§ 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\npayment of obligations of the prospective recipient. Whenever a city,\ncity school district or school district, as such terms are used and\ndefined in the education law, or the public benefit corporation to which\nthe city of New York has assigned payments pursuant to section\ntwenty-seven hundred ninety-nine-tt of the public authorities law, shall\ndefault in the payment of the principal of its bonds or notes issued for\nschool purposes or the payment of the interest on such bonds or notes or\nin the payment of both the principal of and interest on such bonds or\nnotes, the allotment, apportionment and payment of state aid and\nassistance pursuant to the education law, or pursuant to any other law\nhereinafter enacted providing for state aid and assistance in lieu of or\nsubstitution for the state aid and assistance presently provided\npursuant to the education law, to any such city, city school district or\nschool district, or to the city of New York or its school district in\nthe case of a default by such public benefit corporation, shall be\nwithheld by the state upon the following terms and conditions. In the\nevent a holder or owner of any such bond or note shall file with the\nstate comptroller a verified statement describing such bond or note and\nalleging default in the payment thereof or the interest thereon or both\nsuch principal and interest, it shall be the duty of the state\ncomptroller to immediately investigate the circumstances of the alleged\ndefault and prepare and file in his office a certificate setting forth\nhis determinations with respect thereto and to serve a copy thereof by\nregistered mail upon the chief fiscal officer, as such term is defined\nin the local finance law, of the city, city school district, or school\ndistrict which issued such bond or note, or in the case of such public\nbenefit corporation, upon the comptroller of the city of New York, the\nchancellor of the school district of the city of New York, and the chief\nfiscal officer of such public benefit corporation.\n Such investigation by the state comptroller shall cover the current\nstatus with respect to the payment of principal of and interest on all\nsuch outstanding bonds and notes of such city, city school district,\nschool district, or public benefit corporation and the statement\nprepared and filed by the state comptroller pursuant to the foregoing\nprovision shall set forth a description of all such bonds and notes of\nsuch city, city school district school district, or public benefit\ncorporation found to be in default and the amount of principal and\ninterest thereon past due.\n Upon the filing of such a certificate in the office of the state\ncomptroller, the state comptroller shall thereafter deduct and withhold\nfrom the next succeeding allotment, apportionment or payment of such\nstate aid or assistance due such city, city school district or school\ndistrict, or due the city of New York or its school district in the case\nof a default by such public benefit corporation, such amount thereof as\nmay be required to pay the principal of and interest on such bonds and\nnotes of such city, city school district, school district, or public\nbenefit corporation then in default. In the event such state aid or\nassistance initially so withheld shall be insufficient to pay all of the\nprincipal of and interest on such bonds or notes of such city, city\nschool district school district, or public benefit corporation so in\ndefault, the state comptroller shall similarly deduct and withhold from\neach succeeding allotment, apportionment or payment of such state aid or\nassistance due such city, city school district, or school district, or\ndue the city of New York or its school district in the case of a default\nby such public benefit corporation, such amount or amounts thereof as\nmay be required to pay all of the principal of and interest on such\nbonds and notes then in default and to cure such default. Allotments,\napportionments and payments of such state aid so deducted or withheld by\nthe state comptroller shall be forwarded promptly to the paying agent or\nagents for the bonds and notes in default of such city, city school\ndistrict school district, or public benefit corporation for the sole\npurpose of the payment of defaulted principal of and interest on such\nbonds or notes; provided, however, that in the event any such allotment,\napportionment or payment of such state aid so deducted or withheld shall\nbe less than the total amount of all principal and interest on the bonds\nand notes in default with respect to which the same was so deducted or\nwithheld, then the state comptroller shall forward to each paying agent\nan amount in the proportion that the amount of such bonds and notes in\ndefault payable to such paying agent bears to the total amount of the\nprincipal of and interest then in default on such bonds and notes of\nsuch city, city school district, school district, or public benefit\ncorporation. The state comptroller shall promptly notify the chief\nfiscal officer of such city, city school district or school district, or\nin the case of such public benefit corporation, the comptroller of the\ncity of New York, the chancellor of the school district of the city of\nNew York, and the chief fiscal officer of such public benefit\ncorporation, of any payment or payments made to any paying agent or\npaying agents of defaulted bonds or notes pursuant to this provision.\n The state of New York hereby covenants with the purchasers and holders\nand owners from time to time of bonds and notes issued by cities, city\nschool districts, school districts, and such public benefit corporations\nfor school purposes that it will not repeal, revoke or rescind the\nprovisions of this section or amend or modify the same so as to limit,\nimpair or impede the rights and remedies granted hereby; provided,\nhowever, that nothing herein contained shall be deemed or construed as\nrequiring the state to continue the payment of state aid or assistance\nto any city, city school district or school district or as limiting or\nprohibiting the state from repealing or amending any law heretofore or\nhereafter enacted relating to state aid or assistance, the manner and\ntime of payment or apportionment thereof, or the amount thereof.\n