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POLICY (Long-Term Funding Sources)

The State should ensure that there are long-term, adequate sources of funding to support planning, design, construction, operation, and maintenance for public school facilities.

As states develop plans and programs, operational policies and procedures, as well as the funding levels and sources, need to be addressed. States need to establish and implement plans to ensure long-range and stable funding streams or mechanism that will support the needs of the school districts. The facility needs and requirements should be identified in each school district’s Educational Master Plan, Comprehensive Maintenance Plan, and Capital Improvement Program (discussed and described in Section 1: School Facility Planning). Consideration should also be given to results obtained from any statewide needs assessments or compilation of data pertaining to the conditions of schools when applying the minimum adequacy standards.

Finding funding sources to meet the ongoing fiscal requirements for an effective statewide school construction and capital improvement program is a significant challenge. For example, economic conditions change; educational programs change and as a result, facilities need to be changed; residential development or redevelopment changes; enrollments fluctuate; existing schools continue to age and need repair, renovation, and/or rehabilitation; and current or proposed funding sources are not always reliable over extended periods of time.

Most states should, however, be in a position to clearly understand the particulars of their educational facility needs, the anticipated levels of funding required, and the ability of the various funding approaches to meet these needs. With this information in hand, the state has a responsibility to provide the funds necessary to meet these needs and requirements on a continuing basis. However, given the competition for state capital funds, it is not always possible to meet all the educational facilities needs in any one given year. But the reliance upon a funding stream that meets the majority of these needs each year moves the state and the school districts closer to providing equitable facilities throughout the state. Every attempt should be made at the state level so that districts or school facilities provide appropriate educational settings and environments that support required educational programs and services.

Every attempt should also be made to establish a “guaranteed source of funding” at the state level for school construction and capital improvement programs. This type of commitment enables school districts to prepare their plans with some assurance that there will be state support for implementation. It is enormously frustrating for school districts and communities to invest time, energy, community enthusiasm, and financial resources in a planning process, only to have it end up on the shelf, unfunded and therefore not implemented. With predicable funding sources and annual levels of funding, school districts can effectively plan for the future and prioritize projects over - at least - a five-year period. Of course, unforeseen circumstances often interfere with the implementation of state funding plans and expectations. For example, funds from anticipated sources can be diverted to other more urgent needs, or dedicated revenue sources might not be sufficient to meet the school construction needs and requirements in a given year or over a period of years.

The necessity for reliable sources and levels of funding cannot be overemphasized. The school construction process takes time and usually includes the following activities: (a) initial research and prioritizing of projects, (b) procurement of funds and engaging an architect or other design consultants, (c) preparing drawings at the various design phases, (d) obtaining funding for the actual project, (e) preparing the final plans and specifications for bidding, and (f) obtaining the require approvals and/or permits prior to initiating the actual work.

The timing and availability of state funds impacts school districts in which communities must raise local funds in order to complete portions of the facilities work or help fund actual facilities projects. In most cases, the ability to rely upon state funds allows these districts to proceed with certain projects that would otherwise go unfunded. Since time is such an important factor, state programs must acknowledge that “market place costs” are not held constant. There should be mechanisms to adjust or account for changing market conditions as close to the time of actual bidding as possible.

The program for the distribution of state funds should recognize the differences between the capabilities of the school districts and their staff to prepare the materials necessary for submitting a successful application for funding. Technical assistance should be available to all districts and especially to those that might need additional help and guidance. In recognizing these disparities, the program will be more equitable if all applications for a specific program are due at the same time. This allows the state to evaluate all applications simultaneously rather than approving projects on a “fist-come-first serve basis” in which wealthier districts (with more staff or other resources) might submit more applications or submit them earlier and thereby exhaust the majority of the funding available.

It should be noted that in 2002, 44 States had either grants or loan programs that could be used for school construction and capital improvement projects. Forty states had annual state appropriations. Matching funds were required in most instances and the local match ranged from 2 percent to ninety-eight percent. The states use a variety of sources for these loans and grants. The sources include: state general fund, state general obligation bonds, dedicated sales tax, lottery income or gambling revenue, the tobacco settlement, and some smaller specialized sources. Many states will guarantee local bonds or will issue state bonds, which require repayment by the locality. At least one state has a revolving loan fund for maintenance and renovation projects and another state provides full funding for smaller maintenance and renovation projects. Some states repay a portion of the debt service for bonds issued by the school district for school construction and capital improvement projects. A few states approve the issuance of a large state general obligation bond and then district apply for the funds as their projects proceed through the approval process.

Some states provide their funding at the beginning of the project, while others provide partial payments during the construction phase, and others wait until the project is complete to proffer the financial aid. In most cases, it is preferable to have state funding provided during the construction phase to keep pace with monthly requests for payment from the contractors. This is especially helpful to smaller or less wealthy districts that would otherwise have to borrow the money for the state share during the construction phase and then seek reimbursement from the state. This could result in added expenses for districts that can least afford the extra cost. Most contracts require payment within a specified period of time before additional interest charges are assessed against the owner (the school district) as a late payment fee.

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