N.Y. State Finance Law § 99-b: Withholding of state aid for school purposes upon default in payment of obligations of the prospective recipient

§ 99-b. Withholding of state aid for school purposes upon default in

payment of obligations of the prospective recipient. Whenever a city,

city school district or school district, as such terms are used and

defined in the education law, or the public benefit corporation to which

the city of New York has assigned payments pursuant to section

twenty-seven hundred ninety-nine-tt of the public authorities law, shall

default in the payment of the principal of its bonds or notes issued for

school purposes or the payment of the interest on such bonds or notes or

in the payment of both the principal of and interest on such bonds or

notes, the allotment, apportionment and payment of state aid and

assistance pursuant to the education law, or pursuant to any other law

hereinafter enacted providing for state aid and assistance in lieu of or

substitution for the state aid and assistance presently provided

pursuant to the education law, to any such city, city school district or

school district, or to the city of New York or its school district in

the case of a default by such public benefit corporation, shall be

withheld by the state upon the following terms and conditions. In the

event a holder or owner of any such bond or note shall file with the

state comptroller a verified statement describing such bond or note and

alleging default in the payment thereof or the interest thereon or both

such principal and interest, it shall be the duty of the state

comptroller to immediately investigate the circumstances of the alleged

default and prepare and file in his office a certificate setting forth

his determinations with respect thereto and to serve a copy thereof by

registered mail upon the chief fiscal officer, as such term is defined

in the local finance law, of the city, city school district, or school

district which issued such bond or note, or in the case of such public

benefit corporation, upon the comptroller of the city of New York, the

chancellor of the school district of the city of New York, and the chief

fiscal officer of such public benefit corporation.

Such investigation by the state comptroller shall cover the current

status with respect to the payment of principal of and interest on all

such outstanding bonds and notes of such city, city school district,

school district, or public benefit corporation and the statement

prepared and filed by the state comptroller pursuant to the foregoing

provision shall set forth a description of all such bonds and notes of

such city, city school district school district, or public benefit

corporation found to be in default and the amount of principal and

interest thereon past due.

Upon the filing of such a certificate in the office of the state

comptroller, the state comptroller shall thereafter deduct and withhold

from the next succeeding allotment, apportionment or payment of such

state aid or assistance due such city, city school district or school

district, or due the city of New York or its school district in the case

of a default by such public benefit corporation, such amount thereof as

may be required to pay the principal of and interest on such bonds and

notes of such city, city school district, school district, or public

benefit corporation then in default. In the event such state aid or

assistance initially so withheld shall be insufficient to pay all of the

principal of and interest on such bonds or notes of such city, city

school district school district, or public benefit corporation so in

default, the state comptroller shall similarly deduct and withhold from

each succeeding allotment, apportionment or payment of such state aid or

assistance due such city, city school district, or school district, or

due the city of New York or its school district in the case of a default

by such public benefit corporation, such amount or amounts thereof as

may be required to pay all of the principal of and interest on such

bonds and notes then in default and to cure such default. Allotments,

apportionments and payments of such state aid so deducted or withheld by

the state comptroller shall be forwarded promptly to the paying agent or

agents for the bonds and notes in default of such city, city school

district school district, or public benefit corporation for the sole

purpose of the payment of defaulted principal of and interest on such

bonds or notes; provided, however, that in the event any such allotment,

apportionment or payment of such state aid so deducted or withheld shall

be less than the total amount of all principal and interest on the bonds

and notes in default with respect to which the same was so deducted or

withheld, then the state comptroller shall forward to each paying agent

an amount in the proportion that the amount of such bonds and notes in

default payable to such paying agent bears to the total amount of the

principal of and interest then in default on such bonds and notes of

such city, city school district, school district, or public benefit

corporation. The state comptroller shall promptly notify the chief

fiscal officer of such city, city school district or school district, or

in the case of such public benefit corporation, the comptroller of the

city of New York, the chancellor of the school district of the city of

New York, and the chief fiscal officer of such public benefit

corporation, of any payment or payments made to any paying agent or

paying agents of defaulted bonds or notes pursuant to this provision.

The state of New York hereby covenants with the purchasers and holders

and owners from time to time of bonds and notes issued by cities, city

school districts, school districts, and such public benefit corporations

for school purposes that it will not repeal, revoke or rescind the

provisions of this section or amend or modify the same so as to limit,

impair or impede the rights and remedies granted hereby; provided,

however, that nothing herein contained shall be deemed or construed as

requiring the state to continue the payment of state aid or assistance

to any city, city school district or school district or as limiting or

prohibiting the state from repealing or amending any law heretofore or

hereafter enacted relating to state aid or assistance, the manner and

time of payment or apportionment thereof, or the amount thereof.