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What is a Sinking Fund?

A Sinking Fund is a way for residents to invest directly in their school system by keeping their tax dollars local.

In Michigan, a Sinking Fund is a millage levied to support school safety improvements, technology improvements, and the repair and construction of school buildings. It is a “pay as you go” system that does not require borrowing money or paying interest. The Sinking Fund millage is calculated using the taxable value of a home, which is usually about half of the assessed value. Under current legislation, a district can levy up to 3 mills for up to 10 years with voter approval. Sinking Funds cannot be used for things like regular maintenance, purchasing teaching supplies or textbooks, or paying teacher and administrator salaries. In fact, the law requires districts with Sinking Funds to keep these funds separate from other district accounts. Sinking Funds must also receive a separate audit each year to ensure they are being spent appropriately. However, having a Sinking Fund to pay for safety improvements, technology improvements, and repairs allows the district to preserve the money it receives from the state to support instruction, programs, and salaries.

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