Offered April 24, 1996.

Senate Substitute No. 3 adopted, April 24, 1996.

Taken up for Perfection April 24, 1996. Bill declared Perfected and Ordered Printed, as amended.

TERRY L. SPIELER, Secretary.

S3025.10P

To repeal sections 163.011, 163.031, 163.172, 165.051 and 165.111, RSMo 1994, and sections 164.011 and 165.011, RSMo Supp. 1995, relating to the use of public school funds, and enacting ten new sections relating to the same subject, with an emergency clause.

Be it enacted by the General Assembly of the State of Missouri, as follows:

Section A. Sections 163.011, 163.031, 163.172, 165.051 and 165.111, RSMo 1994, and sections 164.011 and 165.011, RSMo Supp. 1995, are repealed and ten new sections enacted in lieu thereof, to be known as sections 163.011, 163.031, 163.172, 164.011, 165.011, 165.016, 165.051, 165.111, 178.405 and 1, to read as follows:

163.011. As used in this chapter unless the context requires otherwise:

(1) "Adjusted gross income":

(a) "District adjusted gross income per return" shall be the total Missouri individual adjusted gross income in a school district divided by the total number of Missouri income tax returns filed from the school district as reported by the state department of revenue for the second preceding year;

(b) "State adjusted gross income per return" shall be the total Missouri individual adjusted gross income divided by the total number of Missouri individual income tax returns, of those returns designating school districts, as reported by the state department of revenue for the second preceding year;

(c) "District income factor" shall be one plus thirty percent of the difference of the district income ratio minus one;

(d) "District income ratio" shall be the ratio of the district adjusted gross income per return divided by the state adjusted gross income per return;

(2) "Average daily attendance" means the quotient or the sum of the quotients obtained by dividing the total number of hours attended in a term by resident pupils between the ages of five and twenty-one by the actual number of hours school was in session in that term. To the average daily attendance of the school term shall be added the full-time equivalent average daily attendance of summer school students. "Full-time equivalent average daily attendance of summer school students" shall be computed by dividing the total number of hours attended by all summer school pupils by the number of hours required in section 160.011, RSMo, in the school term. For purposes of determining average daily attendance under this subdivision, the term "resident pupil" shall include all children between the ages of five and twenty-one who are residents of the school district and who are attending kindergarten through grade twelve in such district. If a child is attending school in a district other than the district of residence and the child's parent is teaching in the school district which the child is attending, then such child shall be considered a resident pupil of the school district which the child is attending for such period of time when the district of residence is not otherwise liable for tuition. Average daily attendance for students below the age of five years for which a school district may receive state aid based on such attendance shall be computed as regular school term attendance unless otherwise provided by law;

(3) "District's tax rate ceiling", the highest tax rate ceiling in effect subsequent to the 1980 tax year or any subsequent year. Such tax rate ceiling shall not contain any tax levy for debt service;

(4) "Eligible pupils" shall be the sum of the average daily attendance of the school term plus the product of two times the average daily attendance for summer school;

(5) "Equalized assessed valuation of the property of a school district" shall be determined by multiplying the assessed valuation of the real property subclasses specified in section 137.115, RSMo, times the percent of true value as adjusted by the department of elementary and secondary education to an equivalent sales ratio of thirty-three and one-third percent and dividing by either the percent of true value as determined by the state tax commission on or before March fifteenth preceding the fiscal year in which the valuation will be effective as adjusted by the department of elementary and secondary education to an equivalent sales ratio of thirty-three and one-third percent or the average percent of true value for the highest three of the last four years as determined and certified by the state tax commission, whichever is greater. To the equalized locally assessed valuation of each district shall be added the assessed valuation of tangible personal property. The assessed valuation of property which has previously been excluded from the tax rolls, which is being contested as not being taxable and which increases the total assessed valuation of the school district by fifty percent or more, shall not be included in the calculation of equalized assessed valuation under this subdivision;

(6) "Free and reduced lunch eligible pupil count", the number of pupils eligible for free and reduced lunch on the last Wednesday in January for the preceding school year who were enrolled as students of the district, as approved by the department in accordance with applicable federal regulations;

(7) "Guaranteed tax base" means the amount of equalized assessed valuation per eligible pupil guaranteed each school district by the state in the computation of state aid. To compute the guaranteed tax base, school districts shall be ranked annually from lowest to highest according to the amount of equalized assessed valuation per pupil. The guaranteed tax base shall be the amount of equalized assessed valuation per pupil of the school district in which the ninety-fifth percentile of the state aggregate number of pupils falls during the preceding year;

(8) "Instructional budgetary efficiency ratio", the quotient of the sum of the district's current operating costs for all non-administrative functions plus the cost of supplies for operation of plant divided by the sum of the district's current operating costs plus all tuition revenue received from other districts and placed in the teachers' or incidental funds;

(9) "Membership" shall be the average of (1) the number of resident full-time students and the full-time equivalent number of part-time students who were enrolled in the public schools of the district on the last Wednesday in September of the previous year and who were in attendance one day or more during the preceding ten school days and (2) the number of resident full-time students and the full-time equivalent number of part-time students who were enrolled in the public schools of the district on the last Wednesday in January of the previous year and who were in attendance one day or more during the preceding ten school days, plus the full-time equivalent number of summer school pupils. "Full-time equivalent number of part-time students" is determined by dividing the total number of hours for which all part-time students are enrolled by the number of hours in the school term. "Full-time equivalent number of summer school pupils" is determined by dividing the total number of hours for which all summer school pupils were enrolled by the number of hours required pursuant to section 160.011, RSMo, in the school term. Only students eligible to be counted for average daily attendance shall be counted for membership;

[(9)] (10) "Operating levy for school purposes" means the sum of tax rates levied for teachers and incidental funds in the payment year and shall be, after all adjustments and equalization of the operating levy, no less than the minimum value required in section 163.021 for eligibility for increases in state aid as calculated pursuant to section 163.031 and no greater than a maximum value of four dollars and sixty cents per one hundred dollars assessed valuation. To equalize the operating levy, multiply the aggregate tax rates for teachers, incidental, and building funds by either the percent of true value, as determined by the state tax commission on or before March fifteenth preceding the fiscal year in which the evaluation will be effective as adjusted by the department of elementary and secondary education to an equivalent sales ratio of thirty-three and one-third percent, or the average percent of true value for the highest three of the last four years as determined and certified by the state tax commission, whichever is greater, and divide by the percent of true value as adjusted by the department of elementary and secondary education to an equivalent sales ratio of thirty-three and one-third percent, provided that for any district for which the equivalent sales ratio is equal to or greater than thirty-three and one-third percent, the equalized operating levy shall be the adjusted operating levy. For any county in which the equivalent sales ratio is less than thirty-one and two-thirds percent, the state tax commission shall conduct a second study in that county and shall use a sample at least twice as large as the one originally used. If the new ratio is higher than the original ratio provided by this subdivision, the new ratio shall be used for the purposes of this subdivision and for determining equalized assessed valuation pursuant to subdivision (5) of this section;

[(10)] (11) "School purposes" pertains to teachers and incidental funds;

[(11)] (12) "Teacher" means any teacher, teacher-secretary, substitute teacher, supervisor, principal, supervising principal, superintendent or assistant superintendent, school nurse, social worker, counselor or librarian who shall, regularly, teach or be employed for no higher than grade twelve more than one-half time in the public schools and who is certified under the laws governing the certification of teachers in Missouri;

[(12)] (13) "Adjusted operating levy", the sum of tax rates for the current year for teachers and incidental funds for a school district as reported to the proper officer of each county pursuant to section 164.011, RSMo;

[(13)] (14) "Current operating costs", all expenditures for instruction and support services excluding capital outlay and debt service expenditures less the revenue from federal categorical sources, food service, student activities and payments from other districts.

163.031. 1. School districts which meet the requirements of section 163.021 shall be entitled to an amount computed as follows: an amount determined by multiplying the number of eligible pupils by the district's equalized operating levy for school purposes as defined in section 163.011 multiplied by the guaranteed tax base per eligible pupil times the proration factor. For the purposes of this section, the proration factor shall be equal to the sum of the total appropriation for distribution under subsections 1 and 2 of this section; and the state total of the deductions as calculated in subsection 2 of this section which do not exceed the district entitlements as adjusted by the same proration factor; divided by the amount of the state total of district entitlements before proration as calculated pursuant to this subsection.

2. From the district entitlement for each district there shall be deducted the following amounts: an amount determined by multiplying the district equalized assessed valuation by the district's equalized operating levy for school purposes times the district income factor; one hundred percent of the amount received the previous year for school purposes from intangible taxes, fines, forfeitures and escheats, payments in lieu of taxes and receipts from state assessed railroad and utility tax; one hundred percent of the amounts received the previous year for school purposes from federal properties pursuant to sections 12.070 and 12.080, RSMo; federal impact aid received the previous year for school purposes pursuant to P.L. 81-874 less fifty thousand dollars multiplied by ninety percent or the maximum percentage allowed by federal regulation if that percentage is less than ninety; fifty percent, or the percentage otherwise provided in section 163.087, of Proposition C revenues received the previous year for school purposes from the school district trust fund pursuant to section 163.087; one hundred percent of the amount received the previous year for school purposes from the fair share fund pursuant to section 149.015, RSMo; and one hundred percent of the amount received the previous year for school purposes from the free textbook fund, pursuant to section 148.360, RSMo.

3. School districts which meet the requirements of section 163.021 shall receive categorical add-on revenue as provided in this subsection. There shall be individual proration factors for each categorical entitlement provided for in this subsection, and each proration factor shall be determined by annual appropriations, but no categorical proration factor shall exceed the entitlement proration factor established pursuant to subsection 1 of this section, except that the vocational education entitlement proration factor established pursuant to line 16 of subsection 6 of this section and the educational and screening program entitlements proration factor established pursuant to line 17 of subsection 6 of this section may exceed the entitlement proration factor established pursuant to subsection 1 of this section. The categorical add-on for the district shall be the sum of: seventy-five percent of the district allowable transportation costs pursuant to section 163.161 multiplied by the proration factor; the special education approved or allowed cost entitlement for the district, provided for by section 162.975, RSMo, multiplied by the proration factor; seventy-five percent of the district gifted education approved or allowable cost entitlement as determined pursuant to section 162.975, RSMo, multiplied by the proration factor; the free and reduced lunch eligible pupil count for the district, as defined in section 163.011, multiplied by twenty percent times the guaranteed tax base per eligible pupil times the minimum value for an operating levy for school purposes as provided in section 163.011 times the proration factor; the career ladder entitlement for the district, as provided for in sections 168.500 to 168.515, RSMo, multiplied by the proration factor; the vocational education entitlement for the district, as provided for in section 167.332, RSMo, multiplied by the proration factor and the district educational and screening program entitlements as provided for in sections 178.691 to 178.699, RSMo, times the proration factor.

4. Each district's apportionment shall be the prorated categorical add-ons plus the greater of the district's prorated entitlement minus the total deductions for the district or zero.

5. (1) In the 1993-94 school year and all subsequent school years, pursuant to section 10(c) of article X of the state constitution, a school district shall adjust upward its operating levy for school purposes to the extent necessary for the district to at least maintain the current operating expenditures per pupil received by the district from all sources in the 1992-93 school year, except that its operating levy for school purposes shall not exceed the highest tax rate in effect subsequent to the 1980 tax year, or the minimum rate required by subsection 2 of section 163.021, whichever is less.

(2) Beginning with the 1993-94 school year, the revenue per eligible pupil received by a district from the following sources: line 1 minus line 10, or zero if line 1 minus line 10 is less than zero, plus line 14 of subsection 6 of this section; plus the product of the current assessed valuation of the district multiplied by the following tax rate - the greater of zero or the minimum rate required by subsection 2 of section 163.021 minus the district's equalized operating levy for school purposes for 1993, shall not be less than the revenue per eligible pupil received by a district in the 1992-93 school year from the foundation formula entitlement payment amount. The department of elementary and secondary education shall make an addition in the payment amount of line 19 of subsection 6 of this section to assure compliance with the provisions contained in this section.

(3) For any school district which meets the eligibility criteria for state aid as established in section 163.021, but which under subsections 1 to 4 of this section, receives no state aid for two successive school years, other than categorical add-ons, by August first following the second such school year, the commissioner of education shall present a plan to the superintendent of the school district for the waiver of rules and the duration of said waivers, in order to promote flexibility in the operations of the district and to enhance and encourage efficiency in the delivery of instructional services. The provisions of other law to the contrary notwithstanding, the plan presented to the superintendent shall provide a summary waiver, with no conditions, for the pupil testing requirements pursuant to section 160.257, RSMo. Further, the provisions of other law to the contrary notwithstanding, the plan shall detail a means for the waiver of requirements otherwise imposed on the school district related to the authority of the state board of education to classify school districts pursuant to section 161.092, RSMo, and such other rules as determined by the commissioner of education, except that such waivers shall not include the provisions established pursuant to sections 160.514 and 160.518, RSMo.

(4) In the 1993-94 school year and each school year thereafter for two years, those districts which are entitled to receive state aid under subsections 1 to 4 of this section, shall receive state aid in an amount per eligible pupil as provided in this subsection. For the 1993-94 school year, the amount per eligible pupil shall be twenty-five percent of the amount of state aid per eligible pupil calculated for the district for the 1993-94 school year pursuant to subsections 1 to 4 of this section plus seventy-five percent of the total amount of state aid received by the district from all sources for the 1992-93 school year for which the district is entitled and which are distributed in the 1993-94 school year pursuant to subsections 1 to 4 of this section. For the 1994-95 school year, the amount per eligible pupil shall be fifty percent of the amount of state aid per eligible pupil calculated for the district for the 1994-95 school year pursuant to subsections 1 to 4 of this section plus fifty percent of the total amount of state aid received by the district from all sources for the 1992-93 school year for which the district is entitled and which are distributed in the 1994-95 school year pursuant to subsections 1 to 4 of this section. For the 1995-96 school year, the amount of state aid per eligible pupil shall be seventy-five percent of the amount of state aid per eligible pupil calculated for the district for the 1995-96 school year pursuant to subsections 1 to 4 of this section plus twenty-five percent of the total amount of state aid received by the district from all sources for the 1992-93 school year for which the district is entitled and which are distributed in the 1995-96 school year pursuant to subsections 1 to 4 of this section. Nothing in this subdivision shall be construed to limit the authority of a school district to raise its district operating levy pursuant to subdivision (1) of this subsection.

(5) If the total of state aid apportionments to all districts pursuant to subdivision (3) of this subsection is less than the total of state aid apportionments calculated pursuant to subsections 1 to 4 of this section, then the difference shall be deposited in the outstanding schools trust fund. If the total of state aid apportionments to all districts pursuant to subdivision (1) of this subsection is greater than the total of state aid apportionments calculated pursuant to subsections 1 to 4 of this section, then funds shall be transferred from the outstanding schools trust fund to the state school moneys fund to the extent necessary to fund the district entitlements as modified by subdivision (4) of this subsection for that school year with a district entitlement proration factor no less than one and such transfer shall be given priority over all other uses for the outstanding schools trust fund as otherwise provided by law.

6. State aid shall be determined as follows:

District Entitlement

1. Number of eligible pupils x (district's equalized operating levy for school purposes) x (proration x GTB per EP) $...... Deductions

2. District equalized assessed valuation x district income factor x district's equalized operating levy for school purposes $......

3. Intangible taxes, fines, forfeitures, escheats, payments in lieu of taxes, etc. (100% of the amount received the previous year for school purposes) $...... .

4. Receipts from state assessed railroad and utility tax (100% of the amount received the previous year for school purposes) $...... .

5. Receipts from federal properties pursuant to sections 12.070 and 12.080, RSMo (100% of the amount received the previous year for school purposes) $......

6. (Federal impact aid received the previous year for school purposes pursuant to P.L. 81-874 less $50,000) x 90% or the maximum percentage allowed by federal regulations if less than 90% $......

7. Fifty percent or the percentage otherwise provided in section 163.087 of Proposition C receipts from the school district trust fund received the previous year for school purposes pursuant to section 163.087, RSMo $...... .

8. One hundred percent of the amount received the previous year for school purposes from the fair share fund pursuant to section 149.015, RSMo $......

9. One hundred percent of the amount received the previous year for school purposes from the free textbook fund pursuant to section 148.360, RSMo $......

10. Total deductions (sum of lines 2-9) $...... Categorical Add-ons

11. The amount distributed pursuant to section 163.161 x proration $...... .

12. Special education approved or allowed cost entitlement for the district pursuant to section 162.975, RSMo, x proration $.......

13. Seventy-five percent of the gifted education approved or allowable cost entitlement as determined pursuant to section 162.975, RSMo, x proration $......

14. Free and reduced lunch eligible pupil count for the district, as defined in section 163.011, RSMo, x .20 x GTB per EP x the minimum value for an operating levy for school purposes as provided in section 163.011 x proration $......

15. Career ladder entitlement for the district as provided for in sections 168.500 to 168.515, RSMo, x proration $......

16. Vocational education entitlements for the district as provided in section 167.332, RSMo, x proration $....... .

17. Educational and screening program entitlements for the district as provided in sections 178.691 to 178.699, RSMo, x proration $......

18. Sum of categorical add-ons for the district (sum of lines 11-17) $......

19. District apportionment (line 18 plus the greater of line 1 minus line 10 or zero) $......

7. Revenue received for school purposes by each school district pursuant to this section shall be placed in each of the incidental and teachers' funds based on the ratio of the property tax rate in the district for that fund to the total tax rate in the district for the two funds[, except that, prior to the 1997-98 school year, no district may reduce the fraction of total district operating costs expended on certificated salaries, and for the 1997-98 school year and thereafter, the district operating levy for the teachers' fund shall not be decreased by a greater proportion than the operating levy of the incidental fund is decreased for the same school year].

163.172. 1. In school year 1994-95 and thereafter, the minimum teacher's salary shall be eighteen thousand dollars. Beginning in the school year 1996-97, for any full-time teacher with a master's degree and at least ten years teaching experience in a public school or combination of public schools, the minimum salary shall be twenty-four thousand dollars.

2. Beginning with the budget requests for fiscal year 1991, the commissioner of education shall present to the appropriate committees of the general assembly information on the average Missouri teacher's salary, regional average salary data, and national average salary data.

3. All school salary information shall be public information.

4. As used in this section, the term "salary" shall be defined as the salary figure which appears on the teacher's contract and as determined by the local school district's basic salary schedule and does not include supplements for extra duties.

5. The minimum salary for any fully certificated teacher employed on a less than full-time basis by a school district, state school for the severely handicapped, the Missouri School for the Deaf, or the Missouri School for the Blind shall be prorated to reflect the amounts provided in subsections 1 and 2 of this section.

6. Beginning with the 1996-97 school year, the general assembly shall make an annual appropriation to the excellence in education fund established in section 160.268, RSMo, for the purpose of fulfilling the minimum salary requirements for public school teachers in those districts meeting the qualifications established under subsection 7 of this section. The appropriation shall be sufficient to ensure that all qualifying districts are able to comply with the minimum salary requirements of this section. The department of elementary and secondary education shall determine, prior to each school year, those districts which shall be eligible to receive funds under this subsection during the school year. A qualifying district shall be eligible to receive funds appropriated under this subsection only during the first three years following the district's qualifying for such funds.

7. To qualify to begin receiving funds under subsection 6 of this section, a school district shall meet all of the following criteria:

(1) A portion of the real property of the district shall have been removed from the tax rolls due to the impact of state or federal government action;

(2) The district shall have received no more state aid on a per pupil basis for each of the last three school years, exclusive of categorical funding, than the district received for the 1992-93 school year;

(3) The salaries paid to all teachers in the district for the school year prior to qualification shall be totally compacted at the eighteen thousand dollar per year minimum established under this section;

(4) The district shall have in its employ for the school year prior to qualification one or more teachers with a master's degree and at least ten years teaching experience in a public school or a combination of public schools;

(5) The district shall be financially distressed or have a history of deficit spending which, if continued, will cause the district to become financially distressed within three years;

(6) The district had an enrollment of no greater than four hundred pupils for the preceding school year; and

(7) The district shall have levied an operating levy for school purposes of no less two dollars and seventy-five cents per one hundred dollars of assessed valuation for the previous year and shall continue to levy at no less than that rate.

164.011. 1. The school board of each district annually shall prepare an estimate of the amount of money to be raised by taxation for the ensuing school year, the rate required to produce the amount, and the rate necessary to sustain the school or schools of the district for the ensuing school year, to meet principal and interest payments on the bonded debt of the district and to provide the funds to meet other legitimate district purposes. In preparing the estimate, the board shall have sole authority in determining what part of the total authorized rate shall be used to provide revenue for each of the funds as authorized by section 165.011, RSMo. For the 1996-97 school year and the 1997-98 school year, prior to setting tax rates for the teachers' and incidental funds, the school board of each school district annually shall set the tax rate for the capital projects fund as necessary to meet the expenditures of the capital projects fund after all transfers allowed pursuant to subsection 7 of section 165.011, RSMo, for expenditures authorized by section 177.088, RSMo, and after the following transfers if needed: in the 1996-97 school year, one- twelfth of the maximum transfer allowed by section 165.011, RSMo; in the 1997-98 school year, one-sixth of the maximum transfer allowed by section 165.011, RSMo; in the 1998-99 school year, one-half of the maximum transfer allowed by section 165.011, RSMo; and, provided that sufficient funds are available to fully fund district entitlements at a proration factor of no less than one, including as necessary, subject to appropriations, a uniform proration of attendance not associated with the regular school term, in the 1999-2000 school year and thereafter, one hundred percent of the transfers allowed by section 165.011, RSMo. Furthermore, except that the tax rate set in the capital projects fund shall not require the reduction of the equalized combined tax rates for the teachers' and incidental funds to be less than the greater of the minimum operating levy for the current year for school purposes established under subsection 2 of section 163.021, RSMo, or the 1993 tax rate as used for state aid purposes in section 163.031, RSMo, plus that portion of the full amount of any voter approved increase in the tax rate ceiling as defined in section 137.073, RSMo, approved after the first day of January, 1994, and before the thirtieth day of March, 1994, as levied in the current year, in any school district located in a county of the fourth classification that had an existing lease purchase arrangement for capital project purposes at the time of the election.

2. The school board of each district shall forward the estimate to the county clerk on or before September first. In school districts divided by county lines, the estimate shall be forwarded to the proper officer of each county in which any part of the district lies.

165.011. 1. The following funds are created for the accounting of all school moneys: Teachers' fund, incidental fund, free textbook fund, capital projects fund and debt service fund. The treasurer of the school district shall open an account for each fund specified in this section, and all moneys received from the county school fund and all moneys derived from taxation for teachers' wages shall be placed to the credit of the teachers' fund. All tuition fees, state moneys received under sections 162.975, RSMo, and 163.031, RSMo, and all other moneys received from the state except as herein provided shall be placed to the credit of the teachers' and incidental funds at the discretion of the district board of education. Money received from other districts for transportation, and money derived from taxation for incidental expenses shall be credited to the incidental fund. Money apportioned for free textbooks shall be credited to the free textbook fund. All money derived from taxation or received from any other source for the erection of buildings or additions thereto and the remodeling or reconstruction of buildings and the furnishing thereof, for the payment of lease purchase obligations, for the purchase of real estate, or from sale of real estate, schoolhouses or other buildings of any kind, or school furniture, from insurance, from sale of bonds other than refunding bonds shall be placed to the credit of the capital projects fund. All moneys derived from the sale or lease of sites, buildings, facilities, furnishings and equipment by a school district as authorized under section 177.088, RSMo, shall be credited to the capital projects fund. Money derived from taxation for the retirement of bonds and the payment of interest thereon shall be credited to the debt service fund which shall be maintained as a separate bank account. Receipts from delinquent taxes shall be allocated to the several funds on the same basis as receipts from current taxes, except that where the previous years' obligations of the district would be affected by such distribution, the delinquent taxes shall be distributed according to the tax levies made for the years in which the obligations were incurred. All refunds received shall be placed to the credit of the fund from which the original expenditures were made. Money donated to the school districts shall be placed to the credit of the fund where it can be expended to meet the purpose for which it was donated and accepted. Money received from any other source whatsoever shall be placed to the credit of the fund or funds designated by the board.

2. The school board may expend from the incidental fund the sum that is necessary for the ordinary repairs of school property and an amount not to exceed the sum of expenditures for classroom instructional capital outlay, as defined by the department of elementary and secondary education by rule, in state-approved area vocational-technical schools and .06 dollars per one hundred dollars equalized assessed valuation multiplied by the guaranteed tax base for the second preceding year multiplied by the number of resident and nonresident eligible pupils educated in the district for the second preceding year for classroom instructional capital outlay, including but not limited to payments authorized pursuant to section 177.088, RSMo. Any and all payments authorized under section 177.088, RSMo, except as otherwise provided in this subsection, for the purchase or lease of sites, buildings, facilities, furnishings and equipment and all other expenditures for capital outlay shall be made from the capital projects fund. If a balance remains in the free textbook fund after books are furnished to pupils as provided in section 170.051, RSMo, it shall be transferred to the teachers' fund. The board may transfer the portion of the balance remaining in the incidental fund to the teachers' fund that is necessary for the total payment of all contracted obligations to teachers. If a balance remains in the debt service fund, after the total outstanding indebtedness for which the fund was levied is paid, the board may transfer the unexpended balance to the capital projects fund. If a balance remains in the bond proceeds after completion of the project for which the bonds were issued, the balance shall be transferred from the incidental or capital projects fund to the debt service fund. After placement in the capital projects fund as required under section 165.051, a school district may transfer from the capital projects fund to the incidental fund the interest earned for which placement is not otherwise provided by law.

3. Tuition shall be paid from either the teachers' or incidental funds.

4. Other provisions of law to the contrary notwithstanding, the school board of a school district that satisfies the criteria specified in subsection 5 of this section may transfer from the incidental fund to the capital projects fund an amount not to exceed the greater of zero or the sum of .18 dollars per one hundred dollars equalized assessed valuation multiplied by the guaranteed tax base for the second preceding year multiplied by the number of resident and nonresident eligible pupils educated in the district for the second preceding year and the amount to be expended for transportation equipment that is considered an allowable cost under state board of education rules for transportation reimbursements during the current year and any amount necessary to satisfy obligations of the capital projects fund for state-approved area vocational-technical schools and an amount not to exceed .06 dollars per one hundred dollars equalized assessed valuation multiplied by the guaranteed tax base for the second preceding year multiplied by the number of resident and nonresident eligible pupils educated in the district for the second preceding year less any amount transferred pursuant to subsection 7 of this section, provided that any amount transferred pursuant to this subsection shall only be transferred as necessary to satisfy obligations of the capital projects fund less any amount expended from the incidental fund for classroom instructional capital outlay pursuant to subsection 2 of this section. For the purposes of this subsection, the guaranteed tax base and a district's count of resident and nonresident eligible pupils educated in the district shall not be less than their respective values calculated from data for the 1992-93 school year.

5. In order to transfer funds pursuant to subsection 4 of this section, a school district shall:

(1) Meet the minimum criteria for state aid and for increases in state aid for the current year established pursuant to section 163.021, RSMo;

(2) Not incur a total debt, including short-term debt and bonded indebtedness in excess of ten percent of the guaranteed tax base for the preceding payment year multiplied by the number of resident and nonresident eligible pupils educated in the district in the preceding year;

(3) Set tax rates pursuant to section 164.011, RSMo;

(4) First apply any voluntary rollbacks or reductions to the total tax rate levied to the teachers' and incidental funds;

(5) In order to be eligible to transfer funds for paying lease purchase obligations:

(a) Incur such obligations prior to January 1, 1997;

(b) Limit the term of such obligations to no more than twenty years;

(c) Limit annual installment payments on such obligations to an amount no greater than the amount of the payment for the first full year of the obligation, including all payments of principal and interest, except that the amount of the final payment shall be limited to an amount no greater than two times the amount of such first-year payment;

(d) Limit such payments to leasing nonathletic, classroom, instructional facilities as defined by the state board of education through rule; and

(e) Not offer instruction at a higher grade level than was offered by the district on July 12, 1994[; and

(6) Change the total compensation, including the district's contribution for retirement, for nonadministrative, certificated staff in the preceding year compared to the 1992-93 school year by a percentage equal to or greater than the percentage change in revenue credited to the teachers' and incidental funds for the same year. For the purposes of this subdivision, "revenue" shall not include any revenue from federal categorical sources, state categorical sources, state grants, student activities, payments from other districts, any amounts expended for classroom instructional capital outlay from the incidental fund, and any amounts transferred to the capital projects fund not otherwise excluded from the definition of revenue pursuant to this subdivision nor shall any expenditure from these sources be included in calculating the amount expended for compensation of nonadministrative, certificated staff. Beginning in the 1997-98 school year, districts shall demonstrate compliance based on data for the average of the preceding three years. Nothing contained in this subdivision shall be construed to require any increase in total compensation greater than nine percent per annum].

6. A school district shall be eligible to transfer funds pursuant to subsection 7 of this section if:

(1) Prior to August 28, 1993:

(a) The school district incurred an obligation for the purpose of funding payments under a lease purchase contract authorized under section 177.088, RSMo;

(b) The school district notified the appropriate local election official to place an issue before the voters of the district for the purpose of funding payments under a lease purchase contract authorized under section 177.088, RSMo; or

(c) An issue for funding payments under a lease purchase contract authorized under section 177.088, RSMo, was approved by the voters of the district; or

(2) Prior to November 1, 1993, a school board adopted a resolution authorizing an action necessary to comply with subsection 9 of section 177.088, RSMo. Any increase in the operating levy of a district above the 1993 tax rate resulting from passage of an issue described in paragraph (b) of subdivision (1) of this subsection shall be considered as part of the 1993 tax rate for the purposes of subsection 1 of section 164.011, RSMo.

7. Prior to transferring funds pursuant to subsection 4 of this section, a school district may transfer, pursuant to this subsection, from the incidental fund to the capital projects funds an amount as necessary to satisfy an obligation of the capital projects fund that satisfies at least one of the conditions specified in subsection 6 of this section, but not to exceed its payments authorized under section 177.088, RSMo, for the purchase or lease of sites, buildings, facilities, furnishings, equipment, and all other expenditures for capital outlay, plus the amount to be expended for transportation equipment that is considered an allowable cost under state board of education rules for transportation reimbursements during the current year plus any amount necessary to satisfy obligations of the capital projects fund for state-approved area vocational-technical schools.

8. Beginning in the 1995-96 school year, the department of elementary and secondary education shall deduct from a school district's state aid calculated pursuant to section 163.031, RSMo, an amount equal to the amount of any transfer of funds from the incidental fund to the capital projects fund performed during the previous year in violation of this section.

9. On or before June 30, 1995, a school district may transfer to the capital projects fund from the balances of the teachers' and incidental funds any amount, but only to the extent that the teachers' and incidental fund unrestricted balances on June 30, 1995, are equal to or greater than eight percent of expenditures from the teachers' and incidental funds for the year ending June 30, 1995.

165.016. 1. A school district shall expend as a percentage of current operating cost, for tuition, teacher retirement and compensation of certificated staff at least seventy-eight percent, or a percentage that is for the 1994-95 and 1995-96 school years, no less than three percentage points less than the base school year certificated salary percentage and for the 1996-97 school year, no less than two percentage points less than the base school year certificated salary percentage. The base school year certificated salary percentage shall be the two year average percentage of the 1991-92 and 1992-93 school years except as otherwise established by the department under subsection 3 of this section. The provisions of this subsection shall not apply to any district receiving state aid pursuant to subsection 6 of section 163.031, RSMo, based on its 1992- 93 payment amount per eligible pupil.

2. Beginning with the 1997-98 school year, a school district shall be in compliance with this subsection if it:

(1) Expended, as a percentage of current operating cost for tuition, teacher retirement and compensation of certificated staff, a percentage that is no less than two percentage points less than the base school year certificated salary percentage; or

(2) Expended at least seventy-five percent of current operating cost for tuition, teacher retirement and compensation of certificated staff; or

(3) (a) Made a transfer in the 1994-95 school year pursuant to subsection 9 of section 165.011, and

(b) Expends at least sixty-five percent of current operating cost for tuition, teacher retirement and compensation of certificated staff; and

(c) Has an unrestricted fund balance in the combined incidental and teachers funds on June thirtieth which is equal to or less than the greater of: a) ten percent of the combined expenditures for the year from those funds; or b) the June 30, 1995 combined fund balance as a percentage of expenditures from those funds for the 1994- 95 school year; or

(4) (a) Did not make a transfer in the 1994-95 school year pursuant to subsection 9 of section 165.011; and

(b) Expends at least sixty-five percent of current operating cost for tuition, teacher retirement and compensation of certificated staff; and

(c) Has an unrestricted fund balance in the combined incidental and teachers funds on June thirtieth which is equal to or less than the greater of: a) ten percent of the combined expenditures for the year from those funds; or b) the June 30, 1993 combined fund balance as a percentage of expenditures from those funds for the 1992-93 school year.

3. (1) The department of elementary and secondary education may exempt a school district from the requirements of this section upon receiving a request for an exemption by a school district. The request shall show the reason or reasons for the noncompliance, and the exemption shall apply for only one school year. Requests for exemptions under this subdivision may be resubmitted in succeeding years.

(2) A school district may request, from the department, a one-time, permanent revision of the base school year certificated salary percentage. The request shall show the reason or reasons for the revision.

(3) A school district receiving state aid pursuant to subsection 6 of section 163.031, RSMo, based on its 1992-93 payment amount per eligible pupil may annually request, from the department, a one-year revision of the allowable fund balance criterion established under subdivision (3) or subdivision (4) of subsection 2 of this section, whichever subdivision is applicable based upon whether the district made transfers under subsection 9 of section 165.011 in the 1994-95 school year, and the department shall review and approve any such request but only to the extent demonstrated as necessary for the district to avoid tax anticipation borrowing for the following school year.

4. Any school district may, by school board action, request an exemption or revision under subsection 3 of this section upon providing public notice of such action, and a written copy of such action shall be provided to any employee of the district upon request. Any request for an exemption or revision under subsection 3 of this section may, at the discretion of the school district, be made orally by the district or may be made by written application to the department, and any such written application shall include, at a minimum, a report by the district auditor or a certified public accountant which shows the district's annual revenues and expenditures over at most a five year period ending with the 1992-93 school year and which shows, for a base year revision, that the base school year certificated salary percentage established under subsection 1 of this section is not representative of the period documented in the application or is not representative of subsequent years. The district may also request that the base school year certificated salary percentage be established as the lesser of the percentage for the 1991-92 school year or the 1992-93 school year if such percentage is more representative of the period documented in the request than the base school year certificated salary percentage established under subsection 1 of this section. When granting an exemption or revision, the department shall consider any comments which have been received from patrons and employees in the district. Any decision by the department on a revision or exemption requested under this section may be appealed to the state board of education. The state board decision shall be final.

5. Any school district which is determined by the department to be in violation of the requirements of subsections 1 or 2 of this section, or both, shall, except as otherwise provided within this subsection, compensate the building level administrative staff and nonadministrative certificated staff during the year following the notice of violation by an additional amount which is equal to one hundred ten percent of the amount necessary to bring the district into compliance with this section for the year of violation. In any year in which a penalty is paid, the district shall pay the penalty payments specified in this subsection in addition to the amount required under this section for the current school year. The department shall establish, by rule, a process whereby a district may request, based upon financial hardship, approval to make the penalty payments required under this section over a period not to exceed three years, provided that no penalty payment plan longer than one year may be approved unless the penalty compensation required is at least two percent of total operating costs for the year of violation. Provided that for the preceding school year, the district met the provisions of subdivision (3) or subdivision (4) of subsection 2 of this section, whichever subdivision is applicable for the purposes of this subsection, the penalty compensation required for compliance may be made, at the option of the local school board, in a separate payment apart from any amount due under contract. Any penalty compensation provided under this subsection shall be provided proportionally to each building level administrative staff member and nonadministrative certificated staff member in the district.

6. Any additional transfers from the teachers or incidental funds to the capital projects funds beyond the transfers authorized by state law and state board policy in effect on January 1, 1996 shall be considered expenditures from the teachers or incidental fund for the purpose of determining compliance with the provisions of subsections 1 and 2 of this section.

7. Each school district shall annually report by September first, to the department, its instructional budgetary efficiency ratio, as defined pursuant to section 163.011, RSMo, for the preceding school year. The department shall annually calculate the statewide average instructional budgetary efficiency ratio for the preceding school year and shall report the statewide ratio and the ratios for all school districts to the governor and the general assembly by December first of the current school year.

165.051. If any school district has money in the teachers', incidental, capital projects or debt service fund not needed within a reasonable period of time for the purpose for which the money was received, the school board in the district, if it deems it advisable, may invest the funds in either open time deposits or certificates of deposit secured under the provisions of sections 110.010 and 110.020, RSMo; or in bonds, redeemable at maturity at par, of the state of Missouri, of the United States, or of any wholly owned corporation of the United States; or in other short term obligations of the United States, including any instrument permitted by law for the investment of state moneys. No open time deposits shall be made or bonds purchased to mature beyond the date that the funds are needed for the purpose for which they were received by the school district. [No funds shall be invested by any district which does not provide a school term of nine months.] Interest accruing from the investment of the surplus funds in such deposits or bonds shall be credited to the fund from which the money was invested.

165.111. 1. The school board of each six-director district shall make and publish annually, not later than September first, in some newspaper published in the school district, and if there is none then in some newspaper of general circulation within the district, a statement of all receipts of school moneys, when and from what source derived, and all expenditures, and on what account; also, the present indebtedness of the district and its nature, and the rate of taxation for all purposes for the year and the district's instructional budgetary efficiency ratio as defined under section 163.011, RSMo. The statement shall be duly attested by the president and secretary of the board, and the secretary shall forward a copy to the state board of education on forms prescribed by the board.

2. The state board of education shall not release the state aid apportioned to the district for the next ensuing school year until a copy of the required statement has been received at its office in Jefferson City and has been approved by it. Any school board which fails, refuses or neglects to order the statement to be made, and any officer of the board who fails, refuses, or neglects to prepare, publish and forward the statement, as required by this section, when ordered by the board, is guilty of a misdemeanor and punishable by a fine not to exceed one hundred dollars.

178.405. 1. Any pupil less than eighteen years of age who graduates from a public school in less than four years at the high school level shall be eligible for a scholarship to attend academic classes at an approved public institution or an approved private institution, as those terms are defined in section 173.205, RSMo, in the succeeding school year. Such attendance shall be included in the average daily attendance of the district the pupil resided in at graduation during such succeeding school year. To attend, a pupil must satisfy all qualifications of the institution attended.

2. The department of elementary and secondary education shall deduct from its state aid payment under section 163.031, RSMo, to the district for the succeeding year a sum that is equal to eighty percent of the per pupil amount resulting from the pupil's attendance pursuant to subsection 1 of this section and such amount shall be deposited in the "Missouri Higher Education Student Voucher Fund", which is hereby created in the state treasury, for the purpose of providing scholarships for pupils attending classes at an approved public institution or an approved private institution pursuant to subsection 1 of this section. One- half of the remaining funds paid to the district based on the attendance of such pupil shall be used for bonus compensation and benefits to certificated staff based upon merit, and the remaining one-half may be used for any school purpose.

3. A pupil attending academic classes at an approved public institution or an approved institution under subsection 1 of this section is eligible for and shall receive, upon request, from the department, a scholarship in the amount of eighty percent of the amount deducted by the department under subsection 2 for such pupil except that the scholarship shall not exceed the tuition, and other fees charged by the institution attended for such classes. The school attended by a pupil shall provide documentation to the department showing the enrollment at the institution, the pupil's high school enrollment record, the amount of tuition paid and attendance records from the institution attended showing the attendance of the pupil.

Section 1. No person may serve for more than three consecutive school years as an administrator in a school district unless the person has taught at least one regular term class during the three preceding years.

Section B. Because of the urgent need to ensure proper expenditures for compensation of public school teachers of the state, this act is deemed necessary for the immediate preservation of the public health, welfare, peace and safety, and is hereby declared to be an emergency act within the meaning of the constitution, and this act shall be in full force and effect upon its passage and approval, or on July 1, 1996, whichever later occurs.