Enacts the New York state school taxpayers' protection act

Section 2 sets forth the legislative findings that public school districts in the state have recently experienced numerous instances of financial scandals and contains the legislative intent behind this measure as seeking to curb and eventually eliminate such scandals through creation of a New York state inspector general for education and by establishing new school district financial safeguards with sanctions for violations of school district finance laws.

Section 3 creates a mandatory reporting scheme for public school district officials and employees to report any cases of suspected corruption, other criminal activity or conflicts of interest occurring within a school district. Any mandated reporter who willfully fails to make such a report would be guilty of a class A misdemeanor with possible civil liability for violations. Any mandated reporter who in good faith participates in making a report shall have immunity from liability.

Sections 4 and 5 shall require the treasurer of either a common school district or union free school district, whichever is applicable, to issue an annual report concerning all money received and disbursed by the district with such treasurer certifying that they have reviewed the annual report. In addition, the treasurer shall certify that based on their knowledge, the report does not contain any untrue statement of a material fact and the financial statements and other information in such report fairly presents in all material respects the financial condition of the school district.

Section 6 requires a public school district superintendent to certify in the annual financial report that they have reviewed the annual report. Furthermore, the superintendent shall certify that based on their knowledge, the financial statements and other financial information fairly presents in all material respects the financial condition of the school district and the report does not contain any untrue statement of a material fact.

Section 7 requires all public school districts outside of New York City, except those with less than eight teachers, to establish a local school district compensation committee to oversee and report on proposed employment contracts between school districts and those districts' bargaining units, administrators and superintendents. Only one of the three compensation committee members is allowed to be from a school board and no school district employees may serve on such committee.

Section 8 mandates school districts to give notice of the availability of proposed employment contracts or agreements at public libraries, the school district office(s) and on the school district web site (if one exists) at least five weeks prior to the vote on whether to approve such contract.

Sections 9 and 10 amend the current Education Law to require annual school district budget administrative components to contain a section outlining all compensation and fringe benefits to which school district teachers, administrators and superintendents are entitled under existing employment contracts.

Section 11 and 12 provide for the annual school district budget statement to be placed on the school district web site (if one exists) and notice be given to the availability of such statement at public libraries and school district offices at least thirty days prior to any school budget vote.

Section 13 stipulates that a school district who prepared a corrective action plan in response to any findings contained in a State Comptroller-issued audit report shall notify residents of the availability of such plan at public libraries, the school district office(s) and on any existing school district web site. Failure to comply with this requirement shall subject a school district to a civil penalty of up to $5,000.

Section 14 would amend the Education law to prohibit any unfunded mandate on a school district which creates a yearly net additional cost to any school district greater than $5,000 or imposes an aggregate yearly net additional cost to all school districts greater than $500,000.

Section 15 establishes a new, independent office called the "Office of the State Inspector General for Education". This office would be charged with receiving and investigating complaints from any source, or on its own initiative, regarding allegations of corruption, financial improprieties, unethical conduct, misconduct or other criminal conduct within public school districts. The Inspector General for Education would also issue a yearly report to the Legislature, Comptroller and the Board of Education that details the results of the Education Inspector General's investigations and contain detailed analysis of the current financial status of those school districts that have been reviewed.

Section 16 amends the General Municipal Law to require the State Comptroller to audit federal and state grant program expenditures in all school districts, BOCES and charter schools.

Section 17 amends the General Municipal Law to require the State Comptroller to report any final audit report findings from audits performed on the grant program expenditures of school districts, BOCES and charter schools to the Office of the State Inspector General for Education.

Sections 18 and 19 amend the Labor Law to enact protections for any public school district employee who in good faith acts as a "whistleblower" by reporting an activity, policy or practice of a public school district (or agent of such district) that the employee reasonably believes constitutes fraud, criminal activity or other malfeasance.

Section 20 amends the Penal Law to create the crime of "defrauding a public pension plan", a class E felony, whenever a person engages in a scheme of an ongoing course of conduct with intent to obtain a benefit or asset, or assist a third party to obtain a benefit or asset, from a public pension plan to which the person or the third party is not otherwise entitled to pursuant to the restriction of Retirement and social Security Law section 211.

Section 21 amends the Retirement and Social Security Law by expressly providing that a retired person receiving a retirement allowance who is employed and earning compensation in a public service position with total compensation exceeding the applicable Retirement and Social Security Law section 212 limit yet without having receiving the requisite legal waiver of such limit, as well as any person who knowingly assists another person the above mentioned conduct, is guilty of larceny and is punishable for such as provided in the penal law.

Section 22 provides for this act to take effect on January 1, 2017.

Existing law

Creates a comprehensive statutory scheme for complete review and oversight of New York State school districts' entire financial operations with new safeguards and penalties to deter fiscal wrongdoing, waste and abuse of any kind.

Justification

Although Suffolk County has recently experienced a series of public school district financial scandals, such scandals are not unique to Suffolk County but could occur anywhere in the state and in fact recently did in Nassau County as well. In fact, a Suffolk County grand jury recently issued a thorough and comprehensive set of recommendations concerning the numerous public school financial misdeeds that occurred in that county. The grand jury found that each episode involved malfeasance by individuals or small groups in an environment where strong internal financial controls in school business offices were lacking and viewed as optional luxuries.

The bill arises out of that grand jury investigation and reflects virtually all of the legislative recommendations made by such grand jury. One of the most important findings made by that grand jury was the need for a new, independent state agency charged with investigating allegations of corruption or other financial criminal conduct within public school districts because of the magnitude and frequency of the financial crimes occurring in the public school system. This measure seeks to address this by creating an office of the Inspector General for Education and giving it broad authority to investigate financial wrongdoing in the schools, refer cases to the appropriate law enforcement authorities when warranted and issue recommendations to assist school districts in avoiding such problems in the future.

Legislative history

2013-14 S.1781A/A.1328A; 2011-12 S.1802; 2009-10 S.3567; 2007-08,S.2681.

Fiscal implications

Possibly slightly increased administrative costs that should be offset by the reduction in illegal and fraudulent public school district spending that should occur as a result of this bill.

Effective date

This act shall take effect January 1, 2017.