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Rep. Lightner votes to save schools, taxpayers money with lower interest rates
RELEASE|February 17, 2022

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

Lightner, of Springport, 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.

“Local school districts – and, in turn, local taxpayers – are being forced by law to pay the 3-percent interest rate, even though market rates are much lower,” Lightner said. “This is a common-sense change that will allow for a more efficient use of taxpayer dollars.”

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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