From Dearborn Heights to Mancelona, voters in over a dozen school districts will see sinking funds on their ballots in the November 4 election.
Like operating millages and bonds, school sinking funds rely on local property taxes (also known as “millages”).
Sinking funds differ from school operating millages in a few key ways:
- Most homeowners also pay taxes for sinking funds. Operating millages only apply to secondary homes and commercial properties in most districts.
- Sinking fund money must go to “capital projects.” The funds cannot directly go to teacher salaries, utility payments, and other general costs.
Examples of capital projects include constructing new buildings or renovating and maintaining old ones. Schools could also use sinking funds to buy new security equipment, classroom technology, or school buses.
Sinking funds give districts smaller amounts of money over time instead of a big chunk of change all at once, like a bond. So this funding method is not always a great way to pay for big renovations or purchases.
However, these funds can help schools make small improvements and take on long-term maintenance needs without getting a loan or taking money out of the operating budget.
Citizens are asked to vote on sinking funds, giving them a chance to decide if the district’s proposed projects and maintenance needs are worth the tax.
That ends up being an opportunity for school leaders and community members to work out what a district’s priorities should be, said David Arsen. He’s a professor emeritus in education policy at Michigan State University who has studied the state’s school finance system.
“These proposals actually get a lot of vetting,” Arsen said. “These don't get on the ballot without a lot of discussion in local communities.”
While sinking funds can’t be used to directly pay salaries and electricity bills, Arsen said some districts end up having to use operating budget money for the sorts of things that sinking funds can pay for.
Questions and answers to help you decide which bubble to fill in for school sinking fund requests on your ballot:
Click on a question to go directly to the answer.
Where can I learn about what a sinking fund will be used for?
How can I make sure a district uses funds appropriately?
Can sinking funds be paid with existing taxes?
Where can I learn about what a sinking fund will be used for?
Districts often have informational web pages about these proposals which include project details, timelines, budgets and more. Some will even include images of the exact areas that need upgrades, replacements or repairs.
“You don't have to take hours, you know, ten minutes of searching on the website, you get a pretty good idea of what's being planned,” MSU professor emeritus David Arsen said. “And I think that's ... a good opportunity for citizens to get involved with things that matter in their communities.”
Arsen said there are typically a lot of opportunities for communities to get engaged through school board meetings and informational town halls as well as social media posts and videos.
“This is one area where we have local control and the proposals actually get a lot of vetting,” he said. “These don't get on the ballot without a lot of discussion in local communities … about what we need, what it should look like, where it should be.”
Local news outlets are also a great place to learn about these proposals, Arsen said.
How can I make sure a district uses funds appropriately?
While a sinking fund is in effect, districts are required to perform annual audits to ensure that money was used in a way that fulfills the proposal’s promises and follows state law. You can find audits for current and past sinking funds on your district's website.
The state's department of treasury reviews each audit. If the department determines that funds were misused, state law requires districts to pay money back into the sinking fund from their operating budget.
Can sinking funds be paid with existing taxes?
Yes and no. Districts can’t use their operating millage on a sinking fund.
But districts have been relying on bonds and sinking funds to handle facility needs for years. So, in some cases they can just ask voters to renew or extend an existing millage that was used to pay off a past bond or fill a lapsed sinking fund.
Dearborn Heights School District No. 7 in Wayne County is asking voters to extend a millage for 10 years at the current rate of about 4.7 mills to cover a sinking fund that will give the district $1.38 million annually. The district says the money would go to repairing roofs, bathroom upgrades and more.
Sometimes districts are asking for a new millage or an increase to an existing one.
