrative code, shall

not be provided when those services are covered by and available

through private group health insurance carriers or federal

reimbursed program sources unless the department and district or

intermediate district agree otherwise and that agreement is

approved by the state budget director. Expenses, other than the

incidental expense of filing, shall not be borne by the parent. In

addition, the filing of claims shall not delay the education of a

pupil. A district or intermediate district shall be responsible for

payment of a deductible amount and for an advance payment required

until the time a claim is paid.

(e) Beginning with calculations for 2004-2005, if an

intermediate district purchases a special education pupil

transportation service from a constituent district that was

previously purchased from a private entity; if the purchase from

the constituent district is at a lower cost, adjusted for changes

in fuel costs; and if the cost shift from the intermediate district

to the constituent does not result in any net change in the revenue

the constituent district receives from payments under sections 22b

and 51c, then upon application by the intermediate district, the

department shall direct the intermediate district to continue to

report the cost associated with the specific identified special

education pupil transportation service and shall adjust the costs

reported by the constituent district to remove the cost associated

with that specific service.

(8) From the allocation in subsection (1), there is allocated

for 2007-2008 an amount not to exceed $15,313,900.00 to

intermediate districts. The payment under this subsection to each

intermediate district shall be equal to the amount of the 1996-97

allocation to the intermediate district under subsection (6) of

this section as in effect for 1996-97.

(9) A pupil who is enrolled in a full-time special education

program conducted or administered by an intermediate district or a

pupil who is enrolled in the Michigan schools for the deaf and

blind shall not be included in the membership count of a district,

but shall be counted in membership in the intermediate district of

residence.

(10) Special education personnel transferred from 1 district

to another to implement the revised school code shall be entitled

to the rights, benefits, and tenure to which the person would

otherwise be entitled had that person been employed by the

receiving district originally.

(11) If a district or intermediate district uses money

received under this section for a purpose other than the purpose or

purposes for which the money is allocated, the department may

require the district or intermediate district to refund the amount

of money received. Money that is refunded shall be deposited in the

state treasury to the credit of the state school aid fund.

(12) From the funds allocated in subsection (1), there is

allocated for 2007-2008 the amount necessary, estimated at

~~$6,600,000.00~~ $7,600,000.00, to pay the foundation allowances for

pupils described in this subsection. The allocation to a district

under this subsection shall be calculated by multiplying the number

of pupils described in this subsection who are counted in

membership in the district times the sum of the foundation

allowance under section 20 of the pupil's district of residence

plus the amount of the district's per pupil allocation under

section 20j(2), not to exceed the basic foundation allowance under

section 20 for the current fiscal year, or, for a pupil described

in this subsection who is counted in membership in a district that

is a public school academy or university school, times an amount

equal to the amount per membership pupil under section 20(6). The

allocation to an intermediate district under this subsection shall

be calculated in the same manner as for a district, using the

foundation allowance under section 20 of the pupil's district of

residence, not to exceed the basic foundation allowance under

section 20 for the current fiscal year, and that district's per

pupil allocation under section 20j(2). This subsection applies to

all of the following pupils:

(a) Pupils described in section 53a.

(b) Pupils counted in membership in an intermediate district

who are not special education pupils and are served by the

intermediate district in a juvenile detention or child caring

facility.

intermediate district and provided educational services by the

department of community health.

(13) After payments under subsections (2) and (12) and section

51c, the remaining expenditures from the allocation in subsection

(1) shall be made in the following order:

(a) 100% of the reimbursement required under section 53a.

(b) 100% of the reimbursement required under subsection (6).

(d) 100% of the payment required under subsection (3).

(e) 100% of the payment required under subsection (8).

(f) 100% of the payments under section 56.

(14) The allocations under subsection (2), subsection (3), and

subsection (12) shall be allocations to intermediate districts only

and shall not be allocations to districts, but instead shall be

calculations used only to determine the state payments under

section 22b.

Sec. 51c. As required by the court in the consolidated cases

known as Durant v State of Michigan, Michigan supreme court docket

no. 104458-104492, from the allocation under section 51a(1), there

is allocated for 2007-2008 the amount necessary, estimated at

~~$713,600,000.00~~ $696,000,000.00, for payments to reimburse

districts for 28.6138% of total approved costs of special education

excluding costs reimbursed under section 53a, and 70.4165% of total

approved costs of special education transportation. Funds allocated

under this section that are not expended in the state fiscal year

for which they were allocated, as determined by the department, may

be used to supplement the allocations under sections 22a and 22b in

order to fully fund those calculated allocations for the same

fiscal year.

Sec. 56. (1) For the purposes of this section:

(a) "Membership" means for a particular fiscal year the total

membership for the immediately preceding fiscal year of the

intermediate district and the districts constituent to the

intermediate district.

(b) "Millage levied" means the millage levied for special

education pursuant to part 30 of the revised school code, MCL

380.1711 to 380.1743, including a levy for debt service

obligations.

districts constituent to an intermediate district, except that if a

district has elected not to come under part 30 of the revised

school code, MCL 380.1711 to 380.1743, membership and taxable value

of the district shall not be included in the membership and taxable

value of the intermediate district.

(2) From the allocation under section 51a(1), there is

allocated an amount not to exceed $36,881,100.00 for 2007-2008 to

reimburse intermediate districts levying millages for special

education pursuant to part 30 of the revised school code, MCL

380.1711 to 380.1743. The purpose, use, and expenditure of the

reimbursement shall be limited as if the funds were generated by

these millages and governed by the intermediate district plan

adopted pursuant to article 3 of the revised school code, MCL

380.1701 to 380.1766. As a condition of receiving funds under this

section, an intermediate district distributing any portion of

special education millage funds to its constituent districts shall

submit for departmental approval and implement a distribution plan.

(3) Reimbursement for those millages levied in 2006-2007 shall

be made in 2007-2008 at an amount per 2006-2007 membership pupil

computed by subtracting from ~~$161,400.00~~ $161,800.00 the 2006-2007

taxable value behind each membership pupil and multiplying the

resulting difference by the 2006-2007 millage levied.

Sec. 62. (1) For the purposes of this section:

(a) "Membership" means for a particular fiscal year the total

membership for the immediately preceding fiscal year of the

intermediate district and the districts constituent to the

intermediate district or the total membership for the immediately

preceding fiscal year of the area vocational-technical program.

(b) "Millage levied" means the millage levied for area

vocational-technical education pursuant to sections 681 to 690 of

the revised school code, MCL 380.681 to 380.690, including a levy

for debt service obligations incurred as the result of borrowing

for capital outlay projects and in meeting capital projects fund

requirements of area vocational-technical education.

districts constituent to an intermediate district or area

vocational-technical education program, except that if a district

has elected not to come under sections 681 to 690 of the revised

school code, MCL 380.681 to 380.690, the membership and taxable

value of that district shall not be included in the membership and

taxable value of the intermediate district. However, the membership

and taxable value of a district that has elected not to come under

sections 681 to 690 of the revised school code, MCL 380.681 to

380.690, shall be included in the membership and taxable value of

the intermediate district if the district meets both of the

following:

(i) The district operates the area vocational-technical

education program pursuant to a contract with the intermediate

district.

(ii) The district contributes an annual amount to the operation

of the program that is commensurate with the revenue that would

have been raised for operation of the program if millage were

levied in the district for the program under sections 681 to 690 of

the revised school code, MCL 380.681 to 380.690.

(2) From the appropriation in section 11, there is allocated

an amount not to exceed $9,000,000.00 for 2007-2008 to reimburse

intermediate districts and area vocational-technical education

programs established under section 690(3) of the revised school

code, MCL 380.690, levying millages for area vocational-technical

education pursuant to sections 681 to 690 of the revised school

code, MCL 380.681 to 380.690. The purpose, use, and expenditure of

the reimbursement shall be limited as if the funds were generated

by those millages.

(3) Reimbursement for the millages levied in 2006-2007 shall

be made in 2007-2008 at an amount per 2006-2007 membership pupil

computed by subtracting from ~~$171,200.00~~ $171,300.00 the 2006-2007

taxable value behind each membership pupil and multiplying the

resulting difference by the 2006-2007 millage levied.

Sec. 104. (1) From the state school aid fund money

appropriated in section 11, there is allocated for 2007-2008 an

amount not to exceed ~~$25,400,000.00~~ $29,322,400.00 for payments on

behalf of districts for costs associated with complying with

sections 104a and 104b, sections 1279, 1279g, and 1280b of the

revised school code, MCL 380.1279, 380.1279g, and 380.1280b, and

1970 PA 38, MCL 388.1081 to 388.1086. In addition, from the federal

funds appropriated in section 11, there is allocated for 2007-2008

an amount estimated at ~~$8,800,000.00~~ $5,477,600.00, funded from

DED-OESE, title VI, state assessments funds and DED-OSERS, section

504 of part B of the individuals with disabilities education

act, Public Law 94-142, plus any carryover federal funds from

previous year appropriations, for the purposes of complying with

the federal no child left behind act of 2001, Public Law 107-110.

(2) The results of each test administered as part of the

Michigan educational assessment program, including tests

administered to high school students, shall include an item

analysis that lists all items that are counted for individual pupil

scores and the percentage of pupils choosing each possible

response.

(3) All federal funds allocated under this section shall be

distributed in accordance with federal law and with flexibility

provisions outlined in Public Law 107-116, and in the education

flexibility partnership act of 1999, Public Law 106-25.

(4) Notwithstanding section 17b, payments on behalf of

districts, intermediate districts, and other eligible entities

under this section shall be paid on a schedule determined by the

department.

Enacting section 1. In accordance with section 30 of article

IX of the state constitution of 1963, total state spending in this

amendatory act and in 2007 PA 137 from state sources for fiscal

year 2007-2008 is estimated at $11,421,596,300.00 and state

appropriations to be paid to local units of government for fiscal

year 2007-2008 are estimated at $11,346,193,300.00.