(c) 2008 The McGraw ‑ Hill Companies 1 Financing Educational Facilities School Finance: A Policy Perspective, 4e Chapter 5

(c) 2008 The McGraw ‑ Hill Companies 2 Financing Facilities Fundamental difference is long term perspective (in what is generally a short term leadership environment) To this point our focus has been on current expenditures (operational budget) For facilities there is good reason to finance them over a longer period of time (capital expenditures or asset protection)

(c) 2008 The McGraw ‑ Hill Companies 3 The Link with Adequacy Recent school finance adequacy court rulings have included facilities as part of an adequate educational program –Comprehensive Approach: Facilities are part of providing adequate educational programs and must be updated –Focused Approach: Focus on facilities as way to generate court ruling on adequacy of funding system

(c) 2008 The McGraw ‑ Hill Companies 4 The Condition of School Facilities Lack of good data (RI regs now require asset protection assessment and plan) Few clear standards on “adequate” school facilities Accounting for deferred maintenance is not well defined (RI Bldg Regs require % of budget devoted to “maintenance”) Limited understanding of the costs to upgrade or replace facilities Savage Inequalities (Kozol 1992)

(c) 2008 The McGraw ‑ Hill Companies 5 The Condition of School Facilities NCES (Lewis et al., 2000) –One-quarter of campuses had at least one inadequate building in 1999 GAO (2000) –Increases in facility spending in the 1990s NEA (2000) –Estimated modernization costs $321.9 billion $268.2 billion for school infrastructure $ 53.7 for technology (not computers- but rather the infrastructure to support wide range of telecommunications and technology)

(c) 2008 The McGraw ‑ Hill Companies 6 The Condition of School Facilities NCES Did not find substantial differences in conditions of school buildings related to characteristics such as instructional level, enrollment, or location in city suburb or rural Did find that schools with more than 70% FRL more likely to have buildings in less than adequate condition

(c) 2008 The McGraw ‑ Hill Companies 7 Court Rulings Arizona – Roosevelt Elem Sch v. Bishop Ohio - DeRolph v. State Wyoming – Campbell County Sch Dist v. State Arkansas – Lakeview v. Huckabee California – Williams v. California

(c) 2008 The McGraw ‑ Hill Companies 8 Court Rulings Arizona – Ct. required state to implement program to assist districts to finance facilities

(c) 2008 The McGraw ‑ Hill Companies 9 Court Rulings California – plaintiffs alleged deteriorating and unsanitary facilities were proof that funding was inadequate State counter-suit alleged plenty of $$ but mismanagement at local level Consent Agreement state provided $ 1 B for infrastructure improvements

(c) 2008 The McGraw ‑ Hill Companies 10 Court Rulings Ohio - DeRolph v. State Wyoming – Campbell County Sch Dist v. State (rated condition of every school in state index $990 M) Arkansas – Lakeview v. Huckabee Courts ruled facilities are essential component of adequacy test

(c) 2008 The McGraw ‑ Hill Companies 11 Six Components of School Infrastructure Needs (NEA) New construction (replacement and enrollment growth) Deferred maintenance (pay now for what wasn’t done before) Renovation (modernizing dated facilities) Retrofitting (using for different purposes) Additions Major improvements to grounds

(c) 2008 The McGraw ‑ Hill Companies 12 Approaches to Financing Facilities General Obligation Bonds –“Borrow” funds from investors and repay over a longer term – generally 20 years Interest is tax free to investors reducing the cost to borrower districts Equity issue due to variation in property wealth of school districts –Most states require voter approval

(c) 2008 The McGraw ‑ Hill Companies 13 State Assistance for School Facilities Flat Grants Equalization aid –Long term impact and commitment creates funding difficulties Basic support Full state support Other options –Lease purchase agreements –Leases –Rental of school space –Local option sales taxes –Developer fees –Sinking funds

(c) 2008 The McGraw ‑ Hill Companies 14 Other Issues that Impact Facility Financing Voter Approval –Bonds typically require voter approval Debt Limits Other jurisdictions that actually issue the bonds and/or pay for facilities

(c) 2008 The McGraw ‑ Hill Companies 15 Impact of Facilities on Student Performance Early research seemed to find a relationship –The research was generally poorly done Recent findings from Wyoming suggest little or no relationship between facility quality and student performance

(c) 2008 The McGraw ‑ Hill Companies 16 Summary Facility funding is an important, but different component of school finance due to the long term nature of the funding need Recent school finance adequacy cases have included the condition of school facilities as a component of adequacy There are potential equity concerns with traditional approaches to facility funding The potential cost of providing equalization aid for facilities is high The link between quality facilities and student performance is not clear, although all students should be able to attend safe, clean schools