(Source: MIRS.news, Published 02/21/2023) Local school districts could use sinking fund ballot proposals to cover school bus purchases under
SB 63, sponsored by Senate Education Chair Dayna Polehanki (D-Livonia), which is now headed to the full Senate.
“It's an unfortunate name for something that's mostly good in my mind, but sinking funds are voter-approved measures that allow for the purchase of things like real estate, the construction or repair of school buildings and most recently, school security improvements or the acquisition or upgrading of technology,” Polehanki told her committee.
According to organizations like the Michigan Association of Superintendents and Administrators, a sinking fund is defined as a savings account into which a school district can put voter approved local mileage revenue for the purpose of financing projects or repairs as they emerge. Ultimately, a voter approved sinking fund operates like an interest-free alternative to bonds.
At Tuesday's Senate Education Committee hearing, where the bill was ultimately reported to the Senate floor, Jennifer Smith of the Michigan Association of School Boards made it clear that the ballot language would still need to specify what a sinking fund would be used for under the legislation, and how districts are currently using general operating dollars to fund transportation.
Smith, whose group supported SB 63, said that a school district could use a bonding mechanism to buy school buses "but sinking funds are less expensive for the taxpayers than bonds."
"Some of our biggest advocates for this change have been from those rural districts. They may have five to 10 times the miles to cover by bus than a suburban or urban district may, and this requires their buses to be purchased more often," Smith said. "Even though they may not have the high property values you would see in the suburbs or urban areas, this change would still be beneficial because it will lessen the amount of dollars taken out of the classroom in order to buy transportation."
According to R.J. Webber, superintendent of Northville Public Schools (serving Novi Township, Northville and parts of Novi, Lyon Township and Salem Township), the average price-tag of a new school bus is $125,000 with each vehicle "requiring constant top-level maintenance due to the preciousness of who they transport."
Webber said Northville Public Schools presently has a fleet of 42 school buses, and each one is required to be purchased with general funds or bond money. He said all maintenance and fuel expenses are paid for through the district's general fund, "impacting what goes into our classrooms."
Michael Zopf, the assistant superintendent for finance and operations at Northville Public Schools, said 30% of the district's 7,130-student population utilizes district-provided transportation.
"Our transportation operating budget is $2.3 million," Zopf told the committee. "With a replacement value of $5.3 million at current pricing, our bus replacement plan is to purchase four to five buses each year, and this is where SB 63 would provide flexibility to our district and to other districts at zero cost to the state."
Zopf said in December 2022, the district issued a purchase order to acquire two regular education buses and two special education buses for the amount of $527,924. He said by authorizing districts to place a sinking fund proposal forward, they would be enabled to relocate general fund resources to student programming.
“Another reason to support SB 63 is that eventually, electrification of district bus fleets will provide a safer and cost-effective transportation option for our students, requiring the decommissioning and replacement of diesel fuel buses," Zopf said.
The legislation, with a substitute originally intending the new sinking fund permission to cover vehicle maintenance expenses, was adopted by the committee 6-1, with Sen. Ruth JOHNSON (R-Holly) opposing it.
SB 63 was opposed by business-focused groups like the Grand Rapids Chamber, the Michigan Chamber of Commerce and the Small Business Association of Michigan.
In a letter to the committee, Director Leah Robinson of Legislative Affairs and Leadership Programming for the Michigan Chamber of Commerce referenced Proposal A of March 1994, which was approved by voters to eliminate property taxes from being used as the primary source of funding for K-12 education.
"SB 63 expands the original intent of the sinking fund and is fiscally unwise because it would allow short-lived assets like school buses to be paid for by debts repaid over 10 or 20 years," Robinson said. "The more uses for sinking funds, the more likely districts will impose sinking fund mileages on taxpayers. Furthermore, expanding sinking fund backtracks to ask taxpayers to raise millage rates and increase property tax rates on residents and businesses (who get no say in the vote for the millage increase)."
The Michigan Chamber of Commerce recommended using remaining American Rescue Plan funds left over from the federal government to fund transportation without the requirement of a tax rate increase.
