Ala. Admin. Code r. 290-1-2-.01.02

Current through Register Vol. 43, No. 1, October 31, 2024

Section 290-1-2-.01.02 - Authorization To Intercept State Funds For Debt Payments

A local board of education may enter into a binding agreement to authorize the State Comptroller to intercept and direct certain state allocated funds to satisfy a debt payment that is due and unpaid in accordance with the provisions of Ala. Act No. 2003-384.

(1) Debt Eligible for Intercept. A debt obligation requiring the approval of the State Superintendent by state laws or Rule 290-1-2-.01.01 may be eligible for payment by intercept of state funds allocated to the local board of education.

(a) The State Superintendent shall not approve a debt obligation of a local board of education which would jeopardize the Foundation Program of education established by state law and by rules and regulations of the State Board of Education.

(b) A debt obligation shall not be eligible for intercept of state allocated funds unless the debt instrument provides for reserved funds for debt payments by one of the following methods:

1. A debt service reserve fund is funded to provide for the maximum amount of principal and interest coming due in any fiscal year for the term of the debt obligation.

2. A restricted fund, consisting of cash or other instruments legally available under state law for the investment of board funds, is funded to provide for the maximum amount of principal and interest coming due in any fiscal year for the term of the debt obligation.

(c) The State Superintendent may reduce the amount of the reserve fund requirement only if a lesser amount is required by the rules of the Internal Revenue Service.

(2) Procedures for Authorization to Intercept State Funds.

(a) Consent for Intercept. Before the issuance of a debt obligation requiring the approval of the State Superintendent, a local board of education may approve a binding agreement authorizing the State Comptroller to intercept and direct certain state allocated funds to satisfy a debt payment that is due and unpaid. In the binding agreement the local board of education shall agree to replace the funds withheld to satisfy the debt payment by providing funds legally available for replacement. The binding agreement shall be submitted to the State Department of Education in a form required by the State Superintendent.

(b) Withdrawal of Consent for Intercept. A local board of education may not withdraw the consent to intercept state allocated funds for a debt obligation unless one of the following conditions are met:

1. The debt obligation has not been issued.

2. The debt obligation has matured.

3. The local board of education has issued refunding bonds to legally defease the debt obligation.

4. The local board of education, the paying agent, and holders of the debt obligation agree that consent to intercept state allocated funds is no longer required.

5. The debt obligation has been satisfied by other means.

(3) Approval by State Superintendent.

(a) The State Superintendent shall approve the issuance of a debt obligation before the State Comptroller can intercept and direct certain state allocated funds to satisfy a debt payment that is due and unpaid.

(b) The State Superintendent shall approve the intercept of state allocated funds directed to the satisfaction of a debt payment that is due and unpaid after determining that the procedures to intercept state allocated funds have been met.

(4) Procedures to Intercept State Allocated Funds.

(a) The State Superintendent shall not approve the intercept of state allocated funds for the satisfaction of a debt payment that is due and unpaid unless the following conditions have been met:

1. The paying agent for a debt obligation approved by the State Superintendent, notifies the State Department of Education by telephone, e-mail, or facsimile that the local board of education has not made the debt payment within two business days after the due date for debt payments specified in the debt instrument.

2. The initial notification of the unpaid debt by the paying agent to the State Department of Education is followed by written notification through U.S. Postal Service, return receipt requested, or by other legal means of official notification.

3. The State Department of Education has notified the local board of education that a payment on a debt obligation is due and unpaid.

4. The State Department of Education has attempted to locate legally available funds for the local board of education to provide payment for the unpaid debt.

5. The State Department of Education has determined that the intercept of state funds allocated to the local board of education is the only source of funds available to make the scheduled debt payment in a timely manner.

(b) The State Superintendent shall then provide documentation and instructions to the State Comptroller, no later than two business days prior to the debt obligation payment date, to pay state allocated funds directly to the paying agent in order to satisfy the debt obligation payment, and to withhold monthly allocations of state funds from the local board of education to equal the amount of debt obligation payment made by the State Comptroller.

Author: Dr. Ed Richardson

Ala. Admin. Code r. 290-1-2-.01.02

New Rule: Filed May 13, 2004; effective June 17, 2004.

Statutory Authority:Code of Ala. 1975, §§ 16-3-13; 16-13-4.