1. Finance in Education Chapter 11

2. Capital Funds Capital funds are generally used for fixed assets, equipment, construction projects, and purchase of property. Debt services were included as part of capital outlay. Presently, it is a separate budget category. It includes expenditures for principal and interest on bonds, leases, and long-term financial obligations.

3. Capital Funds For many years, revenues for capital projects were generated solely by local property taxes. Most school districts were able to finance their own capital-outlay expenditures without assistance. Their school building problems had not yet reached the magnitude they have attained in recent years.

4. Local Support One of the strong traditions that began to develop dearly in school finance history ws that capital-outlay costs were of local concern only, in spite of strong and almost universal acceptance of state responsibility for education. These traditions are open to serious debate, but the general acceptance of this local responsibility, and the almost complete indifference on the part of state governments, is a matter of open record.

5. Local Support Complete local responsibility for financing the current expenditures of school districts was eliminated inmost states in the early part of the twentieth century, with the advent of state grants of various kinds of local districts. Financing the construction of school buildings has not yet made such progress; such financing is still largely a local responsibility in most of the states.

6. Factors Restricting Local Responsibility The property tax may once have been a reasonably fair measure of taxpaying ability, but it is not so today. Using property tax payments exclusively for capital out-lays repudiates our long-term belief in taxing people in terms of their ability to pay for education.

7. Capital Outlays and the Federal Government Financing at local school district facilities at the state level has been a low-priority item, and dew states have yet developed an equalization formula for this purpose. One of the goals of a survey administered by the General Accounting Office in 1995 was to build support in Congress for legislation to modernize America ’ s public schools.

8. Equalization of School Building Costs One of the major factors that has restrained many districts form needed construction has been the low assessment value of their taxable property. Largely because of such low assessment values, most school construction has been financed by some form of bonding.

9. Capital-Outlay Finance Plans Pay-as-you-go financing – The quickest and easiest way of getting necessary resources from the private sector to the public sector. It eliminates the expenditures of large sums of money for interest, costs of bond attorney fees, and election costs.

10. Capital-Outlay Finance Plans Building Reserve Plan – the accumulation of tax funds to be held in reserve for future building needs has been practiced in a few states; in some other it is illegal. This plan provided for spreading construction costs over a period of time before the buildings are erected.

11. Capital-Outlay Finance Plans Bonding – The most common of all local programs for financing capital-outlay and debt-service expenditures. The process involves obtaining taxpayer favor for the district to issue ling-term bonds to obtain funds to construct buildings and provide other facilities. They are required in districts with low assessed valuations of property, where tax revenues are not large enough to finance building costs on a current basis, and where the accumulation of reserve funds is either impracticable or illegal.

12. Financing School Facilities School-building funds allocated by state to local districts should be disbursed on an equalization basis, just as operating funds are. Property taxes should not bear the entire cost of financing school facilities. Increasing the amount the state pays for financing such facilities, of course, outs the burden of taxes on forms of wealth other than real property.