2005 California Education Code Sections 56845 Article 8. Withholding of Payments

56845.  (a) The superintendent may withhold, in whole or in part,
state funds or federal funds allocated under the Individuals with
Disabilities Education Act (20 U.S.C. Sec. 1400 et seq.) from a
district, special education local plan area, or county office after
reasonable notice and opportunity for a hearing if the superintendent
finds either of the following:
   (1) The district, special education local plan area, or county
office failed to comply substantially with a provision of state law,
federal law, or regulations governing the provision of special
education and related services to individuals with exceptional needs
which results in the failure to comply substantially with corrective
action orders issued by the department resulting from monitoring
findings or complaint investigations.
   (2) The district, special education local plan area, or county
office failed to implement the decision of a due process hearing
officer based on noncompliance with provisions of this part, the
implementing regulations, provisions of the Individuals with
Disabilities Education Act (20 U.S.C.  Sec. 1400 et seq.), or the
implementing regulations, which noncompliance results in the denial
of, or impedes the delivery of, a free and appropriate public
education for an individual with exceptional needs.
   (b) When the superintendent determines that a district, special
education local plan area, or county office made substantial progress
toward compliance with state law, federal law, or regulations
governing the provision of special education and related services to
individuals with exceptional needs, the superintendent may apportion
the state or federal funds withheld from the district, special
education local plan area, or county office.
   (c) Notwithstanding any other provision of law, state funds may
not be allocated to offset any federal funding intended for
individuals with exceptional needs, as defined in Section 56026, and
withheld from a local educational agency due to the agency's
noncompliance with state or federal law.
   (d) For purposes of this section, in order to enter into contracts
with one or more local education agencies to serve individuals with
exceptional needs who are not being served as required under this
part, the department is exempt from the requirements of Part 2
(commencing with Section 10100) of Division 2 of the Public Contract
Code and from the requirements of Article 6 (commencing with Section
999) of Chapter 6 of Division 4 of the Military and Veterans Code.