§ 99-c. Withholding of state aid upon failure of municipalities and school districts to repay health insurance reserve receipts when required. 1. In the event a county, city, town, village or school district which has elected to receive distribution or distributions from the health insurance reserve receipts fund, pursuant to an agreement between such municipality or school district and the state and which has elected to terminate its contractual agreement for health benefits with the New York state department of civil service, or if called upon by the New York state department of civil service, pursuant to such agreement, to return such distribution within the time period and under the conditions specified in such agreement, shall be in default of its obligation to repay such distribution, the allotment, apportionment, and payment of local assistance aid, education aid or other state aid as appropriate and as determined by the comptroller shall be withheld by the state upon the following terms and conditions.

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2. In the event of the failure or inability of the municipality or school district to repay its distribution pursuant to the contractual agreement, the department of civil service shall forthwith make and deliver to the comptroller of the state of New York a certificate stating the amount due and not paid, and the state comptroller shall thereafter deduct and withhold from the next succeeding allotments, apportionments or payments of state aid or assistance due such municipality or school district such amount or amounts thereof as may be required to pay the amount due. The state shall not be obligated to pay, by virtue of such withholdings, any additional or increased apportionment or payment of state aid or assistance.

2-a. Notwithstanding the provisions of subdivision two of this section or any other inconsistent provision of law, a school district or board of cooperative educational services which is subject to the requirements of this section may repay its distribution pursuant to a contractual agreement authorized by this section over a period of ten state fiscal years, in equal annual installments, payable by March thirty-first of each year. For school districts or boards of cooperative educational services which terminate the contractual agreement prior to July first, nineteen hundred eighty-three, the first installment shall be paid prior to March thirty-first, nineteen hundred eighty-four. For all other school districts and boards of cooperative educational services, the first installment shall be paid prior to March thirty-first first succeeding the termination of such agreement. The comptroller shall not withhold from state aid or other assistance due a school district or board of cooperative educational services any amount of such distribution due and owing as certified by the department of civil service to the comptroller pursuant to subdivision two of this section, until and unless such school district or board of cooperative educational services fails to make an installment payment authorized by this subdivision by March thirty-first of the applicable year. Upon failure of a school district or board of cooperative educational services to make an installment payment, the withholding provisions of subdivision two of this section shall take effect to the extent of the amount of that unpaid installment. The comptroller shall within sixty days of the date on which this subdivision becomes effective or within sixty days of any subsequent termination of the contractual agreement notify the applicable school district or board of cooperative educational services of the provisions of this subdivision, of the amount due and owing, and the amount of each installment.

3. Notwithstanding any inconsistent provisions of law, the comptroller shall establish a fund, to be called the health insurance reserve receipts fund, to receive transfers of funds from the health insurance carriers or the plan administrator or administrators of the New York state employee health benefit plan, pursuant to contractual agreements between such carriers and the New York state department of civil service and/or from the health insurance fund. Moneys returned by the municipalities and school districts or withheld from state aid by the comptroller pursuant to provisions governing termination of the contractual agreements shall be deposited in this fund. Disbursements from the health insurance reserve receipts fund shall be for the purpose of remitting to the carriers any moneys due them as a result of termination of the state's contract with the carriers or termination of agreements between the state and municipalities and school districts and/or for the purpose of transferring funds to the health insurance fund. Disbursements from such fund shall be made pursuant to the procedures for authorization of expenditures contained in Article 11 of the civil service law upon the issuance of a certificate of approval of availability by the director of the budget and subject to audit and warrant of the comptroller.