§ 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.