(a) Each school district shall purchase and maintain or provide proof of adequate property insurance for the replacement cost of all school facilities and equipment. Insurance purchased to comply with this section may contain a deductible amount, if approved by the department. A school district may comply with this section by initiating and maintaining a program of self-insurance, if the department annually determines that the school district has submitted adequate evidence of the district's ability to self-insure for the replacement cost of all school facilities and equipment. A copy of the insurance policy or other information indicating compliance with this section shall be provided to the department.
(b) If the department determines that a school district is not insured as required under (a) of this section, the department shall notify the school district of the determination. Unless the school district obtains adequate insurance within 30 days after the school district receives notice under this subsection, the department shall purchase the insurance required by (a) of this section for that school district.
(c) The department may not award a school construction or major maintenance grant under AS 14.11 to a municipality that is a school district or a regional educational attendance area that is not in compliance with (a) of this section. The department shall reduce the amount of state aid under AS 14.17.400 for which a school district may qualify by the amount, if any, paid by the department under (b) of this section.
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