House Bill 1307/School District Financial Recovery o Applicability: All school districts except Philadelphia.

Early Warning System: PDE early warning system identifies and assists school districts experiencing mild financial difficulties. Declaration of School District Financial Recovery Status: o Secretary declares financial recovery status if a school district satisfies either of the following: Moderate: Average daily membership greater than 7,500 AND receives basic education subsidy advance (currently Harrisburg and York); OR Severe: Receives basic education subsidy advance AND EITHER: (1) currently in financial distress; or (2) engaged in litigation against the Commonwealth seeking funding to remain in operation (currently CUSD and Duquesne).

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Within 2 years, State Board must issue final-omitted regulations establishing further criteria. Commonwealth commits to ensuring continued effective education of district students.

Chief Recovery Officer (CRO) o o o Appointed by and serves at the pleasure of Secretary. PDE pays salary and expenses. Develops and implements a financial recovery plan for the school district.

Financial Recovery Plan o o Provides for education of students and payment of financial obligations. May require school district to use special tools, if appropriate, including (but not limited to) the following (many of which are currently available to the Philadelphia SRC): Reopen budget. Convert school buildings to charter schools. Cancel or renegotiate contracts, other than collective bargaining agreements (CBAs). 1

Increase tax levies, subject to Act 1. Close or reconstitute a school. Renegotiate CBA, provided that parties have 90 days to ratify or CRO establishes a personnel salary schedule and other contract terms effective until a new agreement is ratified. No right-to-strike.

Sets forth criteria Secretary must use to terminate financial recovery status.

Severe Financial Recovery (CUSD and Duquesne): o o Within 14 days of declaration of financial recovery, school board must vote to proceed with: (1) development and implementation of a plan; or (2) appointment of a Receiver. CRO must prepare plan on a shorter schedule (30 days, vs. 90 days for Moderate).

Financial Recovery Transitional Loan Program o Each financial recovery school district is eligible for a long-term, interest-free loan. o o o o Amount and terms set forth in plan.

Funded by annual appropriation, principal repayments, other unencumbered funds of PDE, and interest earned. Loans are immediately due and payable if district fails to implement plan and is not progressing toward financial stability. A charter school may agree to assist the school district in repayment of the loan. Must be used to implement the plan and pay current expenses.

Transition Period: After financial recovery status is terminated, the school board resumes control but the CRO/PDE oversees the district for the longer of 5 years or for as long as a municipality within the district is in distress under Act 47.

Receivership o The Secretary must petition the Court of Common Pleas for receivership where the district: fails to approve the plan; fails to implement the plan; does not satisfy benchmarks and goals of the plan during the 5-year transition period; or votes to proceed with receivership. Court must grant the petition unless clear and convincing evidence that petition is arbitrary, capricious or wholly irrelevant to restoring the district to financial stability. Court must appoint the individual named in the petition as Receiver. 3-year term, subject to extension.

Receiver: Assumes all powers and duties of the school board except the power to levy and raise taxes. Implements the plan. Compensated by PDE.

Followed by 5-year transition period of CRO/PDE oversight.

Bankruptcy: School districts are specifically prohibited from filing for bankruptcy.

Current Distress Provisions: o Current School Code provisions pertaining to distress in first class A, second class, third class and fourth class school districts no longer apply in 6 months.

Duquesne: Removes the current cap on the number of students that can be tuitioned-out.