THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY ERICKSON, TOMLINSON, FERLO, VANCE, RAFFERTY, CORMAN, FONTANA, ALLOWAY, MUSTO, BAKER, GREENLEAF, EARLL, O'PAKE, WAUGH, BROWNE, SMUCKER, KITCHEN, PILEGGI, LOGAN, STACK AND WONDERLING, JANUARY 30, 2009

REFERRED TO EDUCATION, JANUARY 30, 2009  

AN ACT

Amending the act of March 10, 1949 (P.L.30, No.14), entitled "An

act relating to the public school system, including certain

provisions applicable as well to private and parochial

schools; amending, revising, consolidating and changing the

laws relating thereto," further providing for community

college financial programs and reimbursements; establishing

the Community College Deferred Maintenance Fund; and

abrogating a regulation.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 1902-A of the act of March 10, 1949 (P.L.

30, No.14), known as the Public School Code of 1949, added July

1, 1985 (P.L.103, No.31), is amended to read:

Section 1902-A.  Powers and Duties of State Board of

Education.--(a)  The State Board of Education shall have the

power, and its duty shall be:

(1)  To adopt such policies, standards, rules and regulations

formulated by the Council of Higher Education, as may be

necessary to provide for the establishment, operation and

maintenance of community colleges, including minimum

requirements for physical facilities and equipment, curriculum,

faculty, standards and professional requirements, qualifications

for admission and advancement of students, student enrollment,

student population of the area to be served by the community

college, requirements for satisfactory completion of a two-year

program and the degrees or diplomas or certificates to be

awarded therefor, means of financing and financial resources for

the establishment and support of the community college, and all

matters necessary to effectuate the purposes of this act.

(2)  To approve or disapprove plans for the establishment or

operation of a community college.

(3)  To approve or disapprove petitions of school districts

or municipalities applying for participation in an established

community college. No petition may be approved unless it is

accompanied by the consent of the governing bodies of the

majority of the members of the local sponsor of the established

community college to the participation of the petitioning school

district or municipality.

(b)  In determining such policies, standards, rules and

regulations, the State Board of Education may consider relevant

all minimum requirements established by statute or by regulation

with respect to the State colleges and universities of the

Commonwealth and may consider relevant such minimum requirements

established by statute or by regulation with respect to

secondary and special education programs in the school district

or districts of the area to be served by the community college.

Regulations promulgated under this article shall take effect at

the beginning of the school year following promulgation.

(c)  In approving or disapproving such plans, the State Board

of Education shall consider the needs of areas adjacent to the

areas to be served by the community college and of the State

with respect to higher education and long range plans therefor

established by the State Board of Education. Other school

districts and municipalities may petition the State Board of

Education to become a part of a local sponsor as hereafter in

this act provided.

(d)  No plan for the establishment of a community college

shall be approved unless the State Board of Education determines

that the local sponsor has a population of a sufficient number

to assure a sustained minimum enrollment, has sufficient wealth

to financially support such college and is not adequately served

by established institutions of higher learning. No plan for the

establishment of a community college shall be approved unless it

contains an estimate of operating cost for administration,

instruction, operation and maintenance and such other accounts

as the State Board of Education may, from time to time,

determine. No plan for the establishment of a community college

shall be approved unless it contains an estimate of any proposed

capital improvements for the next following ten years.

(e)  To confer with and obtain the approval of the Governor's

Office as to the number of community colleges which can be

approved for participation during the ensuing fiscal period.

(f)  Wherever in this act the approval of the State Board of

Education is required in any matter, the State Board of

Education may require the Department of Education to make and

report its findings and recommendations on such matter to the

Council of Higher Education for the formulation of policies,

standards, rules and regulations for consideration by the State

Board of Education.

Section 2.  Section 1913-A of the act, amended or added July

1, 1985 (P.L.103, No.31), October 20, 1988 (P.L.827, No.110),

June 7, 1993 (P.L.49, No.16), June 22, 2001 (P.L.530, No.35) and

July 13, 2005 (P.L.226, No.46), is amended to read:

Section 1913-A.  Financial Program; Reimbursement of

Payments.--(a)  The plan submitted by the local sponsor shall

set forth a financial program for the operation of the community

college. The plan shall provide that the local sponsor shall

appropriate or provide to the community college an amount at

least equal to the community college's annual operating costs

less the student tuition as determined in section 1908-A(a) less

the Commonwealth's payment as determined in subsection (b)(1) of

this section. The plan shall also provide that one-half of the

annual capital expenses shall be appropriated or provided by the

local sponsor to the community college. The local sponsor's

appropriation for annual operating costs and annual capital

expenses may in part be represented by real or personal property

or services made available to the community college. The plan

shall indicate whether the appropriation shall come from general

revenues, loan funds, special tax levies or from other sources,

including student tuitions.

(b)  (1)  The Commonwealth shall pay to a community college

on behalf of the sponsor on account of its operating costs

during the fiscal year from funds appropriated for that purpose

an amount equal to:

(i)  for the 1993-1994 fiscal year through the 2000-2001

fiscal year, the lesser of such college's variable State share

ceiling as determined in clause (1.3) or such college's

equivalent full-time student reimbursement as determined in

clause (1.4);

(ii)  for the 2001-2002 fiscal year through the 2004-2005

fiscal year, the college's equivalent full-time student

reimbursement as determined in clause (1.4);

(iii)  for the 2005-2006 fiscal year, the college's payment

as determined in clause (1.5); and

(iv)  for the 2006-2007 fiscal year and each fiscal year

thereafter, the college's payment as determined in clause (1.6).

(1.2)  The Secretary of Education, in consultation with the

community colleges, shall promulgate standards for credit

courses and for noncredit courses that will be eligible for

Commonwealth reimbursement. The standards shall specifically

exclude from eligibility for reimbursement any course or program

in avocational or recreational pursuits. The standards shall be

promulgated by the beginning of the 1994-1995 fiscal year. Until

such standards are promulgated, no community college will be

reimbursed for any credit course which was offered by such

college as a noncredit course during the college's 1992-1993

fiscal year.

(1.3)  The variable State share ceiling of a community

college shall be determined as follows:

(i)  Subtract the taxable income per person of the local

sponsor from the highest taxable income per person of any county

in the Commonwealth.

(ii)  Divide the amount determined under subclause (i) by the

difference between the highest taxable income per person of any

county in the Commonwealth and the lowest taxable income per

person of any county in the Commonwealth.

(iii)  Multiply the quotient determined under subclause (ii)

by one-sixth.

(iv)  Add one-third to the product determined under paragraph

(iii).

(v)  Multiply the sum determined under subclause (iv) by the

community college's operating costs in the year for which

reimbursement is being claimed.

(vi)  The taxable income per person data used in the

preceding calculation shall be data certified to the Secretary

of Education by the Secretary of Revenue under section 2501(9.1)

for school district local sponsors or data otherwise published

by the Secretary of Revenue for a municipal local sponsor.

(1.4)  The equivalent full-time student reimbursement of a

community college shall be the sum of credit course, noncredit

course and stipend reimbursements. These reimbursements shall be

calculated using a reimbursement factor of one thousand and

forty dollars ($1,040) for the 1993-1994 fiscal year, of one

thousand eighty dollars ($1,080) for the 1994-1995 fiscal year

and of one thousand one hundred eighty dollars ($1,180) for the

1995-1996 fiscal year and one thousand and two hundred and ten

dollars ($1,210) for the 1996-1997 fiscal year and one thousand

two hundred sixty dollars ($1,260) for the 1997-1998 fiscal year

and the 1998-1999 fiscal year and one thousand three hundred

dollars ($1,300) for the 1999-2000 fiscal year and one thousand

four hundred dollars ($1,400) for the 2000-2001 fiscal year and

one thousand five hundred dollars ($1,500) for the 2001-2002

fiscal year and for each year thereafter and shall be determined

as follows:

(i)  Credit course reimbursement shall be calculated by

multiplying the reimbursement factor by the number of equivalent

full-time students enrolled in credit courses as determined by

an audit to be made in a manner prescribed by the State Board of

Education. The following apply:

(A)  Course enrollment is to be determined by the standards

of the community college.

(B)  Computer-based documentation or paper-based

documentation may be used to verify enrollment.

(C)  Enrollment in a program of study is to be determined

solely by the declaration of the student.

(ii)  Noncredit course reimbursement shall be calculated as

follows:

(A)  [eighty] Eighty percent (80%) of the reimbursement

factor multiplied by the number of equivalent full-time students

enrolled in eligible noncredit courses for the 1993-1994 fiscal

year, as determined by the audit referred to in paragraph (i)

[;].

(B)  [seventy] Seventy percent (70%) of the reimbursement

factor multiplied by the number of equivalent full-time students

enrolled in eligible noncredit courses for the 1994-1995 fiscal

year and for each year thereafter, as determined by the audit

referred to in paragraph (i)[; or].

(C)  [one] One hundred percent (100%) of the reimbursement

factor multiplied by the number of equivalent full-time students

enrolled in eligible noncredit public safety courses that

provide training for volunteer firefighters and emergency

medical services for the 1995-1996 fiscal year and for each year

thereafter, as determined by the audit referred to in paragraph

(i).

(D)  A noncredit course is eligible for reimbursement if all

of the following apply:

(I)  The course is in the area of public safety; adult basic

education or adult literacy; occupational skills; academics; or

a program for certification in accordance with standards

established by statute, regulation or appropriate industry.

(II)  Regardless of whether the instructor's compensation is

paid directly by the community college or paid by an entity that

contracts with the community college, the community college is

responsible for selecting; supervising; and, if appropriate,

dismissing the instructor.

(E)  Course enrollment is to be determined by the standards

of the community college.

(iii)  Stipend reimbursement on account of a community

college's operating costs for all equivalent full-time students

enrolled in the following categories of two-year or less than

two-year occupational or technical programs, shall be the sum of

the following:

(A)  One thousand one hundred dollars ($1,100) per full-time

equivalent student enrolled in advanced technology programs. For

the fiscal year 1995-1996, 1996-1997 and 1997-1998, the

reimbursement rate shall be calculated at one thousand one

hundred seventy-five dollars ($1,175) per full-time equivalent

student enrolled in advanced technology programs. For the fiscal

year 1998-1999 and each year thereafter, the reimbursement rate

shall be calculated at one thousand four hundred sixty dollars

($1,460) per full-time equivalent student enrolled in advanced

technology programs. Advanced technology programs are programs

using new or advanced technologies which hold promise for

creating new job opportunities, including such fields as

robotics, biotechnology, specialized materials and engineering

and engineering-related programs.

(B)  One thousand dollars ($1,000) per full-time equivalent

student enrolled in programs designated as Statewide programs.

For the fiscal year 1995-1996, 1996-1997 and 1997-1998, the

reimbursement rate shall be calculated at one thousand seventy-

five dollars ($1,075) per full-time equivalent student enrolled

in programs designated as Statewide programs. For the fiscal

year 1998-1999 and each year thereafter, the reimbursement rate

shall be calculated at one thousand three hundred sixty dollars

($1,360) per full-time equivalent student enrolled in programs

designated as Statewide programs. A Statewide program is a

program which meets one or more of the following criteria:

(I)  Program enrollment from out-of-sponsor area is twenty

per cent or more of the enrollment for the program.

(II)  A consortial arrangement exists with another community

college to cooperatively operate a program or share regions in

order to avoid unnecessary program duplication.

(C)  Five hundred dollars ($500) per full-time equivalent

student enrolled in other occupational or technical programs.

For the fiscal year 1995-1996, 1996-1997 and 1997-1998, the

reimbursement rate shall be calculated at five hundred seventy-

five dollars ($575) per full-time equivalent student enrolled in

other occupational or technical programs. For the fiscal year

1998-1999 and each year thereafter, the reimbursement rate shall

be calculated at eight hundred sixty dollars ($860) per full-

time equivalent student enrolled in other occupational or

technical programs.

(1.5)  For the 2005-2006 fiscal year, the payment for a

community college shall consist of the following:

(i)  Each community college shall receive reimbursement for

operating costs equal to the reimbursement for the 2004-2005

fiscal year as determined under clause (1.4)(i) and (ii). This

amount shall be determined based upon the midyear rebudget

submitted by a community college in February 2005.

(ii)  Each community college shall receive an economic

development stipend as calculated under clause (1.7).

(iii)  Each community college shall receive a base supplement

determined by:

(A)  subtracting the total amount of funds determined under

subclauses (i) and (ii) from the State appropriation for payment

of approved operating expenses of community colleges for the

2005-2006 fiscal year;

(B)  dividing the payment under subclauses (i) and (ii) by

the sum of the amounts determined for all community colleges

under subclauses (i) and (ii); and

(C)  multiplying the quotient from subparagraph (B) by an

amount equal to seventy-five percent (75%) of the amount

determined under paragraph (A).

(iv)  Each community college with a 2003-2004 equivalent

full-time enrollment in credit, noncredit and workforce

development courses greater than its 2002-2003 equivalent full-

time enrollment in credit, noncredit and workforce development

courses shall receive a growth supplement amount determined by:

(A)  subtracting its 2002-2003 equivalent full-time

enrollment in credit, noncredit and workforce development

courses from its 2003-2004 equivalent full-time enrollment in

credit, noncredit and workforce development courses;

(B)  dividing the difference from paragraph (A) by the sum of

the differences from paragraph (A) for all community colleges;

and

(C)  multiplying the quotient from paragraph (B) by an amount

equal to twenty-five percent (25%) of the amount determined

under subclause (iii)(A).

Calculations under this subclause shall be based upon the final

claim forms submitted by a community college for the 2002-2003

and 2003-2004 fiscal years.

(1.6)  For the 2006-2007 fiscal year and each fiscal year

thereafter, the payment for a community college shall consist of

the following:

(i)  Each community college shall receive an amount equal to

the reimbursement for operating costs, base supplement and

growth supplement amounts it received in the immediately

preceding fiscal year.

(ii)  Each community college shall receive an economic

development stipend as calculated under clause (1.7). The amount

available for economic development stipends shall increase each

year by the percent increase in the State appropriation for

payment of approved operating expenses of community colleges.

(iii)  Each community college shall receive a base supplement

determined by:

(A)  subtracting the total amount of funds determined under

subclauses (i) and (ii) from the State appropriation for payment

of approved operating expenses of community colleges;

(B)  dividing the payment under subclause (i) by the sum of

the amounts determined for all community colleges under

subclause (i); and

(C)  multiplying the quotient from paragraph (B) by an amount

equal to seventy-five percent (75%) of the amount determined

under paragraph (A).

(iv)  Each community college with an equivalent full-time

enrollment in credit, noncredit and workforce development

courses for the year prior to the immediately preceding year

greater than its equivalent full-time enrollment in credit,

noncredit and workforce development courses for the second year

prior to the immediately preceding year shall receive a growth

supplement amount determined by:

(A)  subtracting its equivalent full-time enrollment in

credit, noncredit and workforce development courses for the

second year prior to the immediately preceding year from its

equivalent full-time enrollment in credit, noncredit and

workforce development courses for the year prior to the

immediately preceding year;

(B)  dividing the difference from paragraph (A) by the sum of

the differences from paragraph (A) for all community colleges;

and

(C)  multiplying the amount from paragraph (B) by an amount

equal to twenty-five percent (25%) of the amount determined

under subclause (iii)(A).

Secondary senior high school students enrolled in credit-

bearing, nonremedial college courses shall be included in the

calculation under paragraph (A). Calculations under this

subclause shall be based upon the audited financial statements

submitted by a community college pursuant to subsection (k.1).

(1.7)  The payment for a community college shall include an

economic development stipend which shall consist of the

following:

(i)  For the 2005-2006 fiscal year, each community college

shall receive an amount equal to the reimbursement for the

2004-2005 fiscal year as determined under clause (1.4)(iii) and

under section 1501 of the act of December 18, 2001 (P.L.949, No.

114), known as the "Workforce Development Act." This amount

shall be determined based upon the midyear rebudget submitted by

a community college in February 2005.

(ii)  For the 2006-2007 fiscal year and each fiscal year

thereafter, each community college shall receive, subject to the

provisions of subclause (iii), an amount determined by:

(A)  Adding the following:

(I)  the number of full-time equivalent students enrolled in

high-priority and high-instructional-cost occupation programs at

the community college multiplied by 1.50;

(II)  the number of full-time equivalent students enrolled in

high-priority occupation programs at the community college

multiplied by 1.25; and

(III)  the number of full-time equivalent students enrolled

in noncredit workforce development courses at the community

college.

(B)  Dividing the total from paragraph (A) by the sum of the

totals from paragraph (A) for all community colleges.

(C)  Multiplying the amount from paragraph (B) by the amount

allocated for the economic development stipend pursuant to

clause (1.6)(ii).

The number of full-time equivalent students shall be determined

based upon the final midyear rebudget submitted by a community

college for the prior fiscal year. Such rebudget shall be

submitted, as required by the Department of Education, no later

than May 31, 2006, and May 31 of each year thereafter.

(iii)  For the 2006-2007 and 2007-2008 fiscal years, the

following shall apply:

(A)  Full-time equivalent students enrolled in stipend

advanced technology programs shall be counted as full-time

equivalent students enrolled in high-priority and high-

instructional-cost occupation programs for the purpose of the

calculation in subclause (ii).

(B)  Full-time equivalent students enrolled in stipend

Statewide programs shall be counted as full-time equivalent

students enrolled in high-priority occupation programs for the

purpose of the calculation in subclause (ii).

(C)  Full-time equivalent students enrolled in other stipend

occupational programs and workforce development courses shall be

counted as full-time equivalent students enrolled in noncredit

workforce development courses for the purpose of the calculation

in subclause (ii).

(D)  For reimbursement for any semester that begins on or

after January 1, 2006, this subclause shall only apply for

students who were enrolled in such programs during the fall 2005

semester.

(1.8)  (i)  The Department of Education shall annually

approve high-priority and high-instructional-cost occupation

programs, high-priority occupation programs and noncredit

workforce development courses.

(ii)  In order to qualify as a high-priority and high-

instructional-cost occupation program, the program must:

(A)  Provide training:

(I)  in a high-priority occupation as defined by the Center

for Workforce Information and Analysis within the Department of

Labor and Industry; or

(II)  in an occupation designed to meet regional workforce

needs as documented through collaboration with one or more

employers.

(B)  Bear an instructional cost to the community college, per

full-time-equivalent student, of at least one hundred thirty

percent (130%) of the average cost per full-time-equivalent

student enrolled in the community college's credit courses.

Instructional costs shall be defined by the Department of

Education and may include personnel, equipment, curricula and

other costs necessary for the program.

(iii)  In order to qualify as a high-priority occupation

program or a noncredit workforce development course, the high-

priority occupation program or noncredit workforce development

course must:

(A)  provide training in a high-priority occupation as

defined by the Center for Workforce Information and Analysis

within the Department of Labor and Industry; or

(B)  provide training in an occupation designed to meet

regional workforce needs as documented through collaboration

with one or more employers.

(iv)  In order to qualify under subclause (ii)(A)(II) or

(iii)(B), the community college shall submit an application to

the Department of Education. The application shall contain:

(A)  Evidence of collaboration with one or more employers.

(B)  Information as to the nature of the proposed program.

(C)  Evidence as to how the program will increase workforce

opportunities for participants.

(v)  The Department of Education shall:

(A)  Determine the form and manner by which applications are

to be submitted under subclause (iv).

(B)  Approve or reject applications received pursuant to

subclause (iv) within twenty (20) days of receipt of a completed

application; otherwise, such applications will be deemed

approved.

(C)  Annually publish guidelines listing criteria and

establishing the approval process for programs and courses under

this clause.

(2)  For the 1993-1994 fiscal year, each community college

shall be reimbursed under clause (1) in an amount which is at

least equal to a one percent (1%) increase over its 1992-1993

operating cost and stipend reimbursement. In no case shall a

community college's 1993-1994 reimbursement under clause (1) per

full-time equivalent student, insofar as said reimbursement does

not include a proportionate share attributable to stipend

reimbursement under clause (1.4)(iii), exceed its 1992-1993

operating cost reimbursement per full-time equivalent student by

more than ten percent (10%).

(2.1)  For the 1994-1995 fiscal year, each community college

shall be reimbursed under clause (1) in an amount which is at

least equal to a one percent (1%) increase over its 1993-1994

reimbursement under clause (1). In no case shall a community

college's 1994-1995 reimbursement under clause (1) per full-time

equivalent student, insofar as said reimbursement does not

include the proportionate share attributable to stipend

reimbursement under clause (1.4)(iii), exceed its 1993-1994

reimbursement under clause (1) per full-time equivalent student,

insofar as said reimbursement does not include the proportionate

share attributable to stipend reimbursement under clause (1.4)

(iii) by more than ten percent (10%).

(2.2)  For the 1995-1996 fiscal year, each community college

shall be reimbursed under clause (1) in an amount which is at

least equal to its 1994-1995 reimbursement under clause (1).

(3)  The [Secretary] Department of Education annually shall

[establish] promulgate regulations establishing criteria to be

used to determine eligibility of programs for each of the above

stipend categories[,]. The department shall approve programs for

funding [in the following fiscal year] according to these

[criteria and] regulations. The Secretary of Education shall

submit to chairmen of the committees of education in the House

of Representatives and Senate a report setting forth [the

established criteria,] any programs approved for funding under

these [criteria] regulations and the recipient community

colleges.

(4)  Each community college shall maintain such accounting

and student attendance records on generally accepted auditing 

principles and standards [as will lend themselves to

satisfactory audit]. The department must complete an audit of a

community college for a school year within one year after the

completion of that school year. If the department does not meet

the time requirement of this clause, the community college

affected shall be required to forfeit reimbursement only for an

intentional violation or for a violation of previously cited and

resolved findings. The Commonwealth shall pay to a community

college on behalf of the sponsor on account of its capital

expenses an amount equal to one-half of such college's annual

capital expenses from funds appropriated for that purpose to the

extent that said capital expenses have been approved as herein

provided.

(5)  For purposes of determining Commonwealth reimbursement

of operating costs, Federally funded expenditures for those

programs in which the Commonwealth participates in the cost

shall be deducted from total operating expenditures to determine

net reimbursable operating costs.

(c)  (1)  Capital expenses shall mean only such expenses as

are incurred with the approval of the Department of Education

for amortization of the purchase of lands; purchase,

construction or improvement of buildings for administrative and

instructional purposes, including libraries; the lease of lands

or buildings, or for rentals to an authority for the same

purpose; and, prior to July 1, 2005, for the purchase, lease or

rental of capital equipment and furniture used for instructional

or administrative purposes. Capital expenses shall include

library books and complementary audio-visual equipment purchased

during the first five years after establishment. On or after

July 1, 2005, capital expenses may include such expenses as are

incurred with the approval of the Department of Education for

the purchase, lease or rental of capital equipment and furniture

used for instructional or administrative purposes. For the

purpose of calculating the Commonwealth's share of operating,

and capital costs incurred prior to the actual admission of

students to a community college, all such costs shall be

interpreted as capital costs. No costs and expenses incurred in

the establishment, construction, operation or maintenance of

dormitories, or the equipment or furnishings for such purposes,

shall be included in capital expenses or operating costs for

purposes of Commonwealth reimbursement.

(2)  The provisions of this subsection shall not prevent the

Commonwealth from reimbursing a community college for capital

expenses incurred prior to the effective date of this act. Such

reimbursement must have approval of the Secretary of Education.

(3)  Notwithstanding any other provision of this act, a

community college may use a portion of its payment of approved

operating expenses for capital expenses not otherwise reimbursed

by the Department of Education.

(c.1)  Notwithstanding any provision of law to the contrary,

two or more community colleges may jointly enter into a

financing arrangement through the State Public School Building

Authority for the purchase, lease or construction of capital

projects deemed necessary by the community colleges. The terms

and conditions of the financing arrangement shall be consistent

with the terms and conditions set forth in the act of July 5,

1947 (P.L.1217, No.498), known as the "State Public School

Building Authority Act."

(d)  The State Board of Education shall adopt policies,

standards, rules and regulations for determining reimbursable

capital expenses and operating costs, and the Department of

Education shall approve such expenses and costs for the purpose

of reimbursement by the Commonwealth.

(e)  The State Board of Education shall apply for, receive

and administer, subject to any applicable regulations or laws of

the Federal Government or any agency thereof, any Federal

grants, appropriations, allocations and programs to fulfill the

purpose of this act.

(f)  All administrative personnel, faculty, and other

employes of the community colleges in the Commonwealth shall be

eligible for inclusion in the Public School Employees'

Retirement System of Pennsylvania, the Pennsylvania State

Employees' Retirement System, or any independent retirement

program approved by the Board of Trustees of a community

college, and the Secretary of Education.

(g)  The community college in the Commonwealth shall be

eligible for participation in the act of July 5, 1947 (P.L.1217,

No.498), known as the "State Public School Building Authority

Act," and the act of May 2, 1945 (P.L.382, No.164), known as the

"Municipality Authorities Act of 1945."

(h)  In all cases where the board of trustees of any

community college fails to pay or provide for the payment of any

rental or rentals due the State Public School Building Authority

or any municipality authority for any period in accordance with

the terms of any lease entered into between the board of

trustees of any community college and the State Public School

Building Authority or any municipality authority, or fails to

pay or to provide for the payment of any other indebtedness when

due, upon written notice thereof from the State Public School

Building Authority or any municipality authority, or in such

cases where an audit reveals any unpaid indebtedness due, the

Secretary of Education shall notify the board of trustees of its

obligation and shall withhold out of any State appropriation

that may be due to such community college an amount equal to the

amount of rental or rentals owing by such board of trustees to

the State Public School Building Authority or any municipality

authority, or an amount equal to the amount of any other

indebtedness owing by such board of trustees, and shall pay over

the amount or amounts so withheld to the State Public School

Building Authority or any municipality authority or to

whomsoever any other indebtedness is due and owing.

(i)  The amount payable to each community college Board of

Trustees on behalf of the sponsor shall be paid in the year in

which the costs and expenses are incurred in quarterly

installments and the Secretary of Education shall draw his

requisition quarterly upon the State Treasurer in favor of each

community college for the amount of reimbursement to which it is

entitled. Reimbursement or payment by the Commonwealth for the

operational expenses and capital equipment and the furnishings

shall be made on or before the end of the fiscal quarters ended

on September 30, December 31, March 31 and June 30 of each

Commonwealth fiscal year. Reimbursements or payments shall be

made semi-annually for the Commonwealth's share of the annual

rentals to an authority or the sponsor or sinking fund or debt-

service payments and other leases upon submission of a community

college requisition in the form required by the Commonwealth,

the reimbursement or payment to be made from funds appropriated

for that purpose. Money that is appropriated under this

subsection but not expended by a community college Board of

Trustees shall not be distributed to a local sponsor.

(j)  In no event shall the payments or final reimbursement

made by the department following audit exceed the appropriation

available for community colleges.

(k)  For fiscal years up to and including the 2004-2005

fiscal year, audits of community colleges shall be conducted as

follows:

(1)  Unless otherwise prescribed by the State Board of

Education, the Commonwealth's fiscal audits of community

colleges under this section shall be conducted in accordance

with "Government Auditing Standards," latest revision,

promulgated by the United States General Accounting Office.

Written audit reports will be produced and will be sent to the

community college by the Commissioner of Postsecondary/Higher

Education. Any cost disallowed under findings contained in the

audit report shall be considered an adjudication within the

meaning of 2 Pa.C.S. (relating to administrative law and

procedure) and regulations promulgated thereunder.

(2)  The Secretary of Education is hereby specifically

authorized and shall be required to resolve audit findings

involving disallowed costs that are contested by community

colleges except for audit findings that involve mathematical

errors, violation of regulations or alleged illegal activities.

The proposed resolution of the Secretary of Education shall not

be subject to the provisions of 2 Pa.C.S. The Secretary of

Education's notice to resolve audit findings shall be sent to

the community college in writing. The Secretary of Education may

resolve the audit findings by reducing the disallowed costs

related thereto in whole or in part.

(3)  The Secretary of Education's notice to resolve an audit

finding by reducing or eliminating the disallowed costs must be

made contingent upon the community college developing and

implementing a corrective action plan to address the audit

finding. The community college must submit a corrective action

plan to the Secretary of Education within 60 business days after

receipt of the Secretary of Education's written notice to

resolve the audit finding. The Secretary of Education shall

approve, reject or alter the plan submitted by the community

college within thirty (30) days of submission. After the

community college receives written notice of approval or agrees

in writing to the Secretary of Education's alterations of the

corrective action plan, said plan shall be implemented and shall

be binding on the community college. Implementation of the

approved or agreed upon corrective action plan will be verified

by an audit conducted by the department no later than the end of

the fiscal year following the fiscal year during which the plan

is implemented. If no agreed upon corrective action plan is in

place within one year after the date of the Secretary of

Education's written notice to resolve audit findings or if the

agreed upon corrective action has not been implemented within

one year after the date of the Secretary of Education's written

notice to resolve the audit findings, then the Secretary of

Education is authorized to adjust payments to the community

college to collect any amounts due based upon the findings

contained in the audit report that was issued to the college by

the commissioner.

(4)  The department shall deduct any amounts due the

Commonwealth as a result of audit findings that are resolved

under this subsection from any future payment due to the

community college from the Commonwealth. The Secretary of

Education is authorized to approve a payment schedule in cases

where immediate repayment of the full amount due the

Commonwealth would jeopardize the ability of the community

college to continue operations.

(5)  Resolution authority provided to the Secretary of

Education in this subsection shall be limited to disallowed cost

findings relating to policy and/or administrative practices. The

resolution authority shall not be used for audit findings in

which the audited community college data and documentation is in

error, where a violation of applicable law or regulation is

found or where criminal violations are suspected by the

Commonwealth auditors and brought to the Secretary of

Education's attention in writing. Notwithstanding the

limitations of this subsection, until June 30, 1995, the

Secretary of Education is authorized to resolve audit findings

involving disallowed costs for fiscal years prior to and

including 1992-1993 when such disallowed costs result from

violation of regulations.

(6)  The department, through the Secretary of Education, is

authorized to issue guidelines for the operation of the

community college educational and financial programs. The

department shall amend these guidelines on an annual basis to

reflect the department's position on issues that require

resolution under this subsection.

(7)  The provisions of subsection (d) are repealed insofar as

they are inconsistent with the provisions of this subsection.

(k.1)  (1)  By January 1, 2007, and January 1 of each year

thereafter, a community college shall submit to the department

an audited financial statement for the immediately preceding

fiscal year. The audited financial statement shall be consistent

with the generally accepted accounting principles prescribed by

the National Association of College and University Business

Officers or its successor, by the American Institute of

Certified Public Accountants or its successor or by any other

recognized authoritative body and consistent with the financial

reporting policies and standards promulgated by Federal

Government and State government which apply to community

colleges, provided that an audited financial statement shall not

be acceptable if the audit is conducted by an employe or member

of the board of trustees of the community college or by an

organization or firm associated with any employe or member of

the board of trustees of the community college. The Department

of Education may withhold funds appropriated to community

colleges as necessary to ensure that audit reports are submitted

in the prescribed fashion.

(2)  The audited financial statement required under clause

(1) shall include:

(i)  results of the tests of the community college's

accounting records and other procedures that are considered

necessary to enable the independent certified public accountant

to express an opinion as to whether the community college's

financial statements are fairly presented, in all material

respects, consistent with the accounting principles set forth in

clause (1);

(ii)  a schedule of operating expenses that presents all

operating expenses pertaining to the community college's

educational program; and

(iii)  a verification of equivalent full-time students

enrolled in the community college in each of the following

categories: credit, noncredit and each economic development

stipend category, during the fiscal year for which the audited

financial statement is presented.

(3)  The department shall review the audited financial

statement of a community college to determine whether the State

funds allocated to the community college have been expended in

accordance with the accounting principles set forth in clause

(1). The department shall have ninety (90) days from the receipt

of an audited financial statement to review the audited

financial statement and notify the community college of any

material failure to meet the requirements of this subsection.

(4)  A community college that receives notice from the

department under clause (3) shall have ninety (90) days from the

receipt of such notice to submit a corrective action plan to the

department.

(5)  The department shall approve, reject or alter the

corrective action plan within thirty (30) days of submission.

After the community college receives written notice of approval

of the corrective action plan or agrees in writing to the

department's alterations of the corrective action plan, the plan

shall be implemented and binding on the community college.

Implementation of the approved or agreed-upon corrective action

plan shall be verified by an audit conducted by the department

no later than the end of the fiscal year following the fiscal

year during which the plan is implemented. If no agreed-upon

corrective action plan is in place within one year after the

date of the department's written notice under clause (4) or if

the agreed-upon corrective action plan has not been implemented

within one year after the date of the department's written

notice under clause (4), then the department shall adjust

payments to the community college to collect any amounts due

based upon the findings contained in the audit report.

(6)  The State Board of Education shall promulgate final-

omitted regulations pursuant to the act of June 25, 1982 (P.L.

633, No.181), known as the "Regulatory Review Act," as necessary

to implement this subsection.

(l)  For the fiscal year 1992-1993, if insufficient funds are

appropriated to make Commonwealth payments pursuant to this

section, such payments shall be made on a pro rata basis.

Section 3.  The act is amended by adding a section to read:

Section 1919-A.  Community College Nonmandated Capital

Fund.--(a)  The Community College Deferred Maintenance Fund is

established as a separate fund in the State Treasury.

(b)  The sources of the fund are as follows:

(1)  Reimbursements repaid by community colleges to the

Commonwealth pursuant to audits under section 1913-A and

regulations under that section.

(2)  Appropriations.

(3)  Earnings on money in the fund.

(c)  The fund shall be used for deferred maintenance projects

in community colleges. Guidelines for disbursement shall be

developed by the Department of Education in consultation with

community colleges.

(d)  The money in the fund is continuously appropriated to

the fund and shall not lapse at the end of any fiscal year.

Section 4.  The following provisions of 22 Pa.Code are

abrogated:

(1)  35.61(f)(2).

(2)  335.22(3).

Section 5.  This act shall take effect in 60 days.