Section 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.