A Michigan district planning capital work is usually drawing on three pockets: bond proceeds, sinking fund revenue, and the general fund. They are not interchangeable. Each carries its own legal restrictions, its own timing, and its own political cost, and matching the wrong scope to the wrong pocket is one of the more expensive administrative mistakes a district can make.
Bond proceeds
Bonds are borrowed money, approved by voters for a described scope, and repaid over time through a debt millage. They are the right instrument for large, discrete, capital-intensive work: new buildings, major additions, whole-building renovations, significant systems replacement across a district.
The constraint that matters: you asked voters to approve a described scope, and that description binds you both legally and politically. Bond language written before design exists is nearly always more optimistic about what the money covers than reality turns out to be. That is why the first thing a district should do after a bond passes is reconcile the promised scope against current costs, which we cover in the first five decisions after a bond passes.
Where districts get it wrong: treating the bond as one pot rather than a sequence. The buildings scheduled last are usually the oldest, carry the most unknowns, and arrive after inflation has eaten the margin. Sequence the riskiest buildings early, when contingency still exists.
Sinking fund revenue
A sinking fund is a voter-approved millage levied for a limited term that generates cash annually rather than borrowed principal up front. Because it is pay-as-you-go, there is no interest cost and no debt on the books, which boards tend to like.
The constraint that matters: allowable uses are defined by statute and are narrower than bond proceeds. Historically this meant construction and repair of school buildings and site work, and the permitted list has been expanded over time to cover additional categories. What has generally stayed outside the boundary is operating expense: you cannot use it to pay salaries or run programs.
The planning constraint: cash arrives annually. A sinking fund suits a rolling program of roof replacements, envelope work, paving, mechanical upgrades, and building repair sequenced over years. It does not suit a single project that needs all its money on day one, unless the district banks revenue for several years first.
Where districts get it wrong: scoping a project against sinking fund revenue without confirming the specific work qualifies under current law. The failure shows up late, during an audit or a bond counsel review, after design is done. Ask the question before the scope is set, not after.
General fund
General fund dollars are the most flexible and the most contested, because every dollar spent on a building is a dollar not spent on instruction. Realistically this covers small repairs, emergency work, furniture and equipment that falls outside other sources, and the staff time to run a program.
Where districts get it wrong: using it as the shock absorber. When a bond project runs over, the pressure to close the gap from the general fund is immense and it is nearly always the wrong answer, because it converts a one-time capital problem into a recurring instructional one. A guaranteed maximum price exists precisely so that gap never opens.
Why this shapes design, not just accounting
Districts often treat funding source as a business-office question to be resolved separately from design. It is not. The source determines what can be in scope, when money is available, and therefore how the work has to be phased.
A practical example: a district wants a secure entry vestibule, a new roof, and a media center renovation at the same building. Depending on the current statute and the district's specific authorizations, those three may draw on three different sources with three different timelines. Designed as one project against one budget, it will not survive review. Designed with the funding structure understood up front, it can be sequenced so each piece is paid from a source that legitimately covers it.
This is exactly the work a Design Framework Report does before design money is committed: match scope to source, phase to cash availability, and produce a plan the business office, the board, and bond counsel can all sign off on.
A short checklist before you commit scope
- Confirm current allowable uses with counsel, not with the last program's assumptions
- Map every scope item to a specific source before design begins
- Check cash timing, not just total dollars, against the construction schedule
- Decide in advance who authorizes moving scope between sources, and how that is documented
- Keep the reconciliation current, so the board is never surprised in public
Keep reading on the first five decisions after a bond passes and the facility master plan that wins a bond election.