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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
AMENDED
school districts; board members; superintendent
Purpose
Requires, if the State Board of Education (SBE) places a school district in receivership, the school district superintendent to be terminated for cause and each seat of the school district governing board (governing board) to be deemed vacant. Outlines governing board member replacement procedures and deems a person ineligible to hold an appointed office in Arizona if the person held a governing board seat deemed vacant due to the school district being placed in receivership. Prohibits a governing board from entering into two or more real estate transactions within a 12-month period if the transactions involve both the same parties and property.
Background
The SBE has jurisdiction over all petitions requesting that a school district be placed in receivership due to school district's alleged insolvency or gross mismanagement and must review allegations of insolvency or gross management. If the SBE determines that the school district is insolvent or engaged in gross mismanagement after providing the school district an opportunity to respond to such allegations at a public meeting, the SBE may place the school district in receivership and appoint a receiver.
On appointment, a receiver must begin a full review and investigation of
the school district's financial affairs and submit a detailed report within 120
days to the SBE listing the findings of the investigation, which must include a
financial improvement plan and budget that details how the school district will
eliminate any continued gross financial mismanagement and achieve solvency. The
financial improvement plan may authorize the receiver to: 1) override any of
the school district superintendent's or governing board's decisions concerning
the school district's management and operation; 2) attend any meetings of the
governing board and administrative staff; 3) supervise the day-to-day
activities of school district staff; 4) place on extended leave, suspend or
terminate for cause the school district's superintendent or chief financial
officer; 5) authorize students to transfer to another school district; 6)
appoint a chief educational officer, chief fiscal officer or competent
independent public accountant for specified purposes; 7) reorganize the school
district's financial accounts, management and budgetary systems; 8) establish
school district fiscal guidelines and a system of internal controls; and
9) cancel or renegotiate contracts as outlined. On review and approval by the
SBE, the receiver must take all necessary steps to implement the financial
improvement plan and budget (A.R.S.
§ 15-103).
Statute deems a person ineligible to hold any appointed office in Arizona
if the person:
1) is not a U.S. citizen; or 2) is unable to speak, write and read the English
language (A.R.S.
§ 38-201).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
School District Superintendents (Retroactive to January 1, 2025)
1. Requires the financial improvement plan for a school district placed in receivership to require the receiver to terminate the school district superintendent for cause, rather than allows the financial improvement plan to authorize the receiver to suspend, place on extended leave or terminate the school district superintendent for cause.
2. Prohibits, if a school district is placed in receivership by the SBE, the receiver from providing a severance or buyout package to the school district superintendent.
3. Allows a school district superintendent who is terminated by a receiver to appeal the termination to the SBE if the school district superintendent files an appeal with the SBE within 30 days of receiving notice of the termination.
4. Requires, if a school district superintendent does not prevail in an appeal of a termination made by a receiver, the school district superintendent to surrender any certificates issued by the Arizona Department of Education (ADE).
Governing Board Members (Retroactive to January 1, 2025)
5. Deems, if the SBE places a school district in receivership, each seat of the governing board as vacant by operation by law 31 days after the SBE places the school district in receivership.
6. Exempts a governing board member from the requirement to vacate the governing board seat if the governing board member:
a) submits a written complaint relating to the school district's financial practices to the SBE or ADE before the date on which ADE recommends that the SBE place the school district in receivership;
b) was elected or appointed to the governing board less than six months before the date on which ADE recommends that the SBE place the school district in receivership; or
c) applies to the SBE for a waiver, in a form and manner prescribed by the SBE, within 30 days of the school district being placed in receivership.
7. Requires the SBE, for governing board members who submit a waiver, to waive the requirement to vacate if the application and supporting evidence clearly demonstrate that the governing board member:
a) attempted to address the school district's fiscal mismanagement; or
b) received false information relating to the school district's finances.
8. Deems, if the SBE does not waive the requirement to vacate for a governing board member, the governing board seat as vacant by operation of law on the date that the SBE formally declines the waiver.
9. Directs, if the SBE places a school district in receivership, the corresponding county school superintendent to appoint governing board members to fill the vacancies.
10. Prohibits the county school superintendent from accepting names from the governing board for consideration when filling the vacancies.
11. Requires, if a school district is located in two or more counties, each governing board vacancy to be filled by the county school superintendent of the county in which the former governing board member resided on the date that the governing board seat was deemed vacant.
12. Determines that the term length of a governing board member who is appointed by the county school superintendent as outlined is until the next general election.
13. Directs the county school superintendent to assign by lot the new governing board members who are elected in the next general election to initial terms of two and four years in office.
14. Determines that, after the initial two- or four-year terms, the term length of each governing board member is four years from January 1 next following the governing board member's election.
15. Deems a person ineligible to hold an appointed state, county, city, town or precinct office that is established by legislative enactment if the person:
a) held a governing board member seat that was deemed vacant as a result of the school district being placed in receivership; or
b) resigned from the office of governing board member up to one month before the school district was placed in receivership.
16. Requires, if the SBE placed a school district in receivership in January 2025:
a) each governing board member seat to be deemed as vacant; and
b) the county school superintendent to fill the vacancies as prescribed.
17. Repeals the requirement to vacate the governing board member seat for a school district placed in receivership in January 2025 on January 1, 2027.
18. Defines supporting evidence as records that a governing board member submits with an application to corroborate facts alleged in the application.
19. Specifies that supporting evidence includes minutes or recordings of governing board meetings, the governing board member's voting record and records of communication between the governing board member and relevant parties.
Miscellaneous
20. Prohibits a governing board from entering into two or more real estate transactions within a 12-month period if the transactions involve both the same parties and property.
21. Directs a governing board, before approving an expenditure or adopting a budget, to require the school district's administrators to provide all information and records relating to an expenditure or budget in a meeting for discussion at least one week before the meeting in which the governing board will vote on the expenditure or budget.
22. Directs a governing board, before publishing a proposed budget, to require the school district's administrators to provide all information and records relating to the school district's budget in a meeting for discussion at least one week before the proposed budget is published.
23. Defines property as a school site, building or facility, a portion of a school site, building, facility or a tract of land.
24. Includes, in transaction, the sale, exchange, purchase or lease, in whole or in part, of property.
25. Contains a severability clause.
26. Makes technical and conforming changes.
27. Becomes effective on the general effective date, with retroactive provisions as noted.
Amendments Adopted by Committee
1. Replaces the requirement for each governing board member of a school district placed in receivership to resign with a determination that each governing board member seat is vacant.
2. Removes the requirement for a county school superintendent to call a special election to replace the temporarily appointed governing board members.
3. Determines that the term of a governing board member appointed by the county school superintendent is until the next general election, rather than until a special election is held.
4. Expands the exemptions from the requirement to vacate a governing board member seat by allowing the SBE to waive the requirement if an individual applies to the SBE as prescribed.
5. Directs the SBE to investigate an individual's conduct as outlined and determine whether the individual knowingly engaged in misconduct.
6. Directs a governing board to require school district administrators to provide outlined information and records as prescribed before approving an expenditure or publishing or adopting a budget.
7. Removes the January 2, 2025, retroactive effective date on the prohibition relating to real estate transactions.
8. Prescribes a January 1, 2025, retroactive effective date for the requirements relating to the termination a school district superintendent and determination that each governing board member seat is vacant for being placed in receivership by the SBE.
9. Makes technical and conforming changes.
Amendments Adopted by Committee of the Whole
1. Specifies that each governing board seat is vacant 31 days after the SBE places the school district in receivership.
2. Modifies waiver requirements for a governing board member to be exempt from the requirement to vacate by:
a) removing the SBE's requirement to investigate a governing board member's performance as prescribed and the SBE's authority to waive the requirement if the governing board member did not engage in misconduct;
b) requiring the SBE to waive the requirement to vacate if outlined conditions are met; and
c) specifying that a governing board member must apply in a form and manner as prescribed by the SBE.
3. Deems, if the SBE does not waive the requirement to vacate, a governing board seat as vacant on the date that the SBE declines the waiver.
4. Defines supporting evidence.
5. Makes technical and conforming changes.
House Action Senate Action
ED 1/28/25 DPA 12-0-0-0 ED 3/19/25 DPA 5-2-0
3rd Read 2/20/25 37-21-2
(W/O emergency)
Prepared by Senate Research
May 30, 2025
MH/ci