CHAPTER 1. ADMINISTRATION OF COMMON SCHOOL FUND BY COUNTY
IC 20-42
ARTICLE 42. FIDUCIARY FUNDS AND ACCOUNTS
IC 20-42-1
Chapter 1. Administration of Common School Fund by County
IC 20-42-1-1
Application
Sec. 1. This chapter applies to a county that has not:
(1) transferred the money in the county's fund to the debt
service funds of the school corporations in the county under
section 5 of this chapter, IC 21-2-4-5 (before its repeal), or a
predecessor law; or
(2) surrendered the money in the county's fund to the treasurer
of state under section 6 of this chapter, IC 21-1-3-1 (before its
repeal), or a predecessor law.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-2
"Fund"
Sec. 2. As used in this chapter, "fund" refers to a common school
fund administered by a county.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-3
Sources of fund
Sec. 3. The funds that:
(1) before March 6, 1865, were:
(A) known and designated as the surplus revenue funds;
(B) appropriated to common schools;
(C) known and designated as the saline fund;
(D) known and designated as the bank-tax fund;
(E) derived from the sale of county seminaries and property
belonging to county seminaries or after March 5, 1865, are
derived from the sale of county seminaries and property
belonging to county seminaries; or
(F) money and property held for county seminaries;
(2) are derived from fines assessed for breaches of the penal
laws of the state;
(3) are derived from forfeitures that accrue;
(4) are derived from lands and other estate that escheat to the
state for want of heirs or kindred entitled to the inheritance of
the lands or other estate;
(5) are derived from lands that:
(A) were granted before March 6, 1865; or
(B) are granted after March 5, 1865;
to the state, if no special object is expressed in the grant;
(6) are derived from the proceeds of the sales of the swamp
lands granted to the state of Indiana by the act of Congress of
September 1850;
(7) are derived from the taxes that are assessed periodically
upon the property of corporations for common school purposes;
and
(8) are derived from the one hundred and fourteenth section of
the charter of the state bank of Indiana;
constitute the common school fund.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-4
Prohibition on reducing principal of fund
Sec. 4. Subject to sections 5, 6 and 9 of this chapter, the fund shall
never be diminished in amount.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-5
Transfer of fund balance to debt service fund
Sec. 5. Any balance remaining in a fund shall be transferred to the
debt service funds of the school corporations in the county. The
amount transferred may be appropriated and paid to a school
corporation's general fund.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-6
Transfer of custody of fund balance to state
Sec. 6. (a) A county council may adopt a resolution to:
(1) elect to surrender the custody of the fund; and
(2) order the board of county commissioners, the county
auditor, and the county treasurer to take any and all steps
necessary to surrender the custody of a fund held in trust by the
county.
If the county council adopts a resolution under this section, the
amount of money distributed to and held in trust by the county is due
and payable to the treasurer of state. A county council may elect
whether the county shall surrender all or any part of the fund. If the
county retains custody of any money in the fund, the county shall
loan the money as otherwise provided by law. Any part of the money
in the fund surrendered by the county shall be paid to the treasurer
of state immediately after the election by the county council.
(b) Within ten (10) days after the passage of the resolution by a
county council of a county electing to surrender the custody of the
fund, the county auditor shall prepare and file with the board of
commissioners of the county a report showing the following:
(1) The total amount of the fund that has been entrusted to and
is held in trust by the county.
(2) The total amount of the funds that is loaned as provided by
law.
(3) The total amount of the fund, if any, loaned to the county
and which loans are unpaid.
(4) The total amount of the fund held in cash in the possession
and custody of the county and that is not loaned.
(5) A separate schedule of past due loans. The schedule must
show the unpaid balance of principal and the amount of
delinquent interest due and unpaid on each delinquent loan.
(c) The board of county commissioners shall examine the reports,
and, if found correct, the board of county commissioners shall order:
(1) that the report be entered on its records; and
(2) the county auditor to draw the county auditor's warrant,
payable to the treasurer of state, for the amount of the fund that
is not loaned and is held in cash in the custody and possession
of the county as shown by the report.
The county auditor shall forward the warrants to the auditor of state
together with a certified copy of the report. The county auditor shall
also forward with the payment a certified copy of the resolution of
the county council electing to surrender the custody of the fund or
any part of the fund.
(d) After passage by the county council of a resolution electing to
surrender the custody of the funds, no part of the fund that is in the
custody of the county may be loaned by the county or by any official
of the county. Except as provided in this subsection, all outstanding
loans of the fund at the time of the passage of the resolution shall be
collected when due. Any loan that comes due and payable after the
passage of the resolution may be renewed for one (1) additional five
(5) year period, on the application of the person owing the loan as
provided by law. However, a loan that is more than one (1) year
delinquent in payment of principal or interest at the time of the
passage of the resolution of the county council may not be renewed.
(e) On:
(1) May 1 or November 1 immediately after the passage of the
resolution electing to surrender the fund; and
(2) each May 1 and November 1 thereafter;
all the money collected and on hand that belongs to the fund shall be
paid to the treasurer of state. If at the time for a semiannual payment
the amount collected and paid to the treasurer of state when added to
the amounts previously paid to the treasurer of state is less than the
result determined by multiplying one-fortieth (1/40) of the amount of
the fund held in trust at the time of the passage of the resolution by
the number of semiannual payments that have occurred after the
passage of the resolution, the county auditor shall draw the county
auditor's warrant on the general fund of the county for an amount
sufficient to pay to the treasurer of state the difference between the
amount paid and the amount equal to the result of multiplying
one-fortieth (1/40) of the amount of the fund held in trust at the time
of the passage of the resolution by the number of semiannual
payments that have occurred after the passage of the resolution.
(f) At the same time and in the same manner, there shall be paid
to the treasurer of state interest to the date of the semiannual payment
on the balance of the funds held in trust by the county from the
immediately preceding October 31 or April 30 at the rate fixed by
law. Whenever within the preceding six (6) months any payment of
the fund has been made by the county to the treasurer of state, the
county shall also pay interest at the rate fixed by law on the amount
of the payment to the date of receipt of the payment by the treasurer
of state. If the amount collected as interest on the fund is not
sufficient to make payment of interest to the treasurer of state, the
county auditor shall draw the county auditor's warrant on the general
fund of the county for an amount sufficient when added to the
amount collected as interest on the fund to pay the interest due to the
state.
(g) The board of county commissioners shall, in its annual budget
estimate, include an estimate of the amount necessary to make the
payments from the county general fund as required by this section,
and the county council shall appropriate the amount of the estimate.
(h) A county is subrogated to all the rights and remedies of the
state with respect to loans made from a fund held in trust by the
county to the extent of any and all payments made from the county
general fund under this chapter.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-7
County liability for fund
Sec. 7. A county shall be held liable for the:
(1) preservation of the part of the fund as is entrusted or has
been entrusted to the county; and
(2) payment of the annual interest on the fund at the rate
established by law.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-8
Deposit of interest in fund
Sec. 8. The payment of annual interest must be full and complete
every year. The payment must appear in the county auditor's report
to the state superintendent. The state superintendent shall, at any
time when the state superintendent discovers from the report, or
otherwise, that there is a deficit in the amount collected, for want of
prompt collection or otherwise, direct the attention of the board of
county commissioners and the county auditor to the fact. The board
of commissioners shall provide for the deficit in their respective
counties.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-9
Required transfer of revenue to state
Sec. 9. (a) This section does not apply to a fund entrusted to a
county before November 1, 1851.
(b) Loans may not be made of the principal of the common school
funds held in trust by the several counties of the state. Each county
auditor and treasurer shall forward semiannually all payments made
and all interest collected on any loan made before March 7, 1953, by
any county from the fund, to the treasurer of state. The amount
transferred to the treasurer of state must be held under IC 20-49-3.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-10
Loans; required interest rate
Sec. 10. Subject to section 9 of this chapter, the:
(1) principal belonging to a fund; and
(2) accumulations to the principal of a fund held by a county;
must be loaned at four percent (4%) per annum. Loans made before
June 1, 1943, with a rate of interest higher than four percent (4%) per
annum must have an interest rate of four percent (4%) per annum.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-11
Minimum balance; loans; maximum term
Sec. 11. In a county where the total amount in the:
(1) fund; or
(2) congressional township school fund;
accumulates to the amount of at least one thousand dollars ($1,000),
a county may borrow and use the funds or any part of the funds for
any lawful purpose for a period not exceeding five (5) years.
As added by P.L.2-2006, SEC.165. Amended by P.L.162-2006,
SEC.40.
IC 20-42-1-12
Form of loan agreement
Sec. 12. (a) If a county council borrows funds under this chapter,
the county council shall adopt an ordinance specifying the amount of
the funds to be borrowed and specify the time for which the loan will
be made. The board of county commissioners shall execute to the
state of Indiana for the use of the funds a written obligation, executed
by the board of county commissioners and attested by the county
auditor, that specifies the following:
(1) The facts under which the written obligation is executed.
(2) The sum of money borrowed.
(3) The time when the money will be repaid to the fund by the
county.
(b) The obligation must be deposited with the county auditor of
the county. The county auditor shall retain the obligation and record
entries concerning the loans. The provisions of IC 6-1.1-20
concerning the loan to the county from the school funds apply to this
section.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-13
Distribution of loaned amount from fund
Sec. 13. After the obligation is deposited with the county auditor
under section 12 of this chapter, the county auditor shall issue a
warrant to the county treasurer, to be paid to the county for the
amount of money specified in the ordinance and obligation. When
the warrant is presented to the county treasurer, the treasurer shall
transfer from the fund the amount contained in the warrant from the
principal sum of the fund to the credit of the county revenue of the
county. Funds transferred under this section become a part of the
general revenue funds of the county.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-14
Investments
Sec. 14. (a) If the funds remain in the county treasury of the
county for four (4) months without having been loaned under this
chapter, upon the request of the county auditor, the board of county
commissioners may, by an order entered of record, direct the county
treasurer to invest the funds in:
(1) bonds, notes, certificates, and other valid obligations of the
United States; and
(2) bonds, notes, debentures, and other securities issued by any
federal instrumentality that are fully guaranteed by the United
States.
(b) If it becomes necessary to obtain the funds invested in the
government bonds under subsection (a) to be able to make a loan to
any borrower, whose application has been approved and granted, the
treasurer shall sell, at the earliest opportunity, a sufficient amount of
the government bonds to make the loan.
As added by P.L.2-2006, SEC.165.
IC 20-42-1-15
Receipts for payment of principal or interest on loan
Sec. 15. (a) All payments of principal or interest must be paid to
the county treasurer. The:
(1) county treasurer shall file a receipt with the county auditor;
and
(2) county auditor shall give the payor a receipt and record the
payment.
(b) The county auditor may accept payment of principal or interest
if the county auditor can immediately transmit and pay the payment
to the county treasurer.
As added by P.L.2-2006, SEC.165.