(1) The department may recommend to the commissioner and the state board that the state board remove a school district's or the institute's accreditation if:

(a) and (b) Repealed.

(c)

(I) The school district or the institute has substantially failed to comply with the provisions of article 44 of this title, concerning budget and financial policies and procedures, or article 45 of this title, concerning accounting and financial reporting; and

(II) The school district or institute has not remedied the noncompliance within ninety days after receipt of notice from the department; and

(III) Loss of accreditation is required to protect the interests of the students and parents of students enrolled in the district public schools or the institute charter schools.

(2) (a) If a school district or the institute is accredited with a turnaround plan and the department determines that the school district or institute has failed to make substantial progress under its turnaround plan, or if the school district or institute has been on performance watch for the full five years, the commissioner shall assign the state review panel to critically evaluate the school district's or the institute's performance and to recommend one or more of the following actions:

(I) If the recommendation applies to a school district:

(A) That the school district's accreditation be removed;

(A.5) That the school district be reorganized pursuant to article 30 of this title 22, which reorganization may include consolidation;

(B) That a private or public entity, with the agreement of the school district, serve as a lead partner in the management of the school district or partially or wholly manage one or more of the district public schools. The local school board and the department shall ensure that the private or public entity uses research-based strategies and has a proven record of success working with school districts and schools under similar circumstances.

(C) That one or more of the district public schools be converted to a charter school;

(D) That one or more of the district public schools be granted status as an innovation school pursuant to section 22-32.5-104 or that the local school board recognize a group of district public schools as an innovation school zone pursuant to section 22-32.5-104; or

(E) That one or more of the district public schools be closed; or

(II) If the recommendation applies to the institute:

(A) That the institute's accreditation be removed;

(A.5) That the institute board be abolished and that the governor appoint a new institute board pursuant to section 22-30.5-505;

(B) That a public or private entity take over management of the institute or management of one or more of the institute charter schools; or

(C) That one or more of the institute charter schools be closed.

(b) In its evaluations and recommendations, the state review panel shall consider:

(I) Whether the school district's or institute's leadership is adequate to implement change to improve results;

(II) Whether the school district's or institute's infrastructure is adequate to support school improvement;

(III) The readiness and apparent capacity of public school and school district or institute personnel to plan effectively and lead the implementation of appropriate actions to improve student academic performance within the district public schools or the institute charter schools;

(IV) The readiness and apparent capacity of public school and school district or institute personnel to engage productively with and benefit from the assistance provided by an external partner;

(V) The likelihood of positive returns on state investments of assistance and support to improve the school district's or institute's performance within the current management structure and staffing; and

(VI) The necessity that the school district or institute remain in operation to serve students.

(3) After considering the recommendations of the commissioner and the state review panel, the state board shall determine the actions the school district or the institute is required to take and direct the local school board or the institute board accordingly. If a school district's or the institute's accreditation is removed and the district or the institute is reorganized and takes any other actions directed by the state board, the state board shall reinstate the school district's or the institute's accreditation at the accreditation category deemed appropriate by the state board.

(3.5) (a) So long as a school district or the institute performs at a level that results in being accredited with priority improvement plan or lower, after the state board initially directs the school district or institute to take action as described in subsections (2) and (3) of this section, the commissioner may in any year, but shall every two years, assign the state review panel to critically evaluate the school district's or the institute's performance and recommend one or more of the actions described in subsection (2)(a) of this section. In evaluating the school district's or institute's performance and recommending actions, the state review panel shall consider the criteria specified in subsection (2)(b) of this section. The state board shall consider the recommendations of the state review panel, the actions that the school district or institute was previously directed to take, the fidelity with which the district or institute has implemented the directed actions, and whether the amount of time that the school district or institute has had to implement the actions is reasonably sufficient to achieve results. The state board shall either require the school district or institute to continue the previously directed actions or direct the school district or institute to undertake additional or different actions as provided in subsections (2) and (3) of this section.

(b) Notwithstanding any provision of subsection (3.5)(a) of this section to the contrary, a school district or the institute remains subject to the provisions of this subsection (3.5) until the school district or institute performs at a level that results in being accredited with improvement plan or higher for two consecutive school years.

(4) (a) The state board shall promulgate rules for the implementation of this section, including but not limited to procedures to ensure a school district's or the institute's right to appeal to the state board before the state board takes final action to remove the school district's or the institute's accreditation pursuant to this section.

(b) In promulgating rules concerning the timeline by which the state board directs and a school district or the institute puts into effect one or more of the actions described in subsection (2)(a) of this section, the state board shall ensure that the timeline is designed to allow the school district or institute to reasonably put into effect any of the actions described in subsection (2)(a) of this section by the beginning of the school year immediately following the school year in which the state board directs the action.