The sums becoming due to any school district shall be disposed of in the following order of priority and for the following purposes and for no others:
To discharge the principal and interest due the commission by reason of any advance or loan made to any such school district by the commission;
To be applied by the school district, subject to the approval of the commission, to defray the cost of any capital improvement;
To pay the principal and interest of school district indebtedness represented by bonds or notes issued before July 1, 1954, for capital improvements, provided that the capital improvements for which such bonds or notes were issued fulfill the rules and requirement for new capital improvements and district organization as provided by the commission, or for bonds or notes issued on or after July 1, 1954, for capital improvements which have been approved by the commission as provided in this chapter.