SCHOOL BOND QUALIFICATION AND LOAN PROGRAM

[Shadowninja]

DEAREST READER...

AT WHAT POINT SHOULD EXISTING OBLIGATIONS TO THE STATE OF MICHIGAN BECOME PART OF THE CONVERSATION WHEN A SCHOOL DISTRICT ASKS VOTERS TO AUTHORIZE ADDITIONAL BOND DEBT?

Because I have a confession.

Until very recently, I didn't know this particular piece of Michigan school finance existed.

And I spend an unreasonable amount of time reading school budgets, audits, bond documents, debt schedules and Treasury records.

So if I didn't know about it...

HOW MANY ORDINARY VOTERS DO?

Welcome to another rabbit hole. 🐇📜

Michigan operates something called the SCHOOL BOND QUALIFICATION AND LOAN PROGRAM.

When a school district issues certain bonds that have been qualified by the State Treasurer, the district collects property taxes through its debt millage to make the principal and interest payments on those bonds.

But sometimes those collections aren't sufficient to meet the required debt-service payment.

Michigan has a mechanism for that.

Under the School Loan Revolving Fund, an eligible district can BORROW MONEY FROM THE STATE OF MICHIGAN to make up the difference and meet its qualified bond debt-service obligations.

That money isn't a grant.

It isn't forgiven.

IT'S A LOAN.

And it accrues interest.

Eventually, when the district's required debt millage produces more money than is needed for its current bond debt-service obligations, repayment to the state begins.

And here's where my spectacles nearly fell off.

As of September 30, 2024, Michigan school districts collectively owed approximately:

💰 $1.1 BILLION

in these state school-bond-program loans.

Read that again.

BILLION. WITH A B.

These balances are not simply the amount of a district's original voter-approved bond.

They represent outstanding loans within the state program that helped districts meet principal and interest requirements on their qualified bond debt.

And Treasury keeps a ledger.

District by district.

Balance by balance.

Whether they're currently BORROWING or REPAYING.

And how many YEARS IN FUND Treasury reports for each district.

That is the ledger I've started opening county by county.

But before I show you another county, I think taxpayers need to understand what they're actually looking at.

Because here's what bothers me.

When communities debate school bonds, the conversation frequently becomes painfully simple:

The schools need improvements.

The kids deserve good facilities.

Vote yes if you support education.

And vote no and somebody will inevitably suggest you simply don't want to invest in children.

Except school debt isn't a referendum on whether you like children.

IT'S A FINANCIAL TRANSACTION.

And voters deserve enough information to evaluate that transaction.

How much existing bond principal remains?

How much interest remains?

What is the current debt millage?

What other debt obligations exist?

Does the district have an outstanding balance with Michigan's school bond loan program?

Is it currently BORROWING from that program or REPAYING it?

How long has Treasury reported the district as participating in the fund?

And when is all of it projected to be paid?

Those aren't anti-school questions.

THOSE ARE INFORMED-VOTER QUESTIONS.

And here's another piece of context that matters.

Of Michigan's 537 local public school districts in 2024, Treasury reported that 389 had outstanding qualified bond debt.

But only 111 were participating in the School Bond Loan Fund, School Loan Revolving Fund, or both with a current loan balance.

So simply having qualified bond debt DOES NOT automatically put a district on this list.

That's important.

And it's precisely why I think voters should know when THEIR district is.

I'm not telling anyone that participation in this program means a district has done something wrong.

It doesn't.

I'm not telling anyone how to vote on a bond.

I won't.

I'm asking a much simpler question:

IF TAXPAYERS ARE BEING ASKED TO AUTHORIZE TOMORROW'S DEBT, SHOULDN'T THEY ALSO BE SHOWN THE OBLIGATIONS THEY'RE STILL CARRYING FROM YESTERDAY'S?

Because apparently there's another ledger.

And now that I've found it...

WE'RE GOING TO READ IT.

SOURCE: Michigan Department of Treasury

School Bond Qualification and Loan Program

2024 Annual Report

Receipts aren't very useful if we only keep the convenient ones.

With receipts and respect. 👑

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