Interest Rate Cut to Save Michigan School Districts $8 Million
LANSING, MI — School districts in Michigan will see immediate savings thanks to recently enacted legislation that lowered the school loan revolving fund interest rate.
The legislation, sponsored by State Sen. Roger Victory, R-Hudsonville, is intended to reduce borrowing costs for school districts participating in the School Bond Qualifying and Lending Program during periods of low interest rates.
The bill, Senate Bill 618, adjusts the interest rate that is assessed on loans under the School Loan Revolving Fund (SLRF) to 1.19%. Governor Gretchen Whitmer estimated this week that the adjusted rate will save local school districts about $8 million in interest.
Whitmer celebrated the bill’s signing in a statement Monday saying she would “work with anyone” to continue making educational investments that benefit schools and students.
“Through these cost savings, we will have even more resources to invest where they matter most: our students, our teachers and our classrooms. I am proud of the work the Michigan Legislature and I have done to close the funding gap between districts and increase per-student funding to its highest level ever,” Whitmer said in a statement. “As we look to the future, we have a huge opportunity to continue saving money for school infrastructure, by providing our students with safe and well-equipped learning facilities. We want parents to know their children are safe, supported and successful, and I will work with anyone to continue to make historic investments in education so we can help every child thrive.
The School Loan Revolving Fund (SLRF) is an independent fund that provides loans to school districts to help them make debt service payments on qualified bonds issued by the state under the Qualifying and Loaning Program. school obligations.
The fund was created in 2005 with an interest rate floor of 3%. With the lower interest rate, the 124 school districts participating in the program should begin saving immediately, according to the Treasury Department press release.
Any money repaid by school districts on loans made by the SLRF is deposited in the fund for future use. In order to borrow from the state to service the debt, the district must have the bond issue qualified and must levy a minimum of 7 thousandths.
The SLRF rate is calculated quarterly and is based on the cost of the program. Participants must submit an application authorized by the Board of Directors, due August 1 each year.
The School Bond Qualifying and Lending Program provides a credit enhancement and state lending mechanism for school district bond issues. The bonds must be qualified by the state treasurer and the bond proceeds must be used for capital expenditure purposes.
School districts can receive state credit rating through the program, which generally results in lower interest rates and costs. It also allows districts to borrow from SLRF. To borrow from SLRF for debt servicing purposes, a district must raise a minimum of seven debt mills and enter into a loan repayment agreement with the state.
“This fund is an important tool for school districts,” said state treasurer Rachael Eubanks. “Lowering the interest rate means local communities can save money for taxpayers, or they can spend more property taxes on building and improving school facilities rather than paying interest on the property. ‘State.”
ALSO ON MLIVE:
Work remains to end disparities caused by K-12 funding gap, advocates say
Betsy DeVos says ballot initiative would allow parents to ‘take control’ of Michigan education