By Michael Bielawski
Lawmakers are stumped with how to fund an anticipated $300 million in school infrastructure upgrades per year over the next two decades.
“The crux of the issue we are wrestling with is how to shift some of the cost for school construction off of the property tax,” said Chris Rupe, an Associate Fiscal Officer for the State of Vermont to the State Aid for School Construction Committee. He spoke to the committee when they met on Nov. 12.
The huge annual spending lift over the next two decades is needed in part because 17 years ago, the Legislature stopped providing construction help to school districts.
Vermont historically provided construction aid to school districts in the Capital Bill, according to a Feb. 1 report to lawmakers. Prior to 2007, the General Assembly had been spending about 20 percent of the total capital funds available (about $10 million per year) on school construction and had also appropriated one-time General Fund revenues to help pay down State obligations.
But in 2007, the General Assembly suspended State aid for school construction. Under the suspension, no State aid was authorized for school construction except for emergency aid and certain consolidation projects.
During the suspension period, it was the intent of the General Assembly to use the time to develop a plan for State aid. The General Assembly extended the suspension in 2008, 2009, and 2013. The 2013 extension declared the intent to maintain the suspension until FY2016 in order to finish paying for projects for which state aid has been committed prior to the suspension, and the suspension remains in place currently.
The State continues to provide certain limited aid to schools on an emergency basis, and has identified funding to assist with the costs of PCB testing and remediation.
Committee playing catch-up on school upgrade planning, financing
The committee is tasked to set policies for schools to follow as they choose projects and proceed with planning, financing, and other tasks.
Property taxes have recently become a sensitive subject in Vermont politics. They were up more than 13% this year, and would have been higher were it not bought down with one-time revenues.
Rupe warned that the money necessary to fix these schools is not readily available, it must come from a yet-to-be-dermined source.
“There is no obvious, magic way to miraculously raise $300 million per year without very difficult choices,” concludes the document titled Considerations for Funding School Construction, put together by Rupe.
The latest version of the funding document that the committee will eventually vote on is the School Construction Governance Draft 2.1.
No obvious funding source
Rupe warned that the usual funding source for large school construction projects is restricted.
“The State Capital Bill that had funded the existing school construction program is severely constrained fiscally,” he told the committee. “The Capital Debt Affordability Advisory Committee [CVAAC] just voted a couple of weeks ago actually to lower its general obligation bond limit from $54 million a year to $50 million in a year for the next few years.”
He explained some of the market forces at play, including rising costs.
“So given the needs out there and what’s going on in the cost of construction in general as well as the state’s ability to get money out the gate and spend money, some of those factors have led to CVAAC modifying their recommendation,” he said.
Rupe said it is important to start the funding process right away.
“I can not stress this enough, it is if you all want long-term success, and funding this as a priority, it’s vitally important to have a funding request come to the legislature at the front end of the budget-development process,” he said.
He humorously added, “If you are expecting me to find $300 million for the next 20 years, you are going to be thoroughly dissatisfied by my slides.”
Different options for financing
Lawmakers are considering a new fund to be specifically for school construction projects. Rupe’s funding document states, “One option could be to create a School Construction Special Fund as the accounting mechanism for managing the funds and retaining interest on those funds within the program, if specified. The Big Bill [the state budget] could appropriate funds from this Special Fund each year to pay for debt service grants to schools.”
Other options include working with the Vermont Bond Bank to get bonds with low and tax-exempt interest rates, there are revolving loans with lower-than-market interest rates, and there are private/public partnerships.
Uncertain future
Rep. Erin Brady, D-Williston, the committee chair, noted that the whole state education financing system will likely change as these projects progress.
“There is a good chance that our education financing system will look differently in the coming years so as we are thinking about all this, we shouldn’t become too fixated on the current system,” Brady said.
The committee did not vote on the funding bill on this day, but they agreed that they would try to wrap up their work before the end of the year.
The author is a writer for the Vermont Daily Chronicle