Expanded Uses of Sinking Fund Proceeds

Effective March 29, 2017, Public Act 319 amended Section 1212 of the School Code (MCL § 380.1212) to allow additional uses for sinking fund proceeds. This amendment applies only to sinking fund millage authorized after this effective date.

The new amendment expanded the definition of permissible expenditures that previously did not allow for the purchase of equipment and furnishings. Under the new authorization, such items may be purchased with sinking fund resources, if they are for the following purposes:

• School security improvements – According toMCL §380.1212(6)(a), “School security improvement” means 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 costs or operation costs related to a capital improvement or purchase or related to a mobile telephone application. 

• Acquisition and upgrading of technology – According to MCL §380.1351a(5), “technology” means any of the following:
  • (a)Hardware and communication devices that transmit, receive, or compute information for pupil instructional purposes.
  • (b)The initial purchase of operating system software or customized application software, or both, accompanying the purchase of hardware and communication devices under subdivision (a).
    • §The “operating system software” is usually already loaded on laptops, tablets and other devices.
    • §The only application software that is allowed to be purchased with sinking fund proceeds is “customized application software.” However, no formal definition has been released as to what this covers.
• (c)The costs of design and installation of the hardware, communication devices, and initial operating system software or customized application software authorized under this subsection.
• MCL §380.1351a(3) also identifies certain expenditures that are not allowable:
  • (a)Upgrades to the operating system or application software.
  • (b)Media, including diskettes, compact discs, videotapes, and disks, unless used for the storage of initial operating system software or customized application software included in the definition of technology under this section.
  • (c)Training, consulting, maintenance, service contracts, software upgrades, troubleshooting, or software support.

As with all changes, individual determinations will continue to be made. The Michigan School Business Officials website contains a database of the sinking fund determination letters previously issued by the Department of Treasury. These letters can be found at http://www.msbo.org/sinking-fund. We also encourage school districts to reach out to their legal counsel for additional guidance. Members of Yeo & Yeo’s Education Services Group would also be happy to help with any questions.