SUMMARY--Authorizes use of money in state permanent school fund to guarantee certain bonds issued by school districts. (BDR 34-641)
FISCAL NOTE: Effect on Local Government: No.
Effect on the State or on Industrial Insurance: No.
EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.
AN ACT relating to financial administration; authorizing the use of money in the state permanent school fund to guarantee certain bonds issued by school districts; and providing other matters properly relating thereto.
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
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Section 1 Chapter 387 of NRS is hereby amended by adding thereto the provisions set forth as sections 2 to 8, inclusive, of this act.
Sec. 2 As used in sections 2 to 8, inclusive, of this act, unless the context otherwise requires, "executive director" means the executive director of the department of taxation.
Sec. 3 1. The board of trustees of a school district may apply to the state treasurer for a guarantee agreement whereby money in the state permanent school fund is used to guarantee the payment of the debt service on bonds that the school district will issue. The amount of the guarantee for bonds of each school district outstanding at any one time must not exceed $25,000,000.
2. The application must be on a form prescribed by the state treasurer. The state treasurer shall develop the form in consultation with the executive director.
3. Medium-term obligations entered into pursuant to the provisions of NRS 350.085 to 350.095, inclusive, are not eligible for guarantee pursuant to sections 2 to 8, inclusive, of this act.
4. Upon receipt of an application for a guarantee agreement from a school district, the state treasurer shall provide a copy of the application and any supporting documentation to the executive director. As soon as practicable after receipt of a copy of an application, the executive director shall investigate the ability of the school district to make timely payments on the debt service of the bonds for which the guarantee is requested. The executive director shall submit a written report of his investigation to the state board of finance indicating his opinion as to whether the school district has the ability to make timely payments on the debt service of the bonds.
Sec. 4 The state treasurer may enter into a guarantee agreement if:
1. The report submitted by the executive director indicates that a school district has the ability to make timely payments on the debt service of the bonds;
2. The state board of finance approves the report submitted by the executive director; and
3. The state treasurer has determined that the amount of bonds to be guaranteed under the agreement, in addition to the total amount of outstanding bonds guaranteed pursuant to sections 2 to 8, inclusive, of this act, does not exceed the limitation established by subsection 1 of section 5 of this act.
Sec. 5 1. The total amount of outstanding bonds guaranteed pursuant to sections 2 to 8, inclusive, of this act must not exceed:
(a) Two-hundred fifty percent of the lower of the cost or fair market value of the assets in the state permanent school fund;
(b) A percentage of the lower of the cost or fair market value of the assets in the state permanent school fund specified for this purpose by section 148 of the Internal Revenue Code of 1986, 26 U.S.C. § 148, or regulations adopted pursuant to that section; or
(c) A percentage of the lower of the cost or fair market value of the assets in the state permanent school fund certified by the state treasurer as the percentage used to determine the maximum amount of bonds that may be guaranteed pursuant to sections 2 to 8, inclusive, of this act,
whichever is less.
2. A certification by the state treasurer pursuant to paragraph (c) of subsection 1 shall be deemed a pledge by this state that, at the time a guarantee agreement is entered into, the total amount of bonds that are guaranteed pursuant to sections 2 to 8, inclusive, of this act will not exceed the percentage certified by the state treasurer pursuant to paragraph (c) of subsection 1.
Sec. 6 1. A guarantee agreement entered into pursuant to section 4 of this act must:
(a) Require the board of trustees of the school district to appoint the state treasurer, or a commercial bank designated by the state treasurer, as paying agent for the debt service on the bonds;
(b) Specify the number of days before a payment on the debt service of the bonds is due that the paying agent must receive the payment from the school district;
(c) Require the board of trustees of the school district to deposit the amount of money due for each payment with the paying agent within the period specified by paragraph (b);
(d) Require that if the school district is unable to make a payment, the board of trustees of the school district or the superintendent of schools of the district shall provide written notice to the state treasurer at least 60 days before the payment is due;
(e) If a loan is made to a school district pursuant to section 7 of this act, require the board of trustees of the school district to repay the loan as provided by section 8 of this act;
(f) Be signed by the state treasurer and the president of the board of trustees of the school district; and
(g) Be approved by a resolution of the state board of finance and the board of trustees of the school district.
2. A guarantee agreement may include such other provisions as the state treasurer determines necessary.
Sec. 7 1. If a school district fails to make a timely payment on the debt service of bonds that are guaranteed pursuant to the provisions of sections 2 to 8, inclusive, of this act, the state treasurer shall:
(a) Withdraw from the state permanent school fund the amount of money due for the payment on the debt service;
(b) Make the payment on the debt service; and
(c) Report the payment to the executive director.
2. The amount of money withdrawn pursuant to subsection 1 shall be deemed a loan to the school district from the state permanent school fund. The state treasurer shall determine the rate of interest on the loan, which must not exceed 1 percent above the average rate of interest yielded on investments in the state permanent school fund on the date that the loan is made. A loan that is made to a school district pursuant to this subsection is a special obligation of the school district and is payable only from the sources specified in section 8 of this act.
3. A school district that receives a loan pursuant to this section shall not:
(a) Include the loan as a general obligation of the school district when determining any limit on the debt of the school district.
(b) Unless the school district obtains the written approval of the executive director, for the period during which the loan is unpaid, enter into any medium-term obligations pursuant to the provisions of NRS 350.085 to 350.095, inclusive, or otherwise borrow money.
4. If the executive director receives notice that a loan has been made pursuant to this section, he shall proceed pursuant to the provisions of NRS 354.685.
Sec. 8 If a loan is made from the state permanent school fund pursuant to section 7 of this act, the loan must be repaid:
1. By the school district from the money that is available to the school district to pay the debt service on the bonds that are guaranteed pursuant to the provisions of sections 2 to 8, inclusive, of this act unless payment from that money would cause the school district to default on other outstanding bonds or medium-term obligations entered into pursuant to the provisions of NRS 350.085 to 350.095, inclusive; and
2. If the school district is not able to repay fully the loan, including any accrued interest, in a timely manner pursuant to subsection 1 or by any other lawful means, the state treasurer shall withhold the payments of money that would otherwise be distributed to the school district from:
(a) The interest earned on the state permanent school fund that is distributed among the various school districts;
(b) Distributions of the local school support tax, which must be transferred by the state controller upon notification by the state treasurer; and
(c) Distributions from the state distributive school account,
until the loan is repaid, including any accrued interest on the loan. The state treasurer shall apply the money first to the interest on the loan and, when the interest is paid in full, then to the balance. When the interest and balance on the loan are repaid, the state treasurer shall resume making the distributions that would otherwise be due to the school district.
Sec. 9 NRS 387.030 is hereby amended to read as follows:
387.030All money derived from interest on the state permanent school fund, together with all money derived from other sources provided by law, must:
1. Be placed in the state distributive school account which is hereby created in the state general fund; and
2. [Be] Except as otherwise provided in section 8 of this act, be apportioned among the several school districts of the state at the times and in the manner provided by law.
Sec. 10. NRS 387.040 is hereby amended to read as follows:
387.0401. Except as otherwise provided in subsection 2 [,] and section 8 of this act, the state treasurer shall pay over all public school money received by him only on warrants of the state controller issued upon the orders of the superintendent of public instruction in favor of county treasurers. When endorsed, the orders are valid vouchers in the hands of the state controller for the disbursement of public school money.
2. [If] Except as otherwise provided in section 8 of this act, if the board of trustees of a school district establishes and administers a separate account pursuant to the provisions of NRS 354.603, the state treasurer shall pay over to the school district all public school money due to the school district.
Sec. 11. NRS 387.124 is hereby amended to read as follows:
387.124Except as otherwise provided in section 8 of this act:
1. On or before August 1, November 1, February 1 and May 1 of each year, the superintendent shall apportion the state distributive school account in the state general fund among the several county school districts in amounts approximating one-fourth of their respective yearly apportionments less any amount set aside as a reserve. Apportionment computed on a yearly basis equals the difference between the basic support and the local funds available. No apportionment may be made if the amount of the local funds exceeds the amount of basic support.
2. If the state controller finds that such an action is needed to maintain the balance in the state general fund at a level sufficient to pay the other appropriations from it, he may pay out the apportionments monthly, each approximately one-twelfth of the yearly apportionment less any amount set aside as a reserve. If such action is needed, the state controller shall submit a report to the department of administration and the fiscal analysis division of the legislative counsel bureau documenting reasons for the action.
Sec. 12. NRS 387.185 is hereby amended to read as follows:
387.1851. Except as otherwise provided in subsection 2 [,] and section 8 of this act, all school money due each county school district must be paid over by the state treasurer to the county treasurer on August 1, November 1, February 1 and May 1 of each year or as soon thereafter as the county treasurer may apply for it, upon the warrant of the state controller drawn in conformity with the apportionment of the superintendent of public instruction as provided in NRS 387.124.
2. [If] Except as otherwise provided in section 8 of this act, if the board of trustees of a school district establishes and administers a separate account pursuant to the provisions of NRS 354.603, all school money due to that school district must be paid over by the state treasurer to the school district on August 1, November 1, February 1 and May 1 of each year or as soon thereafter as the school district may apply for it, upon the warrant of the state controller drawn in conformity with the apportionment of the superintendent of public instruction as provided in NRS 387.124.
3. No county school district may receive any portion of the public school money unless that school district has complied with the provisions of this Title and regulations adopted pursuant thereto.
Sec. 13. NRS 387.205 is hereby amended to read as follows:
387.2051. Money on deposit in the county school district fund or in a separate account, if the board of trustees of a school district has elected to establish such an account under the provisions of NRS 354.603, must be used for:
(a) Maintenance and operation of public schools.
(b) Payment of premiums for Nevada industrial insurance.
(c) Rent of schoolhouses.
(d) Construction, furnishing or rental of teacherages, when approved by the superintendent of public instruction.
(e) Transportation of pupils, including the purchase of new buses.
(f) Programs of nutrition, if such expenditures do not curtail the established school program or make it necessary to shorten the school term, and each pupil furnished lunch whose parent or guardian is financially able so to do pays at least the actual cost of the lunch.
(g) Membership fees, dues and contributions to an interscholastic activities association.
(h) Repayment of a loan made from the state permanent school fund pursuant to section 7 of this act.
2. Money on deposit in the county school district fund, or in a separate account, if the board of trustees of a school district has elected to establish such an account under the provisions of NRS 354.603, when available, may be used for:
(a) Purchase of sites for school facilities.
(b) Purchase of buildings for school use.
(c) Repair and construction of buildings for school use.
Sec. 14. NRS 354.685 is hereby amended to read as follows:
354.685 1. If the department finds that one or more of the following conditions exist in any local government , after giving consideration to the severity of the condition, it may determine that one or more hearings should be conducted to determine the extent of the problem and to determine whether a recommendation of severe financial emergency should be made to the Nevada tax commission:
(a) Required financial reports have not been filed or are consistently late.
(b) The audit report reflects the unlawful expenditure of money in excess of the amount appropriated in violation of the provisions of NRS 354.626.
(c) The audit report shows funds with deficit fund balances.
(d) The local government has incurred debt beyond its ability to repay.
(e) The local government has not corrected violations of statutes or regulations adopted pursuant thereto as noted in the audit report.
(f) The local government has serious internal control problems noted in the audit report which have not been corrected.
(g) The local government has a record of being late in its payments for services and supplies.
(h) The local government has had insufficient cash to meet required payroll payments in a timely manner.
(i) The local government has borrowed money or entered into long-term lease arrangements without following the provisions of NRS or regulations adopted pursuant thereto.
(j) The governing body of the local government has failed to correct problems after it has been notified of such problems by the department.
(k) The local government has not separately accounted for its individual funds as required by chapter 354 of NRS.
(l) The local government has invested its money in financial instruments in violation of the provisions of chapter 355 of NRS.
(m) The local government is in violation of any covenant in connection with any debt issued by the local government.
(n) The local government has not made bond and lease payments in accordance with the approved payment schedule.
(o) The local government has failed to control its assets such that large defalcations have occurred which have impaired the financial condition of the local government.
(p) The local government has recognized sizeable losses as a result of the imprudent investment of money.
(q) The local government has allowed its accounting system and recording of transactions to deteriorate to such an extent that it is not possible to measure accurately the results of operations or to ascertain the financial position of the local government without a reconstruction of transactions.
(r) The local government has consistently issued checks not covered by adequate deposits.
(s) The local government has loaned and borrowed money between funds without following the proper procedures.
(t) The local government has expended money in violation of the provisions governing the expenditure of that money.
(u) Money restricted for any specific use has been expended in violation of the terms and provisions relating to the receipt and expenditure of that money.
(v) Money has been withheld in accordance with the provisions of NRS 354.665.
(w) If the local government is a school district, a loan has been made from the state permanent school fund to the school district pursuant to section 7 of this act.
2. In addition to any notice otherwise required, the department shall give notice of any hearing held pursuant to subsection 1 to the governing body of each local government whose jurisdiction overlaps with the jurisdiction of the local government whose financial condition will be considered at least 10 days before the date on which the hearing will be held.
3. If the department, following the hearing or hearings, determines that a recommendation of severe financial emergency should be made to the Nevada tax commission, it shall make such a recommendation as soon as practicable. Upon receipt of such a recommendation, the Nevada tax commission shall hold a hearing at which the department, the local government whose financial condition will be considered and each local government whose jurisdiction overlaps with the jurisdiction of the local government whose financial condition will be considered are afforded an opportunity to be heard. If, after the hearing, the Nevada tax commission determines that a severe financial emergency exists, it shall require by order that the department take over the management of the local government as soon as practicable.
Sec. 15. NRS 355.060 is hereby amended to read as follows:
355.060 1. The state controller shall notify the state treasurer monthly of the amount of uninvested money in the state permanent school fund.
2. Whenever there is a sufficient amount of money for investment in the state permanent school fund, the state treasurer shall proceed to negotiate for the investment of the money in:
(a) United States bonds;
(b) Obligations or certificates of the Federal National Mortgage Association, the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal Farm Credit Banks Funding Corporation or the Student Loan Marketing Association, whether or not guaranteed by the United States;
(c) Bonds of this state or of other states;
(d) Bonds of any county of the State of Nevada;
(e) United States treasury notes;
(f) Farm mortgage loans fully insured and guaranteed by the Farmers Home Administration of the United States Department of Agriculture; or
(g) Loans at a rate of interest of not less than 6 percent per annum, secured by mortgage on agricultural lands in this state of not less than three times the value of the amount loaned, exclusive of perishable improvements, of unexceptional title and free from all encumbrances.
3. In addition to the investments authorized by subsection 2, the state treasurer may make loans of money from the state permanent school fund to school districts pursuant to section 7 of this act.
4. No part of the state permanent school fund may be invested pursuant to a reverse-repurchase agreement.
Sec. 16. NRS 355.070 is hereby amended to read as follows:
355.070 1. [The] Except as otherwise provided in subsection 3, the state treasurer shall:
(a) Make diligent inquiry as to the financial standing and responsibility of any state, county or person in whose bonds or securities on agricultural lands he proposes to invest.
(b) Require the attorney general to:
(1) Give his written legal opinion as to the validity of any act of any state or county under which the bonds or securities are issued and authorized and in which the state treasurer contemplates investment.
(2) Examine and give his written opinion upon the title and the abstract of title of all agricultural land on which the state contemplates taking mortgages.
2. If the state treasurer is satisfied as to the financial standing and responsibility of the state or county whose bonds or securities he proposes to purchase, or is satisfied of the financial standing and responsibility of the person whose mortgages on agricultural land are offered to the state, and the attorney general gives his written opinion that the act under which the bonds or securities are issued is valid and that the issues were regularly made, or approves the abstract of title of the agricultural land proposed to be mortgaged, the state treasurer may make the investment.
3. The provisions of this section do not apply to loans of money from the state permanent school fund made pursuant to section 7 of this act.
Sec. 17. NRS 374.785 is hereby amended to read as follows:
374.7851. All fees, taxes, interest and penalties imposed and all amounts of tax required to be paid to counties under this chapter must be paid to the department in the form of remittances payable to the department.
2. The department shall deposit the payments in the state treasury to the credit of the sales and use tax account in the state general fund.
3. The state controller, acting upon the collection data furnished by the department, shall, each month, from the sales and use tax account in the state general fund:
(a) Transfer 1 percent of all fees, taxes, interest and penalties collected in each county during the preceding month to the appropriate account in the state general fund as compensation to the state for the costs of collecting the tax.
(b) Transfer 1 percent of all fees, taxes, interest and penalties collected during the preceding month from out-of-state businesses not maintaining a fixed place of business within this state to the appropriate account in the state general fund as compensation to the state for the costs of collecting the tax.
(c) Determine for each county the amount of money equal to the fees, taxes, interest and penalties collected in the county pursuant to this chapter during the preceding month less the amount transferred pursuant to paragraph (a) of this subsection.
(d) Transfer the total amount of taxes collected pursuant to this chapter during the preceding month from out-of-state businesses not maintaining a fixed place of business within this state, less the amount transferred pursuant to paragraph (b) of this subsection, to the state distributive school account in the state general fund.
(e) [Transfer] Except as otherwise provided in section 8 of this act, transfer the amount owed to each county to the intergovernmental fund and remit the money to the credit of the county school district fund.
4. For the purpose of the distribution required by this section, the occasional sale of a vehicle shall be deemed to take place in the county to which the privilege tax payable by the buyer upon that vehicle is distributed.
Sec. 18. This act becomes effective upon passage and approval.