(a) Funds received by a school district may be used only for legitimate items of current education expense and shall not be used for municipal services.

(b) Funds received by a municipality other than a school district may not be used directly or indirectly for education expenses.

(c) If the Secretary determines that a school district has spent funds paid under section 4028 of this title for an item that is not a legitimate item of current education expense, the treasurer of the municipality shall, within 90 days, remit the amount of the expenditure to the Education Fund. The treasurer shall use funds raised pursuant to 17 V.S.A. § 2664, 20 V.S.A. § 2601, or 24 V.S.A. § 1309 for this purpose. If the Secretary determines that a municipality other than a school district has spent funds for an item that is a legitimate item of current education expense, the treasurer of the municipality shall transfer the amount of the expenditure from the local education fund to the municipal fund.

(d) The legislative body of a school district or other municipality may appeal a decision of the Secretary under this section to the State Board, which shall hear the appeal de novo in the manner provided by 3 V.S.A. chapter 25 for the hearing of contested cases. A legislative body of a school district or other municipality may appeal a decision of the State Board to the Superior Court of the district in which the municipality is located. The Superior Court shall hear the matter de novo in the manner provided by Rule 74 of the Vermont Rules of Civil Procedure. An appeal from the decision of the Superior Court shall be to the Supreme Court under the Vermont Rules of Appellate Procedure.

(e) For the purposes of this section, notwithstanding any provision of municipal law to the contrary, "legitimate items of current educational expense" may include reasonable payments to a municipality for services performed on behalf of a school district by its corresponding town or city clerk, the town or city treasurer, or the town or city auditors.

(f) Annually, on a form prescribed by the Secretary, each school district shall report for the previous school year the amount it paid to or received from its corresponding municipality or municipal officials, including any payments made pursuant to subsection (e) of this section, and any property or in-kind services it donated to or received from its corresponding municipality. (Added 1997, No. 60, § 18, eff. July 1, 1998; amended 1999, No. 49, § 21, eff. June 2, 1999; 2003, No. 68, § 22, eff. June 18, 2003; 2013, No. 92 (Adj. Sess.), § 244, eff. Feb. 14, 2014.)