Governor Addresses School Facilities in
January Budget Proposal

January 10, 2014

On Wednesday, January 8, the Governor’s 2014-15 budget proposal was leaked two days ahead of schedule.  The Governor includes a detailed discussion of his concerns about the current School Facility Program and his policy considerations for a future program, and this statement serves as the basis of discussion for further negotiations.  The Governor continues to prioritize paying down the wall of debt and taking a pragmatic approach to spending.

Below is the Governor’s proposal for school facilities:

K-12 School Facilities

Since 1998, voters have approved approximately $35 billion in statewide general obligation bonds to construct or renovate public school classrooms used by the state’s roughly six million K-12 students. These bonds cost the General Fund approximately $2.4 billion in debt service annually. In addition to general obligation bonds, school districts may use developer fees, local bonds, certificates of participation, and Mello-Roos bonds to construct additional classrooms or renovate existing classrooms. There is currently no bond authority remaining in the core school facilities new construction and modernization programs.

 

As part of the 2014 Five-Year Infrastructure Plan, the Administration proposes to continue a dialogue on the future of school facilities funding, including consideration of what role, if any, the state should play in the future of school facilities funding. This infrastructure discussion should also include the growing debt service costs associated with the state’s increased reliance on debt financing.

 

The Administration proposes that any future program be easy to understand and provide school districts appropriate local control and fiscal incentives. The following problems are inherent in the current program and must be addressed:

  • The current program is overly complex and reflects an evolution of assigning over ten different specialized state agencies fragmented oversight responsibility. The result is a structure that is cumbersome and costly for the state and local school districts.
  • The current program does not compel districts to consider facilities funding within the context of other educational costs and priorities. For example, districts can generate and retain state facility program eligibility based on outdated or inconsistent enrollment projections. This often results in financial incentives for districts to build new schools to accommodate what is actually modest and absorbable enrollment growth. These incentives are exacerbated by the fact that general obligation bond debt is funded outside of Proposition 98.
  • The current program allocates funding on a first-come, first-served basis resulting in a substantial competitive advantage for large school districts with dedicated personnel to manage facilities programs.
  • The current program does not provide adequate local control for districts designing school facilities plans. Program eligibility is largely based on standardized facility definitions and classroom loading standards. As a result, districts are discouraged from utilizing modern educational delivery methods.

 

Any future program should be designed to provide districts with the tools and resources to address their core facility gaps, but should also avoid an unsustainable reliance on state debt issuance that characterizes the current school facilities program.

 

While the state examines the future of its role in school facilities, the Budget also includes the following proposals totaling an investment in school facilities of nearly $400 million:

  • Transfer $211 million of remaining School Facility Program bond authority from the specialized programs to the core new construction ($105.5 million) and modernization ($105.5 million) programs to continue construction of new classrooms and modernization of existing classrooms for districts that have been awaiting funding. Approximately $163 million, $3 million, $35 million, and $10 million of general obligation bond authority currently remains in the Seismic Mitigation, Career Technical Education, High Performance Incentive Grant, and Overcrowding Relief Grant programs, respectively.
  • Dedicate $188.1 million of one-time Proposition 98 General Fund to the Emergency Repair Program to provide grants or reimbursement to local educational agencies for the cost of repairing or replacing building systems that pose a health and safety threat to students and staff at eligible school sites. Schools previously identified by the California Department of Education as ranked in deciles one, two, or three based on the 2006 Academic Performance Index are eligible for funding.

 

Energy Efficiency Investments

Proposition 39, The California Clean Energy Jobs Act, was approved in 2012 and increases state corporate tax revenues. For 2013-14 through 2017-18, the measure requires half of the increased revenues, up to $550 million per year, to be used to support energy efficiency.

The Budget proposes to allocate the $363 million of energy efficiency funds available in

2014-15 as follows:

•     $316 million and $39 million to K-12 school and community college districts, respectively, for energy efficiency project grants.

•     $5 million to the California Conservation Corps for continued technical assistance to K-12 school districts.

•     $3 million to the Workforce Investment Board for continued implementation of the Job-training program.

While the Budget does not propose funding for additional revolving loans under the

Energy Conservation Assistance Act (which was provided $28 million in 2013-14), this program will continue to be considered for future funding.

 

Department of Industrial Relations

Public Works/Prevailing Wage Consolidation — The Budget includes multiple adjustments to consolidate all public works and prevailing wage enforcement activities within a single unit supported by a new registration fee on contractors who choose to work on public works projects. The fee will support an $11.4 million program with 83 positions. The new fee will eliminate the program’s reliance on the General Fund and bond funds tied to public works projects, which have resulted in funding challenges in the past. These funding changes, along with programmatic efficiencies realized through the consolidation, will provide the program with a stable funding source to support prevailing wage determinations, monitoring, and enforcement throughout the state. This represents an increase of more than 20 positions compared to prior enforcement levels.