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Legislature Expands Permissible Uses of a Sinking Fund

House Bill 4388 was recently signed into law as Public Act 319 of 2016. PA 319 amends Section 1212 of the Revised School Code to expand the permissible uses of a newly-approved sinking fund levy while reducing the maximum millage rate and duration of that levy.

Under the prior law, a sinking fund could only be used for the construction or repair of school buildings or to purchase real es­tate. Sinking fund dollars could not be used to purchase any loose equipment, which is critical for most technology and security im­provements. PA 319 changes that. For a sinking fund millage approved by voters after the effective date of PA 319 (likely mid or late March 2017, depending on when the current legislative session ends), sinking fund revenue may be used to purchase school securi­ty improvements and instructional technology in addition to traditional building and site improvements.

The statute’s definition of “technology” is the same as that found in Section 1351a for bonds and is, therefore, limited to in­structional technology. Accordingly, any instructional technology that could be purchased with bond proceeds may also be pur­chased with sinking fund revenue. A “school security improvement” is broadly defined to include any capital improvement or purchase designed to deter unauthorized entry of people or items onto school premises. As examples, the statute identifies metal detectors, locks, doors, lighting, cameras, entryway improvements, and mobile phone applications that allow school personnel to communicate with each other while also connecting to emergency services. Notably, that list is not intended to be exhaustive.

A sinking fund still cannot be used to pay for salaries, maintenance, operational costs (other than building repairs), school buses, or other equipment, except for instructional technology and security.

Importantly, the expanded purposes only apply to a sinking fund millage that is approved by voters after the effective date of PA 319. Any newly-approved sinking fund is limited to a maximum of 3 mills for 10 years. That is a reduction from the previously al­lowed maximum of 5 mills for 20 years. The millage rate and duration of a previously-approved and existing sinking fund is un­affected by PA 319, and the tax dollars collected for such an existing sinking fund millage cannot be used for “technology” or “security improvements.” If you have any questions about the amendments, please contact a Thrun Law Firm finance attorney.