(1)  (a) If one (1) or more payments on bonds are made by the state treasurer as provided in this chapter, the state treasurer shall:
(i)  Immediately intercept any payments from any source of operating moneys provided by the state to the school district that issued the bonds that would otherwise be paid to the school district by the state; and
(ii) Apply the intercepted payments to reimburse the state for payments made pursuant to the state’s guaranty until all obligations of the school district to the state arising from those payments, including interest and penalties, are paid in full.
(b)  The state has no obligation to the school district or to any person or entity to replace any moneys intercepted under the authority of this subsection.
(2)  The school district that issued bonds for which the state has made all or part of a debt service payment shall:
(a)  Reimburse all moneys drawn by the state treasurer on its behalf;
(b)  Pay interest to the state on all moneys paid by the state from the date the moneys drawn to the date they are repaid at a rate not less than the average prime rate for national money center banks plus one percent (1%); and
(c)  Pay all penalties required by this chapter.
(3)  (a) The state treasurer shall establish the reimbursement interest rate after considering the circumstances of any prior draws by the school district on the state, market interest and penalty rates, and the cost of funds, if any, that were required to be borrowed by the state to make payments on the bonds.
(b)  The state treasurer may, after considering the circumstances giving rise to the failure of the school district to make payment on its bonds in a timely manner, impose on the school district a penalty of not more than five percent (5%) of the amount paid by the state pursuant to its guaranty for each instance in which a payment by the state is made.
(4)  (a) (i)  If the state treasurer determines that amounts obtained under this section will not reimburse the state in full within one (1) year from the state’s payment of a school district’s scheduled debt service payment, the state treasurer shall pursue any legal action, including mandamus, against the school district and its board to compel it to:
1.  Levy and provide tax revenues to pay debt service on its bonds when due; and
2.  Meet its repayment obligations to the state.
(ii) In pursuing its rights under paragraph (a) of this subsection, the state shall have the same substantive and procedural rights as would a holder of the bonds of a school district.
(b)  The attorney general shall assist the state treasurer in these duties.
(c)  The school district shall pay the attorney’s fees, expenses, and costs of the state treasurer and the attorney general.
(5)  (a) Except as provided in paragraph (c) of this subsection, any school district whose operating funds were intercepted under this section may replace those funds from other school district moneys or from property taxes, subject to the limitations provided in this subsection.
(b)  A school district may use property taxes or other moneys to replace intercepted funds only if the property taxes or other moneys were derived from:
(i)   Taxes originally levied to make the payment but which were not timely received by the school district;
(ii)  Taxes from a supplemental levy made to make the missed payment or to replace the intercepted moneys;
(iii) Moneys transferred from the undistributed reserve, if any, of the school district; or
(iv)  Any other source of money on hand and legally available.
(c)  Notwithstanding the provisions of paragraphs (a) and (b) of this subsection, a school district may not replace operating funds intercepted by the state with moneys collected and held to make payments on bonds if that replacement would divert moneys from the payment of future debt service on the bonds and increase the risk that the state’s guaranty would be called upon an additional time.