Senate leaders still cool to the idea of borrowing
The divide between leadership of the state House and Senate over how to pay for billions in school construction needs widened significantly Thursday when House Republicans filed a bill calling for a $1.9 billion education bond.
Under House Bill 241, $1.5 billion in bond money, pending voter approval, would be earmarked for K-12 construction and renovation projects.
The UNC System and state community colleges would get $200 million each.
House Speaker Tim Moore, (R-Cleveland), said the state’s strong fiscal position, Triple A credit ratings, flush reserves and revenue surplus, makes the education bond a sound fiscal move that will quickly deliver money to school districts.
“There’s currently a competitive bond market and the state can borrow now at very favorable interest rates,” Moore said. “The opportunity is now and waiting can only end up costing the state more down the road.”
Senate leaders back a “pay-as-you-go” proposal they contend will generate $6 billion over 10 years for K-12, community colleges and UNC System construction needs.
Gov. Roy Cooper has also endorsed a bond referendum.
Cooper’s press secretary Ford Porter issued this statement in response to HB 241: “Students and teachers across North Carolina need safe, modern classrooms and a construction bond would let the people decide to invest in new schools and repairs without the risk of harmful budget cuts. Governor Cooper agrees that a bond is the most responsible and reliable wayHor to fund school construction and renovation.”
The bond money generated by HB 241 would be awarded to the state’s 115 school districts using a formula based on Average Daily Membership (ADM), low-wealth, ADM growth and adjustment factor.
The formula is weighted in favor of low-wealth districts that don’t have the tax base to generate revenue for significant capital projects.
“We have right now, today, children in a school that was built in 1924,” Rep. Brenden Jones, (R-Columbus and Robeson) said during Thursday’s roll out of the bill. “So, this [the education bond] is so much needed in my district and it kind of helps set the pace to do this a little faster than when you’re in an economically challenged place like I am. We don’t have the tax base to do these things.”
How the bond would work
Wake County Public Schools, the state’s largest district with more than 159,000 students and 171 schools would receive $109.6 million, the largest share of the bond.
By comparison, Johnston County Public Schools (JCPS), with 36,300 students and 45 schools, would be awarded $77 million.
JCPS would receive $6.4 million for ADM, $39.2 million due to its low-wealth status and another $31.3 million in ADM adjustment because the district’s enrollment is growing but the county doesn’t have money to pay for growth.
Meanwhile, Harnett County Schools with 20,600 students and 29 schools would receive $3.6 million for ADM and $31.4 million for its low-wealth status. The district would not receive an ADM adjustment because its enrollment is not growing.
Low-wealth school districts or districts that reached ADM adjustments would not have to come up with matching funds under HB 241. Others would be required to pay a $1 to $3 match.
HB 241 is sponsored by Speaker Moore along with Representatives Linda P. Johnson (R-Cabarrus); Jeffrey Elmore (R-Wilkes) and Craig Horn (R-Union).
The sponsors were joined at a morning press conference by representatives of the influential N.C. School Boards Association (NCSBA), N.C. Community College Systems (NCCCS) and N.C. Association of County Commissioners (NCACC), all of which endorsed the bond proposal.
“The backlog of school construction needs is so vast that counties need the assistance of the state as they have periodically provided over the last century or so,” said Leanne Winner, director of governmental relations for the NCSBA.
More than $8 billion in K-12 school construction and renovation needs have been identified across the state.
“The bond proposal, if passed by the voters of this state, allows school districts both the guarantee of funds and knowledge of the exact amount they will receive so that school districts can plan projects accordingly,” Winner said.
Moore toured state
Elmore, who is also a veteran Wilkes County teacher, works in one of the districts Moore visited on his tour of the state to assess school construction and renovation needs.
In one school, Elmore said, Moore saw falling concrete in the basement from the floor above.
“You will see that all over North Carolina,” Elmore said. “This [education bond] is a positive approach to be able to inject that money quickly and aid the locals in their efforts to keep up.”
Horn, who co-chairs the House K-12 budget committee, said the state’s aging school buildings were built for a different era.
“We have buildings that are now 50- 60- and some 70-years-old, built in a different time for a different purpose, built during a time when we delivered education on an assembly line method,” Horn said.
He noted, however, that North Carolina is the only state that provides wireless broad band access to every classroom.
“If we’re going to continue to progress, if we’re going to continue to have an opportunity for our kids to receive the best in education, we need to provide them the best in facility,” Horn said.
Community Colleges would get $200 million
Vance-Granville Community College President Rachel Desmarais said the state’s community colleges need bond money to continue to prepare the state’s work force.
“We have substantial needs in facilities, both in renovations and repair of existing buildings as well as new facilities,” Desmarais said.
She thanked the bill sponsors for recognizing that technology is also part of infrastructure.
Antiquated technology is risky and costly, Desmarais said.
“It costs in terms of security and it costs in terms of labor when you have to work with the antiquated technology,” she said. “It costs when you have to backwards train an individual who has just come out of school, perhaps the very school you operate, and has to be trained on antiquated 40 year old technology.”
Senate Bill 5
Under Senate Bill 5 (SB 5), the plan proposed by the Senate leadership, the state would use money from the State Capital and Infrastructure Fund (SCIF) to pay for school construction and renovations.
State Sen. Harry Brown, (R-Onslow), one of the bill’s primary sponsors, said SB 5 would raise about $6 billion for K-12, community colleges and the university system, with each receiving $2 billion for construction and renovation projects over a 10-year stretch.
SCIF currently receives four percent of state revenue to pay down debt and for capital projects for state government and the UNC System.
Under SB 5, the amount of state revenue would be bumped up to 4.5 percent to generate additional revenue for school construction projects and renovations.
Brown contends the pay-as-you go option would save the state $1.2 billion in interest payments over 30 years and put money in school district’s hands much sooner than a statewide bond referendum.
Cooper and Moore have said state government would lose spending flexibility under the pay-as-you-go model.
“If you go with the bond proposal as opposed to just an outright pay-as-you-go, it gives more stability,” Moore said. Counties can rely on it, and it avoids encumbering future budgets down the road.”
Moore is also concerned the pay-as-you go plan would mean an end to the state’s traditional education funding model.
Under the existing model, counties are responsible for construction with occasional state support. The state generally pays district salaries.
“Moving to a permanent reform of our education finance model is not the best approach,” Moore said. “It runs counter to what our state Constitution mandates and we really don’t need to commit taxpayers to a permanent annual support of what has traditionally been a local responsibility when it comes to bricks and mortar.”
Moore worries that state funding for capital needs would become what’s expected if pay-as-you-go wins the day.
“If you go that way, it will create the expectation that the state will continue to provide that capital funding and counties will come to rely on it,” he said.
Duty is clear
Horn said it’s clear that the state must step in to help school districts, particularly low-wealth districts that cannot pay for much-needed capital improvements.
He said the education bond is the best way to cover the bill.
“We got to modernize and we’ve got to help these locals, many of whom are now in areas that don’t have a tax base that can support a local bond or local funding,” Horn said. “So, we as a state must deliver quality education and we must do that with quality facilities.”
Horn promised the great divide over how to pay for needed school construction and renovations will receive a thorough hearing.
“It’s the right things for us to do and now is the right time for us to do it,” Horn said.