Wall of debt could crush state’s role in funding school construction

Unless there is a major turnaround in the California economy in the next two years, schools may be looking at a future without financial support from the state for building new classrooms and upgrading old ones.

Earlier this month, a state senator who sits on the governing board of school facilities oversight issued a dire warning to school officials to not assume that there will ever be another school bond."

Last week, Sen. Loni Hancock, a Democrat from Berkeley and a member of the State Allocation Board, did not back away from her assertion that school districts could very well have to fund construction projects with little or no help from the state in the near future.

"I feel it's very important that we be very honest about the state's financial situation," Hancock said in an interview with Cabinet Report. "To keep taking applications on the assumption that there's going to be a [school facilities] bond, it's like ignoring the reality of the state's financial situation."

That reality is this: Existing bond authority for school construction will be gone in the next 12 to 24 months and there's growing concern about the voter appetite for approving more borrowing.

California's debt burden was recently estimated at between $167 billion and $335 billion - at least six times greater than the $28 billion Gov. Jerry Brown thought he faced when he entered office in 2011.

Brown's efforts to reduce spending and pay down the wall of debt' have included drastic budget cuts - especially in education funding; an overhaul of the public pension system, and asking voters to approve temporary tax increases this November.

That tax measure, Proposition 30, is critical to stabilizing California's budget, said Hancock, and will likely be a good indicator of how voters might react to a 2014 statewide facilities bond - the state's only source of funding for school construction.

"If Prop. 30 passes, it will stabilize the state and education funding, and that will be good for the chances of another bond, I would imagine," the Senator said. "Although, there's a limit to how many bonds you can have on the ballot, and if there's a water bond and a school bond, we may go over that tipping point of what bond holders are going to want to pay for."

Jon Coupal, president of the Howard Jarvis Taxpayers Association, said 2014 is too far out to predict how state residents might vote on a school facilities bond.

But, he said, if voters shoot down Prop. 30, that's probably an indication that they won't be inclined to vote for taxpayer funded initiatives in 2014.

"We don't see the credit of the state turning around significantly even in two years," Coupal said. "We hope that's not true but, right now, we just don't see it changing anytime soon."

Prior to 1998 when the School Facilities Program - as it exists today - was established, the state's contributions to school construction were mostly in the form of loans to districts that were approaching or likely to exceed their legal level of bonded indebtedness.

Since 1949, voters have approved 21 of 24 statewide bond measures related to school construction.

But it was Proposition 1A, a $6.7 billion bond measure passed in November, 1998, that established the School Facility Program and changed the methods by which funds are allocated.

Since then, the program has expanded to include some 15 sub-programs and doles out $35 billion to schools for construction and modernization. In the same time period, school districts have contributed $66 billion, most from locally-approved bonds.

Districts continue to seek local construction funding - there are 106 K-14 school bonds totaling $11.7 billion on local ballots this November.

Hancock's colleagues on the SAB know that without a 2014 facilities bond the state's ability to contribute to school construction funding will be nonexistent.

A number of board members, however, remain optimistic even as they explore options for revamping the School Facilities Program between now and then.

Assemblyman Curt Hagman, one of two Republican legislators on the SAB, said that education must be a priority in California and that there needs to be a state funding program for school construction.

"I think there will be a bond in 2014, but I also think there are some reforms we can compromise on," said Hagman, who has had discussions with fellow board member Assemblywoman Joan Buchanan about ideas for reducing program costs and streamlining functions. "I'm always optimistic that if we can come up with something both Republicans and Democrats support and worked together on that the general public will support it as well."

For her part, Buchanan, a Democrat, has committed to working tirelessly to see that a facilities bond makes the 2014 ballot and trying to convince voters to approve it.

There's also added incentive for the building industry to get behind a 2014 bond - steep fees on new construction that districts can charge in the absence of School Facility Program funding. Districts' ability to assess those fees was suspended in a trailer bill passed as part of this summer's budget packet; however, they kick back in if the Legislature fails to get a bond on the ballot or if voters reject the bond.

"Not having a bond would have a profound impact in so many ways," said Buchanan. "It would sort of turn things upside down for school districts."

Buchanan and Hagman, along with several other members of the SAB, were named to a subcommittee this month to begin looking into possible program changes as well as pre-bond planning.

In the meantime, school districts can continue to submit to the state project applications aligned to regulations that could change and which may never receive matching funds.

"If Prop. 30 does not pass, there will be massive cuts to ordinary education - just the day to day operation of schools," Hancock said. "What would make people assume that there will be another bond; that there will be a state budget that would have the capacity to pay the interest on the bonds?

"It seems to me we're going round and round on a discussion when, really, people who care about school construction ought to be out working to pass Prop. 30. Otherwise, it's like sitting and demanding that needs be met when there's no money to meet them."

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