Study: State should increase, overhaul school construction bonds

Nov 30, 2015 by

By John Fensterwald –

The state’s system of school construction and upkeep is inadequate and inequitable, with districts serving low-income students more often underfunding construction, then overspending on patching up facilities that needed major renovations, a new research study has found.

“California must bolster – not recede from – its role in the state-local funding partnership for K-12 school facilities,” concluded the paper by Jeffrey Vincent, deputy director of the Center for Cities + Schools in the Institute of Urban and Regional Development at UC Berkeley. “Moving forward, the state should ensure that all school districts can reasonably meet both maintenance and capital investment needs” by combining local dollars with “stable and predictable state funding.”

The release of the study, with new data showing disparities in facilities funding, is well-timed. School construction could become a contentious issue in Sacramento next year.

With voters last passing a state-funded construction bond in 2006, the state has run out of money, with about $2 billion dollars worth of state-approved district projects waiting for funding. A coalition of school districts and building and design contractors, the Coalition for Adequate School Housing or CASH, already has gathered enough signatures to place a $9 billion bond on the November 2016 ballot. About $2 billion would be dedicated to community colleges and the rest divided among K-12 districts, charter schools and technical education partnerships. But Gov. Jerry Brown, in his budget message last year, said that the state should not take on more school construction debt and that local districts should increase their contribution.

Voters have passed $35 billion in school facility bonds since 1998 that, together with matching funds from school districts and developers’ fees, have raised $100 billion for school construction projects. The state is on the hook for $50 billion in interest and principal – $1.7 billion annually for the next three decades. Instead of floating bonds, Brown said the state should contribute a smaller share of construction costs annually through the general fund and target it to school districts without the capacity to issue their own bonds.

Without Brown’s blessing and the backing of the California Teachers Association, which has yet to take a position, the school coalition could struggle to get the $9 billion bond passed. As a result, school construction leaders and state Department of Finance officials have started discussions to see if they could agree on a new funding framework – perhaps, as an alternative, a smaller bond, based more on districts’ ability to pay.

The Center for Cities + Schools’ study agreed that a new formula for allocating facility funding should be weighted toward districts based on financial need. But it also called for more state money. It found that 62 percent of districts failed to meet the industry spending standard (3 percent annually of the current replacement value of the facilities) on maintenance and operations, and more than half aren’t meeting the standard (2 percent annually of the current facilities’ replacement value) for spending on major renovation and modernization projects. Those districts that met the target for renovation spent on average about $2,000 more annually per student in state and local bond money than those that didn’t meet the standard for spending.

Vincent said the federal data probably understated the spending shortfall, since the maintenance data included the costs of school security, which is expensive in urban schools, and the federal data for capital spending included new construction as well as modernization.

The study examined 2008-2012 federal data, which coincided with the recession, when districts cut back spending. The Legislature also waived the requirement that districts spend 3 percent of their budgets on building maintenance. Most districts reduced or even eliminated spending on buildings as a result. Vincent said that data were the latest available ­and pointed to another problem: The state doesn’t collect extensive data on capital and maintenance expenses and doesn’t require districts to inventory their needs – one of the report’s recommendations.

The federal data show significant disparities in spending among districts by taxable property and family income. Districts that met neither capital spending nor annual maintenance spending benchmarks on average had only about 33 percent of the property wealth per student that higher-spending districts had. Districts with the highest assessed property values spent nearly four times more per student on capital needs. Assessed value per student is an indication of a district’s ability to issue long-term bonds.

Districts with the least taxable wealth per student spent more each year on maintenance, out of their operating budgets, than they did on capital projects; property-rich districts spent more on capital projects than maintenance. Although there are some high-wealth districts serving mainly poor kids, there is an overall correlation between family income and a district’s property values. The study found that districts with the highest percentages of low-income families also spent nearly twice as much per student annually on repairs and maintenance than on capital projects. The implication is that some students are attending decrepit, perhaps unsafe and unhealthy schools, needing emergency work, the study said.

“Remember,” the study said, “that inadequate capital renewal spending leads to expensive critical and emergency repairs. Schools that operate with obsolete or worn out systems, components, and equipment require more attention to maintenance and repair.”

Calls for reforming allocation formula

The coalition’s proposed bond would perpetuate the current allocation formula, in which the state matches new construction projects dollar for dollar and pays 60 percent of the cost of modernization and renovation projects. There would continue to be a hardship provision, in which the state would pay up to 100 percent of the project, for districts that cannot afford to pay for buildings urgently needing repairs. That provision has funded about $3.5 billion – 10 percent – of the $35 billion that the state funded for construction since 1998, said Bill Savidge, the recently retired assistant executive director of the State Allocations Board, which oversees state construction funding. San Bernardino Unified, in a financially stressed city with a large percentage of low-income students, is an example of a large district that qualified for assistance, he said.

But Vincent said the state should consider revising the allocation system, in which state money is distributed to districts with approved projects on a first-come, first-served basis. It favors wealthy districts and big districts, like Los Angeles Unified, with large full-time facilities staff who can get the applications done quickly. “There are small, rural districts that have never passed a school bond,” Savidge said.

Vincent said in an interview that the state has a responsibility to make sure all children have safe and adequate buildings. He noted that Proposition 39, which provided $500 million annually for energy conservation projects in schools and community colleges, distributed the money on a per-student basis, not first-come, first-served.

The report noted that at least 23 states adjust for local wealth in their facility funding formulas. Adopting such an approach would align school facilities funding with the more equitable approach to general funding under the Local Control Funding Formula, it said.

Savidge agreed that it’s time to take another look at the first-come, first-served system, particularly if the Brown administration insists on a smaller state role in construction funding. “If we have limited funds, we have to find a way to establish financial need and to rank projects by health and safety or by priority, like career tech,” he said.

Source: Study: State should increase, overhaul school construction bonds | EdSource

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