(A) If a local government fails to collect and remit in full all amounts due to the authority on the date such amounts are due under the terms of any bond, revenue bond, note, or other obligation of the local government, the authority shall notify the State Treasurer who, subject to the withholding of amounts under Section 14, Article X of the State Constitution, shall withhold all or a portion of such funds of the State and all funds administered by the State, its agencies, boards, and instrumentalities allotted or appropriated to such local government and apply so much as is necessary to the payment of this amount.

(B) Nothing contained in this section mandates the withholding of funds allocated to a local government which would violate contracts to which the State is a party, the requirements of federal law imposed on the State, or judgments of any court binding the State.