State Rep. Ann Bollin this week voted to save Michigan schools millions of dollars by lowering interest rates for a bond program backed by the state.

Bollin, of Brighton Township, said the plan would update a state law that has schools paying 3-percent interest on certain bonds, even though market interest rates are currently much lower.

“It just doesn’t make sense to require local schools to keep paying higher interest rates when the market rate is so much lower,” Bollin said. “This common-sense plan will ensure taxpayer dollars are used as effectively and efficiently as possible.”

Local school districts with loans qualified by the state treasurer through the School Bond Qualification and Loan Program issue bonds using the state’s credit rating, typically resulting in lower interest rates. Qualified school districts may also borrow from the state to pay principal and interest requirements on its outstanding qualified bonds. Under current law, schools borrowing from the program must be charged interest at a rate that is the greater of 3 percent or the average annual cost of funds used to make qualified loans plus 0.125 percent.

If the artificial 3-percent floor were not in place, the Michigan Department of Treasury estimates the current interest rate would be 1.16104 percent. With approximately $486 million in loans currently outstanding to school districts around the state, the treasury department estimates the lower interest rate would collectively save Michigan school districts more than $8.5 million a year.

The plan, House Bill 5666, now advances to the Senate for further consideration.

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