INDIANAPOLIS – On Tuesday, a proposal authored by State Senator Luke Kenley and co-authored by State Senator Eddie Melton (D-Merrillville) was approved by the Senate unanimously. Senate Bill (SB) 196 comes as a response to Standard and Poor, a national credit rating agency, threatening to downgrade Indiana’s school bond rating due to the state’s current intercept statute.

Currently, when a school corporation fails to make a required debt service payment, the State Treasurer is required to withhold money first from funds a school corporation receives except state tuition support, then second from a school corporation’s state tuition support.

“My hope is that SB 196 will address Standard and Poor’s concerns,” Sen. Melton said. “If this bill passes through the House of Representatives and signed by the Governor, it will prevent the ratings of school corporations across Indiana from being lowered, forcing districts to pay higher interest rates on debt.”

SB 196 outlines that debt service obligations also includes payments to a school corporation’s designated creditor. The State Treasurer would transfer debt service payments to the paying agent within five business days after the agent notifies the State Treasurer that the school corporation has defaulted on a debt service payment. If the payment due is greater than money in all funds appropriated to the school corporation plus excess state tuition support distributions, the remainder would be made up from the state General Fund.

“The intent of this bill isn’t just to assist my district or current failing districts, it’s much broader than that,” Sen. Melton said. “It will provide protection for all schools in Indiana who may, however unfortunate, face a debt crisis in the future.”