(a) The division shall take one or more of the following actions against a department that the division determines is not in substantial compliance with division standards or requirements adopted under Sections 509.003 through 509.006:
(1) a reduction, refusal, or suspension of payment of state aid to the department; or
(2) an imposition of budget control over the department.
(b) The board shall provide for notice and a hearing in cases in which the division proposes to take an action authorized by this section, other than a refusal by the division to provide discretionary grant funding or a reduction by the division of discretionary grant funding during a funding cycle. The division shall define with specificity the conduct that constitutes substantial noncompliance with division standards and shall establish the procedures to be used in imposing or waiving a sanction authorized by this section, subject to approval of the definition and the procedures by adoption by the board.