Allocation for discretionary nonmandated payments; duties of district; weighted foundation payments; purchase and support of business function software; payments for litigation costs; claim of inadequate funding or unfunded constitutional requirement; escrowed funds as work project; purpose; final determination; expedited review of claim by local claims review board; removal to court of appeals; violation of state constitution; lawsuit challenging payments relating to costs reimbursed by federal title XIX Medicaid funds; definitions.

Sec. 22b. (1) Except as otherwise provided in this section, for discretionary nonmandated payments to districts under this section, there is allocated for 2025-2026 an amount not to exceed $6,783,000,000.00 from the state school aid fund and general fund appropriations in section 11, there is allocated for 2026-2027 an amount not to exceed $6,914,450,000.00 from the state school aid fund and general fund appropriations in section 11, and there is additionally allocated for 2026-2027 only an amount not to exceed $56,100,000.00 from the state school aid fund appropriation in section 11. In addition, there is allocated for 2025-2026 only an amount not to exceed $124,000,000.00 from the state school aid fund appropriation in section 11, and there is allocated for 2026-2027 only an amount not to exceed $130,000,000.00 from the enrollment stabilization fund appropriation in section 11. Funds allocated under this section that are not expended in the fiscal year for which they were allocated, as determined by the department, may be used to supplement the allocations under sections 22a and 51c to fully fund those allocations for the same fiscal year. (2) Subject to subsection (4) and section 296, the allocation to a district under subsection (1) is an amount equal to the sum of the amounts calculated under sections 20, 20m, 51a(2), 51a(3), 51a(11), and 51e, minus the sum of the allocations to the district under sections 22a and 51c. Except as otherwise provided in this subsection, for a community district, the allocation as otherwise calculated under this section is increased by an amount equal to the amount of local school operating tax revenue that would otherwise be due to the community district if not for the operation of section 386 of the revised school code, MCL 380.386, to offset the absence of local school operating revenue in a community district in the funding of the state portion of the foundation allowance under section 20(4). Beginning with the fiscal year ending September 30, 2027, it is the intent of the legislature that the previous sentence no longer applies. Beginning with the fiscal year ending September 30, 2027, for a qualifying school district that has entered into a qualifying debt agreement, all of the following apply: (a) The qualifying school district is presumed to have paid the unpaid obligations of the qualifying school district under the qualified debt agreement and repaid all outstanding operating obligations of the qualifying school district. (b) Section 386 of the revised school code, MCL 380.386, is presumed to no longer apply to the community district. (c) The qualifying school district is presumed, after payment under subdivision (a), to have remitted to the community district any remaining money in any revenue fund established under the qualified debt agreement. (3) To receive an allocation under this section, each district must do all of the following: (a) Comply with section 1280b of the revised school code, MCL 380.1280b. (b) Comply with sections 1278a and 1278b of the revised school code, MCL 380.1278a and 380.1278b. (c) Furnish data and other information required by state and federal law to the center and the department in the form and manner specified by the center or the department, as applicable. (d) Comply with section 1230g of the revised school code, MCL 380.1230g. (e) Comply with section 21f. (f) For a district that has entered into a partnership district agreement with the department, comply with section 22p. (g) Comply with 1 of the following, as applicable: (i) If Senate Bill No. 903 of the 103rd Legislature is enacted into law, section 1280h of the revised school code, MCL 380.1280h. (ii) If subparagraph (i) does not apply, section 164m. (h) Comply with section 1280f of the revised school code, MCL 380.1280f. Beginning with the fiscal year ending September 30, 2026, if a district is not using a curriculum from the department's evidence-based curriculum list required under section 1280f of the revised school code, MCL 380.1280f, the district must provide a notification to all parents or legal guardians of students in grades K to 5 receiving instruction with that curriculum that includes all of the following: (i) A statement informing parents or legal guardians that the curriculum used by the district is not evidence-based or not aligned to state standards, which could negatively impact student academic outcomes. (ii) A statement explaining why the district is not using a curriculum that is evidence-based or aligned to state standards. (iii) A plan, including a projected timeline, for when a new curriculum will be adopted that is evidence-based and aligned to state standards. (4) In addition to the allocation under subsection (1), and subject to subsection (3) and section 296, from the state school aid fund money appropriated in section 11 there is allocated for 2026-2027 an amount not to exceed $1,627,665,100.00 for a weighted foundation payment to districts in an amount equal to the target foundation allowance multiplied by the weighted pupil membership for the district. (5) Districts are encouraged to use funds allocated under this section for the purchase and support of payroll, human resources, and other business function software that is compatible with that of the intermediate district in which the district is located and with other districts located within that intermediate district. (6) From the allocation in subsection (1), the department shall pay up to $1,000,000.00 in litigation costs incurred by this state related to commercial or industrial property tax appeals, including, but not limited to, appeals of classification, that impact revenues dedicated to the state school aid fund. (7) From the allocation in subsection (1), the department shall pay up to $1,000,000.00 in litigation costs incurred by this state associated with lawsuits filed by 1 or more districts or intermediate districts against this state. If the allocation under this section is insufficient to fully fund all payments required under this section, the payments under this subsection must be made in full before any proration of remaining payments under this section. (8) It is the intent of the legislature that all constitutional obligations of this state have been fully funded under sections 22a, 31d, 51a, 51c, 51e, and 152a. If a claim is made by an entity receiving funds under this article that challenges the legislative determination of the adequacy of this funding or alleges that there exists an unfunded constitutional requirement, the state budget director may escrow or allocate from the discretionary funds for nonmandated payments under this section the amount as may be necessary to satisfy the claim before making any payments to districts under subsection (2). If funds are escrowed, the escrowed funds are a work project appropriation and the funds are carried forward into the following fiscal year. The purpose of the work project is to provide for any payments that may be awarded to districts as a result of litigation. The work project is completed upon resolution of the litigation. (9) If the local claims review board or a court of competent jurisdiction makes a final determination that this state is in violation of section 29 of article IX of the state constitution of 1963 regarding state payments to districts, the state budget director shall use work project funds under subsection (8) or allocate from the discretionary funds for nonmandated payments under this section the amount as may be necessary to satisfy the amount owed to districts before making any payments to districts under subsection (2). (10) If a claim is made in court that challenges the legislative determination of the adequacy of funding for this state's constitutional obligations or alleges that there exists an unfunded constitutional requirement, any interested party may seek an expedited review of the claim by the local claims review board. If the claim exceeds $10,000,000.00, this state may remove the action to the court of appeals, and the court of appeals has and shall exercise jurisdiction over the claim. (11) If payments resulting from a final determination by the local claims review board or a court of competent jurisdiction that there has been a violation of section 29 of article IX of the state constitution of 1963 exceed the amount allocated for discretionary nonmandated payments under this section, the legislature shall provide for adequate funding for this state's constitutional obligations at its next legislative session. (12) If a lawsuit challenging payments made to districts related to costs reimbursed by federal title XIX Medicaid funds is filed against this state, then, for the purpose of addressing potential liability under such a lawsuit, the state budget director may place funds allocated under this section in escrow or allocate money from the funds otherwise allocated under this section, up to a maximum of 50% of the amount allocated in subsection (1). If funds are placed in escrow under this subsection, those funds are a work project appropriation and the funds are carried forward into the following fiscal year. The purpose of the work project is to provide for any payments that may be awarded to districts as a result of the litigation. The work project is completed upon resolution of the litigation. In addition, this state reserves the right to terminate future federal title XIX Medicaid reimbursement payments to districts if the amount or allocation of reimbursed funds is challenged in the lawsuit. As used in this subsection, "title XIX" means title XIX of the social security act, 42 USC 1396 to 1396w-6. (13) As used in this section: (a) "Dissolved district" means that term as defined in section 20. (b) "Local school operating revenue" means school operating taxes levied under section 1211 of the revised school code, MCL 380.1211. For a receiving district, if school operating taxes are to be levied on behalf of a dissolved district that has been attached in whole or in part to the receiving district to satisfy debt obligations of the dissolved district under section 12 of the revised school code, MCL 380.12, local school operating revenue does not include school operating taxes levied within the geographic area of the dissolved district. (c) "Michigan finance authority" means the public body corporate and politic created within the department of treasury by Executive Reorganization Order No. 2010-2, MCL 12.194. (d) "Obligations" means that term as defined in a qualified debt agreement. (e) "Qualified debt agreement" means a master debt indenture settlement agreement between a qualifying school district and 1 or more other parties, including without limitation, the state treasurer and the Michigan finance authority. (f) "Qualifying school district" means a school district described in section 12b of the revised school code, MCL 380.12b. (g) "Receiving district" and "school operating taxes" mean those terms as defined in section 20.