Transfer of new construction funds just a step in getting new money for schools
The State Allocation Board is expected Wednesday to approve the transfer of $800 million in bonding authority from a lightly used account to the School Facility Program, New Construction Fund.
While the move is critical to replenishing funding for new school projects in the future, it is somewhat symbolic since selling the state bonds remains problematic given the still troubled credit market and Californias poor credit rating.
Once the bonds are sold, however, the transferred funds will provide a badly-needed shot in the arm for school facility planners that have seen resources depleted over the last year and especially since December when loans from a critical public works pool were cutoff in response to the states cash crisis.
The transfer would be drawn from the Proposition 47, 2002 Unrestricted Critically Overcrowded School Facilities Fund. State regulations allow the board to transfer the money to be used for any new construction purpose.
Staff at the Office of Public School Construction said that there is $840.7 million left in the Unrestricted Critically Overcrowded School Facilities Fund, but they are recommending the board leave $40.7 million as a reserve.
Even if the allocation board approves the transfer, it is not clear when new money would be flowing.
Rob Cook, executive officer of the Office of Public School Construction, said schools draw money from a multi-billion public works construction fund overseen by the Pooled Money Investment Board, which is chaired by the state treasurer.
The investment board froze new loans from the construction fund in December in an effort to protect the states cash reserves during the months-long budget standoff. Although lawmakers and the governor agreed last week to a new spending plan they hope will close the states $42 billion shortfall, the investment board has not yet rescinded the December action.
A special meeting of the investment board is expected soon to consider lifting the freeze.
But the public works pool is funded with the proceeds from an almost continuous sale of state bonds such as the Proposition 47 bonds. Thus, even if the investment board decides to begin loaning out of the public works pool again, they face the problem of selling new bonds in a still skittish credit market.
Meanwhile, the recession and the drawn-out budget battle has left California with the nations lowest credit rating. Thats a big problem, Cook said, because some institutional investors that are the normal consumers of large municipal issues, may not be legally allowed to buy California bonds because of their low rating.
Assuming that such challenges can be overcome, however, Cook said that school administrators should be aware that the new money coming from Proposition 47 would be subject to Labor Compliance provisions something money from Proposition 1D bonds were not.