Chapter 715 Oregon Laws 2003

AN ACT

SB 550

Relating to school finance; creating new provisions; amending ORS 327.008, 327.013, 327.019, 327.077, 327.099, 327.336 and 338.145 and section 4, chapter 695, Oregon Laws 2001; repealing ORS 327.047 and 327.051; appropriating money; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Section 2 of this 2003 Act is added to and made a part of ORS 327.006 to 327.081.

SECTION 2. (1) There is established within the State School Fund a High Cost Disabilities Account.

(2) Each fiscal year, the Department of Education shall distribute moneys from the account to school districts as high cost disabilities grants. A school district may receive moneys from the account if the school district has a resident pupil with disabilities for whom the approved costs to the school district of providing special education and related services, as determined under subsection (4) of this section, exceed $25,000.

(3) The amount of moneys received by a school district under this section for each resident pupil with disabilities shall equal the approved costs, as determined under subsection (4) of this section, incurred by the school district in providing special education and related services to the pupil minus $25,000.

(4) The department shall determine the approved costs incurred by a school district in providing special education and related services to a pupil with disabilities. The approved costs incurred by a school district may include costs incurred by an education service district of providing special education and related services to the school district through the resolution process described in ORS 334.175. In determining the approved costs for which a school district may receive moneys under this section, the department shall consider:

(a) How efficiently the special education and related services are provided by the school district; and

(b) The use of available resources by the school district.

(5) If the total approved costs for which school districts are seeking moneys from the account exceed the amount in the account in any fiscal year, the department shall prorate the amount of moneys available for distribution in the account among those school districts that are eligible for moneys from the account.

(6) The department shall distribute any moneys in the account that are not distributed under this section in any fiscal year to school districts based on ORS 327.008 and 327.013.

(7) The State Board of Education may adopt any rules necessary for the administration of this section.

SECTION 3. Section 2 of this 2003 Act is repealed on July 1, 2005.

SECTION 4. ORS 327.008, as amended by section 13, chapter 6, Oregon Laws 2002 (third special session), is amended to read:

327.008. (1) There is established a State School Fund in the General Fund. The fund shall consist of moneys appropriated by the Legislative Assembly and moneys transferred from the Education Stability Fund. The State School Fund is continuously appropriated to the Department of Education for the purposes of ORS 327.006 to 327.081, 327.095, 327.099, 327.101, 327.125, 327.137, 334.380, 336.575, 336.580, 336.635, 342.173, 343.243, 343.533[,] and 343.961 [and 461.543].

(2) There shall be apportioned from the State School Fund to each school district a State School Fund grant, consisting of the positive amount equal to a general purpose grant and a facility grant and a transportation grant and a high cost disabilities grant minus local revenue, computed as provided in ORS 327.013.

(3) There shall be apportioned from the State School Fund to each education service district a State School Fund grant as calculated under sections 2 to 7, chapter 695, Oregon Laws 2001.

(4) All figures used in the determination of the distribution of the State School Fund shall be estimates for the same year as the distribution occurs, unless otherwise specified.

(5) Numbers of students in average daily membership used in the distribution formula shall be the numbers as of June of the year of distribution.

(6) A school district may not use the portion of the State School Fund grant that is attributable to the facility grant for capital construction costs.

(7) The total amount of the State School Fund that is distributed as facility grants [shall] may not exceed $17.5 million in any biennium. If the total amount to be distributed as facility grants exceeds this limitation, the Department of Education shall prorate the amount of funds available for facility grants among those school districts that qualified for a facility grant.

(8) Each fiscal year, the Department of Education shall transfer the amount of $12 million from the State School Fund to the High Cost Disabilities Account established in section 2 of this 2003 Act.

SECTION 5. ORS 327.008, as amended by section 13, chapter 6, Oregon Laws 2002 (third special session), and section 4 of this 2003 Act, is amended to read:

327.008. (1) There is established a State School Fund in the General Fund. The fund shall consist of moneys appropriated by the Legislative Assembly and moneys transferred from the Education Stability Fund. The State School Fund is continuously appropriated to the Department of Education for the purposes of ORS 327.006 to 327.081, 327.095, 327.099, 327.101, 327.125, 327.137, [334.380,] 336.575, 336.580, 336.635, 342.173, 343.243, 343.533 and 343.961.

(2) There shall be apportioned from the State School Fund to each school district a State School Fund grant, consisting of the positive amount equal to a general purpose grant and a facility grant and a transportation grant [and a high cost disabilities grant] minus local revenue, computed as provided in ORS 327.013.

(3) There shall be apportioned from the State School Fund to each education service district a State School Fund grant as calculated under [sections 2 to 7, chapter 695, Oregon Laws 2001] ORS 327.019.

(4) All figures used in the determination of the distribution of the State School Fund shall be estimates for the same year as the distribution occurs, unless otherwise specified.

(5) Numbers of students in average daily membership used in the distribution formula shall be the numbers as of June of the year of distribution.

(6) A school district may not use the portion of the State School Fund grant that is attributable to the facility grant for capital construction costs.

(7) The total amount of the State School Fund that is distributed as facility grants may not exceed $17.5 million in any biennium. If the total amount to be distributed as facility grants exceeds this limitation, the Department of Education shall prorate the amount of funds available for facility grants among those school districts that qualified for a facility grant.

[(8) Each fiscal year, the Department of Education shall transfer the amount of $12 million from the State School Fund to the High Cost Disabilities Account established in section 2 of this 2003 Act.]

SECTION 6. The amendments to ORS 327.008 by section 5 of this 2003 Act become operative on July 1, 2005.

SECTION 7. ORS 327.008, as amended by section 13, chapter 695, Oregon Laws 2001, and section 14, chapter 6, Oregon Laws 2002 (third special session), is amended to read:

327.008. (1) There is established a State School Fund in the General Fund. The fund shall consist of moneys appropriated by the Legislative Assembly and moneys transferred from the Education Stability Fund. The State School Fund is continuously appropriated to the Department of Education for the purposes of ORS 327.006 to 327.081, 327.095, 327.099, 327.101, 327.125, 327.137, 336.575, 336.580, 336.635, 342.173, 343.243, 343.533[,] and 343.961 [and 461.543].

(2) There shall be apportioned from the State School Fund to each school district a State School Fund grant, consisting of the positive amount equal to a general purpose grant and a facility grant and a transportation grant minus local revenue, computed as provided in ORS 327.013.

(3) There shall be apportioned from the State School Fund to each education service district a State School Fund grant as calculated under ORS 327.019.

(4) All figures used in the determination of the distribution of the State School Fund shall be estimates for the same year as the distribution occurs, unless otherwise specified.

(5) Numbers of students in average daily membership used in the distribution formula shall be the numbers as of June of the year of distribution.

(6) A school district may not use the portion of the State School Fund grant that is attributable to the facility grant for capital construction costs.

SECTION 8. ORS 327.013, as amended by section 17, chapter 695, Oregon Laws 2001, is amended to read:

327.013. The State School Fund distributions for school districts shall be computed as follows:

(1) General Purpose Grant = Funding Percentage ´ Target Grant ´ District extended ADMw.

(2) The funding percentage shall be calculated by the Superintendent of Public Instruction to distribute as nearly as practicable the total sum available for distribution of money.

(3) Target Grant = Statewide Target per ADMw Grant + Teacher Experience Factor.

(4) Statewide Target per ADMw Grant = $4,500.

(5) Teacher Experience Factor = $25 ´ {District average teacher experience - statewide average teacher experience}. “Average teacher experience” means the average, in years, of teaching experience of certified teachers as reported to the Department of Education.

(6) District extended ADMw = ADMw or ADMw of the prior year, whichever is greater.

(7)(a) Weighted average daily membership or ADMw = average daily membership + an additional amount computed as follows:

(A) 1.0 for each student in average daily membership eligible for special education as a child with disabilities under ORS 343.035, applicable to not to exceed 11 percent of the district’s ADM without review and approval of the Department of Education. Children with disabilities eligible for special education in adult local correctional facilities as defined in ORS 169.005 or adult regional correctional facilities as defined in ORS 169.620 [shall] may not be included in the calculation of the 11 percent.

(B) 0.5 for each student in average daily membership eligible for and enrolled in an English as a Second Language program under ORS 336.079.

(C) 0.2 for each student in average daily membership enrolled in a union high school district or in an area of a unified school district where the district is only responsible for educating students in grades 9 through 12 in that area.

(D) -0.1 for each student in average daily membership enrolled in an elementary district operating kindergarten through grade 6 or kindergarten through grade 8 or in an area of a unified school district where the district is only responsible for educating students in kindergarten through grade 8.

(E) 0.25 times the sum of the following:

(i) The number of children 5 to 17 years of age in poverty families in the district, as determined by the Department of Education from a report of the federal Department of Education based on the most recent federal decennial census, as adjusted by the school district’s proportion of students in the county receiving free or reduced price lunches under the United States Department of Agriculture’s current Income Eligibility Guidelines if the number is higher than the number determined from census data and only if the school district had an average daily membership of 2,500 or less for the 1995-1996 school year, and as further adjusted by the number of students in average daily membership in June of the year of distribution divided by number of students in average daily membership in the district, or its predecessors, in June of the year of the most recent federal decennial census;

(ii) The number of children in foster homes in the district as determined by the report of the Department of Human Services to the federal Department of Education, “Annual Statistical Report on Children in Foster Homes and Children in Families Receiving AFDC Payments in Excess of the Poverty Income Level,” or its successor, for October 31 of the year prior to the year of distribution; and

(iii) The number of children in the district in state-recognized facilities for neglected and delinquent children, based on information from the Department of Human Services for October 31 of the year prior to the year of distribution.

(F)(i) An additional amount as determined by ORS 327.077 (1997 Edition) shall be added to the ADMw for each remote small school in the district.

(ii) An additional amount as determined by section 23, chapter 1066, Oregon Laws 1999, for each small high school in the district that is equal to the small high school additional weighting amount.

(G) All numbers of children used for the computation in this section must reflect any district consolidations that have occurred since the numbers were compiled.

(b) The total additional weight that shall be assigned to any student in average daily membership in a district, exclusive of students described in paragraph (a)(E) and (F) of this subsection shall not exceed 2.0.

(8) High cost disabilities grant = the total amount received by a school district under section 2 of this 2003 Act for providing special education and related services to resident pupils with disabilities.

[(8)] (9)(a) Transportation grant [=] equals:

(A) 70 percent of approved transportation costs for those school districts ranked below the 80th percentile under paragraph (b) of this subsection.

(B) 80 percent of approved transportation costs for those school districts ranked in or above the 80th percentile but below the 90th percentile under paragraph (b) of this subsection.

(C) 90 percent of approved transportation costs for those school districts ranked in or above the 90th percentile under paragraph (b) of this subsection.

(b) Each fiscal year, the Department of Education shall rank school districts based on the approved transportation costs per ADM of each school district, ranking the school district with the highest approved transportation costs per ADM at the top of the order.

[(9)] (10) Local Revenues are the total of the following:

(a) The amount of revenue offset against local property taxes as determined by the Department of Revenue under ORS 311.175 (3)(a)(A);

(b) The amount of property taxes actually received by the district including penalties and interest on taxes;

(d) The amount of revenue received by the district from the county school fund;

(e) The amount of revenue received by the district from the 25 percent of federal forest reserve revenues required to be distributed to schools by ORS 294.060 (1);

(f) The amount of revenue received by the district from state managed forestlands under ORS 530.115 (1)(b) and (c);

(g) Moneys received in lieu of property taxes;

(h) Federal funds received without specific application by the school district and which are not deemed under federal law to be nonsupplantable;

(i) Any positive amount obtained by subtracting the operating property taxes actually imposed by the district, based on the rate certified pursuant to ORS 310.060, from the amount that would have been imposed by the district if the district had certified the maximum rate of operating property taxes allowed by law; and

(j) Any amount distributed to the district in the prior fiscal year under section 4 (3), chapter 695, Oregon Laws 2001.

[(10)] (11) Notwithstanding subsection [(9)] (10) of this section, Local Revenues do not include:

(a) For those districts with a statutory rate limit on operating taxes on July 1, 2003, that is greater than $4.50 per $1,000 of assessed value, either:

(A) The amount of revenue actually received by the district, including penalties and interest on taxes, that is used for payment of bonds issued to finance or refinance an unfunded obligation for prior service costs under a contract of integration pursuant to ORS 238.685 (2)(a); or

(B) The amount of property taxes actually received by the district, including penalties and interest on taxes, that results from an increase in the district’s rate of ad valorem property tax under section 11 (5)(d), Article XI of the Oregon Constitution; and

(b) If a school district imposes local option taxes pursuant to ORS 280.040 to 280.145, an amount equal to the lesser of:

(A) The amount of revenue actually received by the district from local option taxes imposed pursuant to ORS 280.040 to 280.145;

(B) [Ten] Fifteen percent of the combined total for the school district of the general purpose grant, the transportation grant, [and] the facility grant and the high cost disabilities grant of the district; or

[(11)(a)] (12)(a) Facility Grant = 8 percent of total construction costs of new school buildings.

(b) A school district shall receive a Facility Grant in the distribution year that a new school building is first used.

(A) “New school building” includes new school buildings, adding structures onto existing school buildings and adding premanufactured structures to a school district if those buildings or structures are to be used for instructing students.

(B) “Construction costs” does not include costs for land acquisition.

SECTION 9. The amendments to ORS 327.013 by section 8 of this 2003 Act apply to State School Fund distributions commencing with the 2003-2004 distribution.

SECTION 10. ORS 327.013, as amended by section 17, chapter 695, Oregon Laws 2001, and section 8 of this 2003 Act, is amended to read:

327.013. The State School Fund distributions for school districts shall be computed as follows:

(1) General Purpose Grant = Funding Percentage ´ Target Grant ´ District extended ADMw.

(2) The funding percentage shall be calculated by the Superintendent of Public Instruction to distribute as nearly as practicable the total sum available for distribution of money.

(3) Target Grant = Statewide Target per ADMw Grant + Teacher Experience Factor.

(4) Statewide Target per ADMw Grant = $4,500.

(6) District extended ADMw = ADMw or ADMw of the prior year, whichever is greater.

(7)(a) Weighted average daily membership or ADMw = average daily membership + an additional amount computed as follows:

(A) 1.0 for each student in average daily membership eligible for special education as a child with disabilities under ORS 343.035, applicable to not to exceed 11 percent of the district’s ADM without review and approval of the Department of Education. Children with disabilities eligible for special education in adult local correctional facilities as defined in ORS 169.005 or adult regional correctional facilities as defined in ORS 169.620 may not be included in the calculation of the 11 percent.

(B) 0.5 for each student in average daily membership eligible for and enrolled in an English as a Second Language program under ORS 336.079.

(E) 0.25 times the sum of the following:

(F)[(i)] An additional amount as determined by ORS 327.077 [(1997 Edition)] shall be added to the ADMw for each remote small elementary school and for each small high school in the district.

[(ii) An additional amount as determined by section 23, chapter 1066, Oregon Laws 1999, for each small high school in the district that is equal to the small high school additional weighting amount.]

(G) All numbers of children used for the computation in this section must reflect any district consolidations that have occurred since the numbers were compiled.

[(8) High cost disabilities grant = the total amount received by a school district under section 2 of this 2003 Act for providing special education and related services to resident pupils with disabilities.]

[(9)(a)] (8)(a) Transportation grant equals:

(A) 70 percent of approved transportation costs for those school districts ranked below the 80th percentile under paragraph (b) of this subsection.

(B) 80 percent of approved transportation costs for those school districts ranked in or above the 80th percentile but below the 90th percentile under paragraph (b) of this subsection.

(C) 90 percent of approved transportation costs for those school districts ranked in or above the 90th percentile under paragraph (b) of this subsection.

[(10)] (9) Local Revenues are the total of the following:

(a) The amount of revenue offset against local property taxes as determined by the Department of Revenue under ORS 311.175 (3)(a)(A);

(b) The amount of property taxes actually received by the district including penalties and interest on taxes;

(d) The amount of revenue received by the district from the county school fund;

(e) The amount of revenue received by the district from the 25 percent of federal forest reserve revenues required to be distributed to schools by ORS 294.060 (1);

(f) The amount of revenue received by the district from state managed forestlands under ORS 530.115 (1)(b) and (c);

(g) Moneys received in lieu of property taxes;

(h) Federal funds received without specific application by the school district and which are not deemed under federal law to be nonsupplantable;

(j) Any amount distributed to the district in the prior fiscal year under section 4 (3), chapter 695, Oregon Laws 2001, or ORS 327.019 (8).

[(11)] (10) Notwithstanding subsection [(10)] (9) of this section, Local Revenues do not include[:],

[(a) For those districts with a statutory rate limit on operating taxes on July 1, 2003, that is greater than $4.50 per $1,000 of assessed value, either:]

[(A) The amount of revenue actually received by the district, including penalties and interest on taxes, that is used for payment of bonds issued to finance or refinance an unfunded obligation for prior service costs under a contract of integration pursuant to ORS 238.685 (2)(a); or]

[(B) The amount of property taxes actually received by the district, including penalties and interest on taxes, that results from an increase in the district’s rate of ad valorem property tax under section 11 (5)(d), Article XI of the Oregon Constitution; and]

[(b)] if a school district imposes local option taxes pursuant to ORS 280.040 to 280.145, an amount equal to the lesser of:

[(A)] (a) The amount of revenue actually received by the district from local option taxes imposed pursuant to ORS 280.040 to 280.145;

[(B)] (b) Fifteen percent of the combined total for the school district of the general purpose grant, the transportation grant[,] and the facility grant [and the high cost disabilities grant] of the district; or

[(C)] (c) $750 per district extended ADMw.

[(12)(a)] (11)(a) Facility Grant = 8 percent of total construction costs of new school buildings.

(b) A school district shall receive a Facility Grant in the distribution year that a new school building is first used.

(B) “Construction costs” does not include costs for land acquisition.

SECTION 11. The amendments to ORS 327.013 by section 10 of this 2003 Act apply to State School Fund distributions commencing with the 2005-2006 distribution.

SECTION 12. The amendments to ORS 327.013 by section 10 of this 2003 Act become operative on July 1, 2005.

SECTION 13. ORS 327.013, as amended by section 30, chapter 1066, Oregon Laws 1999, section 12, chapter 670, Oregon Laws 2001, and sections 17, 20 and 23, chapter 695, Oregon Laws 2001, is amended to read:

327.013. The State School Fund distributions for school districts shall be computed as follows:

(1) General Purpose Grant = Funding Percentage ´ Target Grant ´ District extended ADMw.

(2) The funding percentage shall be calculated by the Superintendent of Public Instruction to distribute as nearly as practicable the total sum available for distribution of money.

(3) Target Grant = Statewide Target per ADMw Grant + Teacher Experience Factor.

(4) Statewide Target per ADMw Grant = $4,500.

(6) District extended ADMw = ADMw or ADMw of the prior year, whichever is greater.

(7)(a) Weighted average daily membership or ADMw = average daily membership + an additional amount computed as follows:

(B) 0.5 for each student in average daily membership eligible for and enrolled in an English as a Second Language program under ORS 336.079.

(E) 0.25 times the sum of the following:

(F) An additional amount as determined by ORS 327.077 shall be added to the ADMw for each remote small elementary school and for each small high school in the district.

(G) All numbers of children used for the computation in this section must reflect any district consolidations that have occurred since the numbers were compiled.

(8)(a) Transportation grant [=] equals:

(A) 70 percent of approved transportation costs for those school districts ranked below the 80th percentile under paragraph (b) of this subsection.

(B) 80 percent of approved transportation costs for those school districts ranked in or above the 80th percentile but below the 90th percentile under paragraph (b) of this subsection.

(C) 90 percent of approved transportation costs for those school districts ranked in or above the 90th percentile under paragraph (b) of this subsection.

(9) Local Revenues are the total of the following:

(a) The amount of revenue offset against local property taxes as determined by the Department of Revenue under ORS 311.175 (3)(a)(A);

(b) The amount of property taxes actually received by the district including penalties and interest on taxes;

(d) The amount of revenue received by the district from the county school fund;

(e) The amount of revenue received by the district from the 25 percent of federal forest reserve revenues required to be distributed to schools by ORS 294.060 (1);

(f) The amount of revenue received by the district from state managed forestlands under ORS 530.115 (1)(b) and (c);

(g) Moneys received in lieu of property taxes;

(h) Federal funds received without specific application by the school district and which are not deemed under federal law to be nonsupplantable;

(j) Any amount distributed to the district in the prior fiscal year under section 4 (3), chapter 695, Oregon Laws 2001, or ORS 327.019 (8).

(10) Notwithstanding subsection (9) of this section, Local Revenues do not include[:],

[(a) The amount of revenue actually received by the district, including penalties and interest on taxes, that is used for payment of bonds issued to finance or refinance an unfunded obligation for prior service costs under a contract of integration pursuant to ORS 238.685 (2)(a); and]

[(b)] if a school district imposes local option taxes pursuant to ORS 280.040 to 280.145, an amount equal to the lesser of:

[(A)] (a) The amount of revenue actually received by the district from local option taxes imposed pursuant to ORS 280.040 to 280.145;

[(B)] (b) [Ten] Fifteen percent of the combined total for the school district of the general purpose grant, the transportation grant and the facility grant of the district; or

[(C)] (c) [$500] $750 per district extended ADMw.

(11)(a) Facility Grant = 8 percent of total construction costs of new school buildings.

(b) A school district shall receive a Facility Grant in the distribution year that a new school building is first used.

(B) “Construction costs” does not include costs for land acquisition.

SECTION 14. The amendments to ORS 327.013 by section 13 of this 2003 Act apply to State School Fund distributions commencing with the 2005-2006 distribution.

SECTION 15. The amendments to ORS 327.013 by section 13 of this 2003 Act become operative on July 1, 2005.

SECTION 16. ORS 327.019 is amended to read:

327.019. (1) As used in this section:

(a) “Education service district extended ADMw” means the sum of the extended ADMw of the component school districts of the education service district as computed under ORS 327.013.

(b) “Local revenues of an education service district” means the total of the following:

(A) The amount of revenue offset against local property taxes as determined by the Department of Revenue under ORS 311.175 (3)(a)(A);

(B) The amount of property taxes actually received by the district including penalties and interest on taxes;

(D) Any positive amount obtained by subtracting the operating property taxes actually imposed by the district based on the rate certified pursuant to ORS 310.060 from the amount that would have been imposed by the district if the district had certified the maximum rate of operating property taxes allowed by law.

(2) Each fiscal year, the Superintendent of Public Instruction shall calculate a State School Fund grant for each education service district as provided in this section.

(3)(a) Each fiscal year, the superintendent shall calculate the total amount appropriated or allocated to the State School Fund and available for distribution to school districts, education service districts and programs + total amount of local revenues of all school districts, computed as provided in ORS 327.013, + total amount of local revenues of all education service districts. The superintendent may not include in the calculation under this paragraph amounts [transferred from the State School Fund to the Out-of-State Disabilities Placement Education Fund or amounts] recovered by the Department of Education from the State School Fund under ORS 343.243.

(b) The superintendent shall multiply the amount calculated under paragraph (a) of this subsection by 95 percent.

(c) Based on the amount calculated under paragraph (b) of this subsection, the superintendent shall calculate a funding percentage to distribute as nearly as practicable under ORS 327.006 to 327.133 the total amount calculated under paragraph (b) of this subsection as school district general purpose grants, facility grants and transportation grants to school districts.

(d) Based on the funding percentage calculated under paragraph (c) of this subsection, the superintendent shall calculate the general purpose grant, facility grant and transportation grant amounts for each school district.

(4) The general services grant for an education service district shall equal the higher of:

(a) Total amount calculated under subsection (3)(d) of this section for the component school districts of the education service district ´ 5.263 percent; or

(b) $1 million.

(5) Subject to subsection (6) of this section, the State School Fund grant for an education service district = general services grant :MINUS local revenues of the education service district.

(6)(a) After completing the calculations under subsections (2) to (5) of this section, the Superintendent of Public Instruction shall apportion from the State School Fund to each education service district an amount = (funding percentage´ general services grant) -local revenues of the education service district.

(b) The funding percentage used in paragraph (a) of this subsection shall be calculated by the superintendent to distribute as nearly as practicable the total amount available for distribution to education service districts from the State School Fund for each fiscal year.

(7) Notwithstanding subsections (5) and (6) of this section, the State School Fund grant of an education service district may not be less than zero.

(8) An education service district shall distribute to its component school districts any amount of local revenues of the education service district that is greater than the general services grant. The amount that each component school district receives under this subsection shall be prorated based on the district extended ADMw of each school district.

SECTION 17. The amendments to ORS 327.019 by section 16 of this 2003 Act apply to State School Fund distributions commencing with the 2005-2006 distribution.

SECTION 18. The amendments to ORS 327.019 by section 16 of this 2003 Act become operative on July 1, 2005.

SECTION 19. Section 4, chapter 695, Oregon Laws 2001, is amended to read:

Sec. 4. (1) For the 2001-2002, 2002-2003, 2003-2004 and 2004-2005 fiscal years, to calculate the target amount for each education service district:

(a) The Superintendent of Public Instruction shall calculate the total amount appropriated or allocated to the State School Fund for a fiscal year and available for distribution to school districts, education service districts and programs + total amount of local revenues of all school districts, computed as provided in ORS 327.013, + total amount of local revenues of all education service districts. The superintendent may not include in the calculation under this paragraph amounts [transferred from the State School Fund to the Out-of-State Disabilities Placement Education Fund or amounts] recovered by the Department of Education from the State School Fund under ORS 343.243.

(b) The superintendent shall multiply the amount calculated under paragraph (a) of this subsection by:

(A) For the 2001-2002 fiscal year, 95.34 percent.

(B) For the 2002-2003 fiscal year, 95.36 percent.

(D) For the 2004-2005 fiscal year, 95.15 percent.

(c) Based on the amount calculated under paragraph (b) of this subsection, the superintendent shall calculate a funding percentage to distribute as nearly as practicable under ORS 327.006 to 327.133 the total amount calculated for each fiscal year under paragraph (b) of this subsection as school district general purpose grants, facility grants, [and] transportation grants and high cost disabilities grants to school districts.

(2) The target amount for each education service district is equal to the following percent of the total of the education service district’s component school districts’ general purpose grants, facility grants and transportation grants, as calculated under subsection (1)(d) of this section:

(a) For the 2001-2002 fiscal year, 4.888 percent.

(b) For the 2002-2003 fiscal year, 4.866 percent.

(d) For the 2004-2005 fiscal year, 5.097 percent.

(3) For the 2003-2004 and 2004-2005 fiscal years, an education service district shall distribute to its component school districts any amount of local revenues of the education service district that is greater than the general services grant of the education service district for that fiscal year. The amount that each component school district receives under this subsection shall be prorated based on the district extended ADMw of each school district.

SECTION 20. The amendments to section 4, chapter 695, Oregon Laws 2001, by section 19 of this 2003 Act apply to State School Fund distributions commencing with the 2003-2004 distribution.

SECTION 21. ORS 327.336 is amended to read:

327.336. (1) As used in this section:

(a) “Extended ADMw” means the district extended weighted average daily membership computed under ORS 327.013 (6).

(b) “Local option tax rate” means the amount of local option taxes imposed by the school district for the current fiscal year, after compression under ORS 310.150 and after subtraction of the amount of school district local option taxes that are distributed to an urban renewal agency pursuant to ORS 457.440, divided by the assessed value of the school district.

(d) “Target district” means the school district that, for the fiscal year prior to the year for which grants are being determined, had a total assessed value of taxable property per district extended ADMw that was greater than all but 25 percent of the school districts in this state for that prior fiscal year. The Department of Education shall determine which school district is the target district for a fiscal year, based on the total assessed values of school districts reported to the Department of Education by the Department of Revenue for the fiscal year prior to the year for which grants are being determined under this section.

(2) A school district shall receive a local option equalization grant for a fiscal year:

(a) In which the school district imposes local option taxes pursuant to ORS 280.040 to 280.145; and

(b) For which the total assessed value of taxable property per extended ADMw of the school district for the prior fiscal year does not exceed the total assessed value of taxable property per extended ADMw of the target district for the prior fiscal year.

(3) The amount of the local option equalization grant shall equal the lesser of:

(a) The product of the local option tax rate of the school district for the current fiscal year ´ (total assessed value per extended ADMw of the target district for the prior fiscal year - total assessed value per extended ADMw of the school district for the prior fiscal year) ´the extended ADMw of the school district for the prior fiscal year; or

(b) The amount obtained by subtracting the local option tax imposed by the school district for the current fiscal year, after compression under ORS 310.150, from the lesser of:

(A) [Ten] Fifteen percent of the combined total for the school district of the general purpose grant, the transportation grant, [and] the facility grant and the high cost disabilities grant of the school district for the current fiscal year; or

(B) [$500] $750 multiplied by the extended ADMw of the school district for the current fiscal year.

(4) If the amount computed under subsection (3)(b) of this section is zero or less, a local option equalization grant may not be made to the school district for the fiscal year.

(5) As soon as is practicable after school districts have certified property taxes to the assessor under ORS 310.060, the Department of Revenue shall report to the Department of Education a list of school districts certifying local option taxes for the current fiscal year and the local option tax rates for those districts. The amount of each local option equalization grant shall be calculated by the Department of Education.

(6) If the election authorizing the imposition of a local option tax is held after the start of a biennium in which the local option tax is to be imposed, the local option equalization grant for a fiscal year of that biennium shall be determined as otherwise prescribed in this section, but may not be paid to the school district until the first fiscal year of the next succeeding biennium.

SECTION 21a. The amendments to ORS 327.336 by section 21 of this 2003 Act apply to local option equalization grants awarded on or after the effective date of this 2003 Act.

SECTION 22. ORS 327.336, as amended by section 21 of this 2003 Act, is amended to read:

327.336. (1) As used in this section:

(a) “Extended ADMw” means the district extended weighted average daily membership computed under ORS 327.013 (6).

(2) A school district shall receive a local option equalization grant for a fiscal year:

(a) In which the school district imposes local option taxes pursuant to ORS 280.040 to 280.145; and

(3) The amount of the local option equalization grant shall equal the lesser of:

(b) The amount obtained by subtracting the local option tax imposed by the school district for the current fiscal year, after compression under ORS 310.150, from the lesser of:

(A) Fifteen percent of the combined total for the school district of the general purpose grant, the transportation grant[,] and the facility grant [and the high cost disabilities grant] of the school district for the current fiscal year; or

(B) $750 multiplied by the extended ADMw of the school district for the current fiscal year.

(4) If the amount computed under subsection (3)(b) of this section is zero or less, a local option equalization grant may not be made to the school district for the fiscal year.

SECTION 23. The amendments to ORS 327.336 by section 22 of this 2003 Act become operative on July 1, 2005.

SECTION 23a. The amendments to ORS 327.336 by section 22 of this 2003 Act apply to local option equalization grants awarded on or after July 1, 2005.

SECTION 24. ORS 327.099 is amended to read:

327.099. (1) The Department of Education shall adjust the distribution to a school district to reflect the difference between the estimated level of local revenues to the district under ORS 327.013 [(9)] and the projected level of those same local revenues used to calculate the State School Fund apportionment to the district. The adjustment shall be incorporated in the May 15 apportionment to the district in the distribution year.

(2) The department shall adjust the May 15 apportionment to a school district in the distribution year to reflect an ADMw of the district equal to the higher of the ADMw of the prior year or the adjusted ADMw for the December quarter. Adjusted ADMw for the December quarter shall equal:

(a) ADMw as determined by the department from information provided in the December quarterly report for the current distribution year filed with the department under ORS 327.133;

(b) Multiplied by the lesser of 1.0 or the average of the ratios for the preceding two years of the ADM for the year ending June 30 to the ADM for the quarter ending December 31 for the same school year as filed under ORS 327.133.

(3) The sum equal to the sum of all negative adjustments made to the May 15 apportionment under subsection (1) of this section is appropriated to the department for purposes of funding positive adjustments required under subsection (1) of this section and adjustments required under subsection (2) of this section.

(4) The department shall also set aside an amount of the funds appropriated to the State School Fund for the fiscal year to fund any positive adjustments required under subsection (1) of this section and adjustments required under subsection (2) of this section in excess of the amount available under subsection (3) of this section. The amount set aside shall be as determined by law.

(5) If the amounts available under subsections (3) and (4) of this section are either not sufficient to fund the positive adjustments or exceed the positive adjustments to districts required under subsections (1) and (2) of this section and the adjustments required under subsection (2) of this section, the Superintendent of Public Instruction shall recalculate the funding percentage in ORS 327.013 (2) to distribute as nearly as practicable the total sum available for distribution.

SECTION 25. ORS 338.145 is amended to read:

338.145. (1) The public charter school shall be responsible for providing transportation to students who reside within the school district and who attend the public charter school. The public charter school may negotiate with a school district for the provision of transportation to students attending the public charter school.

(2) Notwithstanding subsection (1) of this section, the school district within which the public charter school is located shall be responsible for the transportation of students attending the public charter school pursuant to ORS 327.043 in the same manner as students attending nonchartered public schools if the student is a resident of the school district. However, a school district may not be required to add or extend existing bus routes or other transportation services pursuant to this subsection.

(3) Students who attend public charter schools and who reside outside of the school district may use existing bus routes and transportation services of the school district in which a public charter school is located.

(4) Any transportation costs incurred by a school district under this section shall be considered approved transportation costs for purposes of ORS 327.013 [(8)] in the same manner as transportation costs incurred by the school district for transporting students who attend nonchartered public schools are considered approved transportation costs for purposes of ORS 327.013 [(8)].

SECTION 26. Sections 27 to 30 of this 2003 Act are added to and made a part of ORS 327.006 to 327.081.

SECTION 27. (1) There is transferred to the Small School District Supplement Fund from the State School Fund, for the fiscal year beginning July 1, 2003, the amount of $2.5 million.

(2) There is transferred to the Small School District Supplement Fund from the State School Fund, for the fiscal year beginning July 1, 2004, the amount of $2.5 million.

SECTION 28. (1) There is established the Small School District Supplement Fund, separate and distinct from the General Fund.

(2) The moneys in the Small School District Supplement Fund are appropriated continuously to the Department of Education for purposes of the grant program created by section 30 of this 2003 Act.

SECTION 29. As used in this section and section 30 of this 2003 Act:

(1)(a) “Small high school” means a public school that is operated by a small school district and that has students in:

(A) Grades 9 through 12, with an ADM of less than 350 in grades 9 through 12; or

(B) Grades 10 through 12 only, with an ADM of less than 267.

(b) “Small high school” does not include an alternative education program or a public charter school.

(2) “Small school district” means a school district with a weighted average daily membership (ADMw) of less than 8,500.

SECTION 30. (1) In addition to those moneys distributed through the State School Fund, the Department of Education shall award grants to small school districts with one or more small high schools from moneys appropriated to the department from the Small School District Supplement Fund.

(2) The amount of each grant = the small high school’s ADM ´ (the total amount available for the grants in each fiscal year ¸ the total ADM of all small high schools).

(3) A small school district shall receive a grant under this section for each small high school operated by the school district.

(4) The State Board of Education shall adopt any rules necessary for the administration of this section.

SECTION 31. Sections 27 to 30 of this 2003 Act are repealed on June 30, 2005.

SECTION 32. ORS 327.077 is amended to read:

327.077. (1) A school may qualify as a remote small elementary school if the average daily membership in grades one through eight for an elementary school teaching:

(a) Eight grades is below 224.

(b) Seven grades is below 196.

(d) Five grades is below 140.

(e) Four grades is below 112.

(f) Three grades is below 84.

(g) Two grades is below 56.

(h) One grade is below 28.

(2) A school may qualify as a small high school if:

(a) The school is in a school district that has an ADMw of less than 8,500; and

(b) The average daily membership in grades 9 through 12 for a high school teaching:

(A) Four grades is below 350.

(B) Three grades is below 267.

(3) No elementary school shall qualify as a remote small elementary school under subsection (1) of this section if it is within eight miles by the nearest traveled road from another elementary school unless there are physiographic conditions that make transportation to another school not feasible.

(4)(a) If an elementary school in a school district qualifies as a remote small elementary school, the district shall have an additional amount added to the district’s ADMw.

(b) The additional amount = {224- (ADMa ¸ (number of grades in the school ¸ eight))} ´ 0.0045 ´ ADMa ´ distance adjustment.

(5)(a) If a high school in a district qualifies as a small high school, the district shall have an additional amount added to the district’s ADMw.

(b) The additional amount = {350- (ADMa ¸ (number of grades in the school¸ four))}´ 0.0029´ ADMa.

(6) The distance adjustment for an elementary school = 0.025 for each 10th of a mile more than eight miles that a school is away from the nearest elementary school measured by the nearest traveled road or 1.0, whichever is less.

(7)(a) A school may qualify as a remote small elementary school under this section only if the location of the school has not changed since January 1, 1995, and if the school qualified as a remote small school on July 18, 1995.

(b) A school may qualify as a small high school under this section only if the location of the school has not changed since January 1, 1995, and if the school qualified as a small high school on October 23, 1999.

(c) A public charter school as defined in ORS 338.005 may qualify as a remote small elementary school under this section only if the location of the school has not changed since January 1, 1995, and if the school qualified as a nonchartered public remote small school on July 18, 1995.

(d) A public charter school as defined in ORS 338.005 may qualify as a small high school under this section only if the location of the school has not changed since January 1, 1995, and if the school qualified as a nonchartered public remote small school on July 18, 1995.

(e) The Superintendent of Public Instruction may waive the requirements of paragraph (a), (b), (c) or (d) of this subsection if the superintendent determines that exceptional circumstances exist.

(f) An alternative education program as defined in ORS 336.615 may not qualify as a small high school under this section.

(8) The opening of a public charter school shall not disqualify a school as a remote small elementary school under subsection (3) of this section or change the distance adjustment for a school under subsection (6) of this section.

(9)(a) Notwithstanding subsections (2), (5) and (7)(b) and (d) of this section, if two high schools merge and prior to the merger at least one of the high schools qualified as a small high school under this section, the Department of Education shall continue to add an additional amount pursuant to subsection (5) of this section to the ADMw of the school district in which the new merged high school is located that is equal to the higher of:

(A) The additional amount the school district of each of the former small high schools would have received under this section for the small high school based on the ADMa of each of the high schools prior to the merger; or

(B) In the case of a high school that remains qualified as a small high school under subsection (2) of this section after a merger, the ADMa of the merged small high school.

(b) The department shall add the additional amount under this subsection only for the first four fiscal years after the merger of the two high schools is final. If the merger of the two high schools becomes final on or before September 1, for purposes of this paragraph the merger shall be considered final in the prior fiscal year.

[(9)] (10) For purposes of this section:

(a) The “adjusted average daily membership” or “ADMa” for an elementary school shall be the average daily membership for the school, but no less than 25.

(b) The “adjusted average daily membership” or “ADMa” for a high school shall be the average daily membership for the school, but no less than 60.

SECTION 33. The amendments to ORS 327.077 by section 32 of this 2003 Act apply to:

(1) State School Fund distributions commencing with the 2003-2004 distribution; and

(2) Small high schools for which the merger with another high school became final on or after January 1, 2003.

SECTION 34. Section 35 of this 2003 Act is added to and made a part of ORS 310.200 to 310.242.

SECTION 35. (1) If the permanent rate limit on operating taxes of a school district is increased on or after the effective date of this 2003 Act pursuant to section 11 (5)(d), Article XI of the Oregon Constitution, the statutory rate limit on operating taxes of the school district shall remain at the same rate as before the increase in the permanent rate limit on operating taxes of the district.

(2) This section applies only to school districts with a statutory rate limit on operating taxes on July 1, 2003, that is greater than $4.50 per $1,000 of assessed value.

SECTION 36. Section 35 of this 2003 Act applies to tax years beginning on or after July 1, 2005.

SECTION 37. Section 38 of this 2003 Act is added to and made a part of ORS chapter 328.

SECTION 38. (1) A school district may enter into a funds diversion agreement with the Department of Education for the purpose of making lease payments to an Indian tribe for the debt service costs of capital improvements of public school facilities on the reservation of the Indian tribe. A funds diversion agreement entered into under this section must contain all of the following provisions:

(a) Moneys payable to the school district by the department from the State School Fund will be paid directly to a debt service account in amounts equal to the debt service owed by the school district.

(b) The department must pay the amounts required under the funds diversion agreement to the debt service account agreed to by the Indian tribe and the school district.

(c) The department must pay the amounts required under the funds diversion agreement pursuant to the schedule specified in the agreement before paying any other amounts to the school district. The agreement may provide an exception for amounts payable under a prior funds diversion agreement with the school district.

(d) The agreement may not be revoked by the school district.

(e) The agreement will remain in effect until all payments under the lease have been made.

(2) If the department is not able to pay moneys to a debt service account as required by a funds diversion agreement, the department shall give notice to the school district within 30 days after becoming aware that the moneys will not be paid according to the agreement.

(3) Nothing in this section or in any funds diversion agreement entered into under this section obligates the state or the department to pay an amount to a school district that is more than amounts the district is otherwise entitled to receive under law.

SECTION 39. Section 38 of this 2003 Act is repealed on June 30, 2029.

SECTION 40. On January 1, 2004, the Out-of-State Disabilities Placement Education Fund is abolished. Any moneys in the fund on January 1, 2004, shall be transferred to the State School Fund.

SECTION 41. ORS 327.047 and 327.051 are repealed on January 1, 2004.

SECTION 42. This 2003 Act takes effect on the 91st day after the date on which the regular session of the Seventy-second Legislative Assembly adjourns sine die.

Approved by the Governor August 29, 2003

Filed in the office of Secretary of State September 2, 2003

Effective date November 26, 2003

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