(2) If, after the preliminary investigation, the superintendent finds that there is a substantial basis to believe that the school district or public charter school sponsors, financially supports or is actively involved with religious activity, the superintendent shall:

(a) In the case of a school district:

(A) Notify the complainant and the school district;

(B) Withhold immediately all funds due the school district under ORS 327.095; and

(C) Schedule a contested case hearing to be conducted in accordance with ORS 183.413 to 183.470.

(b) In the case of a public charter school:

(A) Notify the complainant, the public charter school, the school district in which the public charter school is located and the sponsor of the public charter school;

(B) Withhold immediately all funds for the public charter school that, pursuant to ORS 338.155, are due under ORS 327.095 to the school district in which the public charter school is located;

(C) Order the school district in which the public charter school is located to withhold immediately all funds due the public charter school under ORS 338.155; and

(D) Schedule a contested case hearing to be conducted in accordance with ORS 183.413 to 183.470.

(3)(a) In the case of a school district if, after the preliminary investigation, the superintendent finds that there is no substantial basis to believe that the school district sponsors, financially supports or is actively involved with religious activity, the superintendent shall notify the complainant and the district of that finding and shall not withhold funds due the district under ORS 327.095 or schedule a hearing.

(b) In the case of a public charter school if, after the preliminary investigation, the superintendent finds that there is no substantial basis to believe that the public charter school sponsors, financially supports or is actively involved with religious activity, the superintendent shall notify the complainant, the public charter school, the school district in which the public charter school is located and the sponsor of the public charter school of that finding and shall not schedule a hearing or withhold funds for the public charter school that, pursuant to ORS 338.155, are due under ORS 327.095 to the school district in which the public charter school is located. The superintendent shall also order the school district in which the public charter school is located not to withhold funds due the public charter school under ORS 338.155.

(4) During the preliminary investigation, the school district or public charter school shall cooperate to a reasonable degree with the superintendent and provide any evidence that the superintendent considers necessary for the investigation. If the school district or public charter school fails or refuses to cooperate to a reasonable degree with the superintendent during the investigation, the superintendent shall presume that there is a substantial basis to believe that the school district or public charter school sponsors, financially supports or is actively involved with religious activity and shall proceed as provided in subsection (2) of this section.

(5) If the superintendent makes a finding under subsection (2) or (4) of this section, the school district or public charter school shall receive no funds under ORS 327.095 or 338.155 from the date of the superintendent’s finding until the superintendent finds that the school district or public charter school is no longer sponsoring, financially supporting or actively involved with religious activity.

(6) The funds withheld under this section shall be held in an escrow account and shall be removed from that account only as follows:

(a) If the superintendent determines, after a contested case hearing, or a court on appeal rules, that the school district or public charter school never sponsored, financially supported or was actively involved with religious activity, the entire amount, including interest thereon, in the escrow account shall be released to the school district or public charter school.

(b) If the superintendent determines, after a contested case hearing, or a court on appeal rules, that the school district or public charter school sponsored, financially supported or was actively involved with religious activity in the past but has ceased to do so, that portion of the amount, including interest thereon, in the escrow account that accrued to the school district or public charter school after the school district or public charter school ceased the proscribed conduct shall be paid to the school district or public charter school. Any amount, including interest thereon, permanently withheld from the school district or public charter school shall revert to the State School Fund or to the General Fund, if the biennium has ended.

(c) If the school district or public charter school does not cease the proscribed conduct by the beginning of the next school year, the superintendent shall notify the State Treasurer who shall cause the amount in the escrow account, including interest thereon, to revert to the State School Fund or to the General Fund, if the biennium has ended.

(7) If the superintendent schedules a contested case hearing, as provided in subsection (2) of this section, the superintendent may conduct such further investigation of the facts relevant to the complaint as the superintendent considers necessary. In conducting the investigation, the superintendent shall have the power of subpoena to compel production of documents and attendance of witnesses at depositions and may do all things necessary to secure a full and thorough investigation.

(8) If a person or school district or public charter school fails to comply with any subpoena issued under subsection (7) of this section, a judge of the circuit court of any county, on application of the superintendent, shall compel obedience by proceedings for contempt as in the case of disobedience of the requirements of a subpoena issued from circuit court. [1985 c.584 §2; 1999 c.200 §28; 2005 c.209 §5]