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Michigan
Senate
Committee Tired of State Paying Schools'
Interest
MIRS, May 12, 2005
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A Senate appropriations
subcommittee moved today a package of bills designed to end
school districts' ability to stick the state with the interest
costs of whatever state-issued bonding debts they can't pay off
in a timely matter. It allows the state treasurer to give
districts a deadline for paying off their debts.
The Senate Appropriations K-12, School Aid and Education
Subcommittee gave their blessing to the package —
SB
0406,
SB
0407,
SB
0408,
SB
0409,
SB
0410
and
SB
0411
— that repeals the School Bond Loan Fund Act and replaces it
with the “School Bond Qualifications, Approval, and Loan Act.”
Under current law, the state is required to make loans to school
districts for certain capital construction projects.
Essentially, the program works like this: A school district may
issue state qualified bonds for a capital improvement, like
build a new school, and, with voter approval, levy a property
tax to repay those bonds.
If that tax levy doesn't raise enough dollars to pay the
principal and interest on those bonds, the district can borrow
the difference from the state to pay bondholders. Those loans
now total around $700 million.
In order to make those loans, the state borrows money and incurs
debt service costs, and these costs grow over time, because the
rate at which school districts repay the state is slower than
the rate at which the state must pay its debt.
Currently, the state's debt service cost on this borrowing is
about $40 million, but it could grow to as much as $200 million
in 15 years. This occurs because, under current law, a school
district can postpone the repayment of its debt to the state if
it issues bonds for a second construction project before
repaying the state for the first project. As a result, the state
is repaying debt more rapidly than it receives payments from
school districts.
The main bill in the package,
SB
0406,
would, among other things, change that. For school districts
that currently have an outstanding loan with the state, the
state treasurer would review the district's property tax value
and debt service information and establish a repayment date for
those loans.
The repayment date would be the earlier of the date that the
district could repay the state, based on its taxable value and
debt service information, or five years after the date on which
the bonds were due to be paid off.
For new borrowing, the loans would have to be repaid on a date
that is established by the state treasurer when the school
district's bond issue is approved, but no more than five years
after the bonds are paid.
SB
0407
creates the School Bond Revolving Fund (SBRF), from which future
loans would be made.
SB
0408
requires the repayment of loans from the SBRF to be deposited
back into it.
SB
0410
would allow the state treasurer to withhold all or part of a
school district's State Aid payment, if the district defaults on
its repayment schedule.
SB
0411
would make it a felony to lie or conceal material information to
get state approval for a bond issue, or to improperly use the
proceeds.
Legislation Targets Out-of-State Child Placements
MIRS, May 12, 2005
Rep. Dudley Spade (D-Tipton) and Rep. Roger Kahn (R-Saginaw)
have introduced legislation designed to reduce the number of
children in abuse/neglect, or delinquency cases that are sent to
out-of-state youth programs by state or county judges.
HB 4783, sponsored by Spade and HB 4784, introduced by Kahn,
would prevent state money from being used toward out-of-state
placements.
"Although Michigan's network of public and private child care
providers is ranked very highly compared to other states in the
nation, as of this week the state government has over 600
children currently placed in out-of-state programs, far away
from their families," Spade said. "This number does not even
include those children placed out-of-state directly by counties.
This bill would work to significantly reduce that number."
Currently under Michigan law, a child cannot be sent
out-of-state unless the program to which he or she is being sent
offers a special program not available in Michigan.
However, according to proponents of the proposed legislation,
there is no requirement that the specialty be in an area that
would benefit the child and there is little practical control on
the programs being used. Placement of juveniles is, depending on
the situation, controlled either by the state or local county
government. In either case a portion of the costs are covered by
that county and the rest by the state.
"The bills would stipulate that if a child were to be placed
outside of Michigan, no state monies would be contributed toward
those placements," Spade said. "This does not prevent counties
from sending children to out-of-state facilities if they truly
believe that it is necessary, but would significantly reduce the
number of unnecessary out-of-state placements and keep many
children closer to their families while promoting Michigan's
economy. I can say from experience that Michigan's current child
care programs are fully capable of serving these children."
The bills have been referred to the Committee on Family and
Children Services.
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