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Sinking Fund Uses Expand, Pending Governor’s Signature

Kacie Kefgen

By Kacie Kefgen, MASB Assistant Director of Labor Relations and Legal Services

DashBoard, Nov. 2, 2016

The House and Senate have passed sinking fund legislation that is expected to be signed by the Governor in the coming weeks.

Currently, school districts may ask their voters to start a sinking fund, which operates like a savings account. Local property tax revenue goes into the sinking fund to pay for real estate and the construction or repair of school buildings (see MCL 380.1212). By putting tax revenue in the sinking fund and saving it over time, rather than bonding, the district and taxpayers save money in interest and legal fees.

The new legislation, House Bill 4388, will change our current statute in three major ways:

  • Districts will be able to ask voters to approve sinking funds for the use of school security improvements and technology;
  • Maximum millage rates for sinking funds will be will be reduced from 5 to 3 mills; and
  • The maximum number of years for the millage will be reduced from 20 to 10 years.

With the Governor’s approval, this new legislation will become effective on the 91st day after the Legislature’s sine die adjournment, which is the final day of session. As a result, the bill should go into effect in late March.

Common Questions

We have a sinking fund on the ballot during this election. Will we be able to use the funds for technology and security if it passes?

No. For any sinking funds that already exist or are approved before the new legislation passes, the old rules apply. So, those funds can last for up to 20 years and have a higher millage rate, but they cannot be used for security or technology.

What sorts of technology expenses could be covered with sinking fund dollars?

For the purposes of the new legislation, “technology” is defined in MCL 380.1351a. That section describes technology as:

  • hardware and communication devices that transmit, receive or compute information for pupil instructional purposes;
  • the initial purchase of operating system software or customized application software, or both, accompanying the purchase of hardware and communication devices mentioned above; and
  • the costs of design and installation of the hardware, communication devices, and initial operating system software or customized application software authorized under this subsection.

Personnel costs cannot be paid for with sinking fund dollars.

What sort of security expenses could be covered with sinking fund dollars?

HB 4388 defines school security expenses as any capital improvement or purchase that is designed to act as a deterrent to unauthorized entry of persons or items onto school premises, or to otherwise promote security, including, but not limited to, metal detectors, locks, doors, lighting, cameras and enhancements to entryways. School security improvement also includes a mobile telephone application that provides the ability to communicate with personnel on site while also connecting an emergency telephone call to a 9-1-1 center. School security improvement does not include personnel or operation costs related to a capital improvement or purchase or related to a mobile telephone application.

If you have any questions regarding sinking funds, please contact me at kkefgen@masb.org or 517.327.5914.

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