Schools could benefit from a state reform of how they can spend local tax dollars

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Capital News Service
LANSING — School districts could have an easier time paying for security systems and classroom electronics thanks to a new bill that would broaden the use of the millage they collect.
The legislation would affect sinking funds, which are better than they sound. They allow voter-approved property tax to be collected and spent by a district to buy land for a new school, build a new building or repair an existing building. The bill, sponsored by Rep. Michael McCready, R-Bloomfield Hills, would also allow sinking funds to buy equipment and technology.
According to a House summary of the bill, 173 districts have sinking funds. The Michigan Association of School Boards supports the bill, as it would make budgeting easier.
“Without a sinking cost fund, the money has to be taken out of a school’s operating budget,” said Jennifer Smith, the association’s director of government relations. “With it, money from the millage can be spent as it is collected.”
Instead of buying with bonds or credit, schools can use a sinking fund as the millage is collected. As the money is spent, the cost of a project sinks, and more money is left in operating budgets.
School administrators have been trying for two decades to broaden the use of local millage revenue, Smith said.
The Michigan Chamber of Commerce has historically opposed similar legislation. This time around, the chamber is neutral; reassured by some restrictions McCready put into the bill, said Tricia Kinley, the chamber’s senior director of tax & regulatory reform.
“In the past, these proposals were always vague and open-ended,” Kinley said. “He tightened down a lot of the language and made it a very narrow change to the law.”
Legally, sinking funds can’t be used for hiring people, such as security guards, but a school could use them to install new security cameras. Laptops, tablets and new software would also be covered.
How will taxpayers be affected? Theoretically, less than before.
“Rep. McCready built in some taxpayer protections by ratcheting down the allowable millage and the allowable years a district could impose a sinking fund,” Kinley said. “That’s how we got to a neutral stance.”
Broader use comes at a price for schools. Currently, districts can levy up to five mills annually over a maximum of twenty years. The new bill would set the maximum at 3 mills up to ten years.
The added options are worth the lower cap, Smith said. The average rate imposed by districts with a sinking fund is around one and a half mills, according to the House Fiscal Agency. Only 12 districts levy more than three and would be affected by the cap.
The bill has passed the House and was reported favorably by the Senate Appropriations Committee in early September.
It has not yet been scheduled for a vote of the full Senate according to McCready’s legislative aide, Jason Lachowski.

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