Call for single grant support for school facility needs
(Calif.) The state should abandon its nearly 20-year-old school construction program in favor of a finance model similar to Gov. Jerry Brown’s Local Control Funding Formula, the non-partisan Legislative Analyst’s Office said Tuesday.
In a report to the Legislature on school facilities, the LAO recommends that instead of relying on voter-approved bonds to help pay for construction and upkeep, the state should create a grant program that awards funds based on student attendance and district need.
“Problems suggest a new School Facilities Program is in order,” the LAO wrote in 2015-16 Budget: Rethinking How the State Funds School Facilities. “We believe the current system is not well-equipped to meet state and local school facility priorities.”
The report comes two years after Brown initially targeted the School Facilities Program as being in need of reform. In its report, the LAO shares many of the governor’s concerns about the program, agreeing that it has become overly complex, prescriptive, unfair and expensive.
As of 2015, the LAO reports, the state still owes more than $50 billion in principal and interest on K-12 school facility bonds going back to 1988. According to the state treasurer, the state will pay an average of $1.7 billion annually until the outstanding debt is paid off – expected to be 2044.
District administrators and facility advocates argue that while the current facilities program, created in 1998, could be tweaked to be less cumbersome it has served schools well, providing $35.4 billion for facilities in that time.
But because this money is awarded on a first-come, first-served basis to districts with approved projects and matching funds, critics say, it provides an unfair advantage to LEAs in wealthier communities or with dedicated facilities staff who are able to navigate the system.
Under the LAO plan, the Legislature would provide an annual grant amount for school facility needs based on the replacement value of existing school buildings as well as an estimate of the average useful life of the buildings.
“The state would then provide annual funds to school districts to cover a minimum share of this expected cost (districts with fewer local resources would qualify for a higher state share…),” said the LAO, offering formulas for calculating what the state’s share might be.
Grant funds would also be awarded on the basis of student attendance, and the monies could be used for any building needs, including new construction, modernization or major maintenance. Districts would be able to supplement these state dollars with revenue from local bonds, developer fees and operational funds, the LAO suggests.
If the state adopts a new facilities funding structure, said the LAO, as with the LCFF, districts receiving money from the program should be required to adopt five-year “facility accountability plans” in which they detail how they plan to address unmet maintenance needs as well as future facility needs.
Of note in the LAO report is the agency’s recommendation that during the transition to the new program the state could reduce a district’s grant funding based on the amount of debt service the state is currently paying for that district. Districts for which the state is not paying debt service would not have their grant funds reduced, the LAO said.
State lawmakers, however, have voiced their support in recent years for continuing the existing program – last year backing legislation that would have put a new facilities bond on the ballot until Brown stepped in to squelch final approval.
Two new, similar bills have been introduced this year, and in this session’s first policy hearing on the subject held last week, members of the Assembly’s Committee on Education expressed opposition to dismantling the existing program.
According to the LAO, data from the State Allocation Board, which oversees the School Facility Program, shows that about 865 school districts (91 percent of all districts) have participated in the SFP.
Data from the California Debt and Investment Advisory Commission revealed that school districts have authorized at least $75.2 billion in local bonds for school facilities since 1998. The LAO pointed out that the commission did not collect data for the 1999 and 2001 elections, so the actual total is likely slightly higher.
School districts have also levied $9.4 billion in developer fees since 1998, reporting a peak of $1.1 billion annually in 2004-05 and 2005-06 and a low of $210 million by 2010-11 in the aftermath of the housing crash. Developer fees averaged $585 million annually from 1998-99 to 2013-14, the LAO said in its report.
The SAB also reports that it has received applications for $1.2 billion in school facility projects since the state exhausted bond authority in core programs.
Of this total, $393 million in applications (multiple project types) have been approved, $490 million in applications are for new construction projects that have not been reviewed, and $331 million in applications are for unapproved modernization projects.