School Facilities Funding in California—a time of transition and changeCitizen’s Bond Oversight Committee West Contra Costa Unified School District

William Savidge, Assistant Executive Officer State Allocation Board June 19, 2013

AGENDA

Background/Context—over a decade of state and local spending on school facilities

Understanding the State School Facilities Program Where are we now?

State Allocation Board Responding to lack of authority, getting funds out

Transition—School Facilities Program Review Challenges & Opportunities

The Governor’s budget message on school facilities Proposition 39 (2012) implementation School Facilities related legislation update

BACKGROUND/CONTEXT Over a decade of strong support for school facilities

funding At the state and local levels Meeting significant growth needs Modernization of schools, special programs

Coupled with high bonding levels in other areas Transportation, Natural resources, High Education

Long-term growth in state bond debt Resulting debt-service from general fund

Local GO Bond funding key component Debt limits and impacts

Over a decade of school facilities work in CA

State & Local partnership

~20% enrollment growth Overcrowding relieved

Modernized thousands of schools

70%/30% local/state share of spending

From Center for Cities and Schools, UC Berkeley Report for CA Dept. of Education

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$0.00

$10,000,000,000.00

$20,000,000,000.00

$30,000,000,000.00

$40,000,000,000.00

$50,000,000,000.00

$60,000,000,000.00

$70,000,000,000.00

$80,000,000,000.00

$90,000,000,000.00

$100,000,000,000.00

Prop 1AERBLRBGO

Total State Bond Debt $92.6 billion

Statewide bond debt

Data from “Debt Affordability Report 2012” State Treasurer Bill Lockyer

2004 2005 2006 2007 2008 2009 2010 2011 2012$0

$1

$2

$3

$4

$5

$6

$7

$8

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%Debt ServiceDebt Service as % of GF Rev-enues

Fiscal Year Ending

Deb

t Ser

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($ B

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De

bt

Se

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GF R

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Debt Service

Local debt constraints

Local funding for school facilities Developer fees have dried up with the housing market… Just starting to come back now

Local General Obligation Bonds Proposition 39 limits

The 55% majority blessing But…individual tax limitation @ $60/$100,000 of assessed

valuation (“AV”) for Unified Districts And…overall bonding capacity limitations @ 2.5% of AV

As local Districts continue facilities investments Tax rate limitations become critical

Cash flow, refinancing, different bond strategies

The State School Facilities Program (SFP)

SFP is funded from voter-approved statewide bonds Prop. 1A (1998), Prop. 47

(2002), Prop. 55 (2004), Prop. 1D (2006)

New Construction funding for un-housed students

Modernization funding for upgrades to existing facilities

Matching funds from local districts New Construction 50%/50%,

Modernization 60%(state)/40% (dist.)

Multiple special programs Financial Hardship (100% state

funding) Facility Hardship—immediate

health/safety repairs Charter School Facilities Overcrowding Relief Grant for

replacement of portables Critically Overcrowded Schools

to relieve overcrowding at existing sites

Career Technical Ed facilities Seismic Mitigation Program Joint Use Facilities High Performance Incentive

Grant Program

WCCUSD SFP projects New Construction

Lovonya DeJean MS

Modernization 17 measure M Elementary All Measure D Secondary All Measure J projects

High Performance Incentive grants on Modernization projects

Charter School funding for LPS Richmond @ Gompers Like-Kind Replacement

Modernization of Gompers

Joint-Use funding Pinole MS Gym with City of Pinole

Overcrowding Relief Grants at Dover and Ford to replace portables

Example of WCCUSD local bond funds leveraging multiple state funding programs:

Portola Middle School Seismic Mitigation Program

replacement of main bldg. Portola Modernization funding—

to build like-kind replacement at Castro site

Castro site Modernization funding for existing classroom building

High Performance Incentive grant on increase on the Modernization

Over $120 mil. State funds rec’d to date by WCCUSD

SFP—where are we now?

Bond Authority is fully allocated for major programs

Limited funds remain in special programs Seismic Mitigation Program $175 mil. High Performance Incentive Grant Program $39 mil. Overcrowding Relief Grant $77 mil.

Financial crisis led to change in state bond sales Previously ongoing bond sales & pooled money system Changed to bi-annual infrastructure bond sales Limited cash availability School facilities projects receive “Unfunded Approvals” Wait for cash when state sells bonds

SFP—where are we now?

State Allocation Board (SAB) Responsible for SFP funding and

programs Established in Education Code Supported by Dept. of General

Services (DGS) Staff to Board: Office of Public

School Construction (OPSC)

Six Legislative members 3 Senators (2 Dem, 1 Rep) 3 Assembly members (same) Director Dept. of Finance Supt. Public Instruction (CDE) Director DGS Governor’s appointee

Current Membership Chair: Tom Dyer, Dept. of

Finance Vice-Chair: Asm. Joan

Buchanan Sen. Loni Hancock Sen. Carol Lu Sen. Ron Wyland Asm. Curt Hagman Asm. Adrin Nazarian Kathleen Moore, CDE Esteban Almanza, DGS Cesar Diaz, CBCTC

SAB Actions Lack of remaining state bond authority

No longer processing applications for funding Applications accepted, reviewed for completeness Placed on SAB-Acknowledged List Unprecedented action by the Board—previously had

provided “Unfunded Approvals” Even without state bond authority remaining

Non-Participation in Priority in Funding (PIF) regs Unfunded projects waiting for cash haven’t participated in

funding process New regulations require participation in funding rounds

After 2 rounds projects are rescinded if not certified for funding

Money may return to program to fund additional projects

SAB Program Review

Subcommittee of the SAB for Program Review Chaired by Assm. Joan Buchannan

With funding depleted, no statewide bond before 2014 A perfect opportunity to look at the state program What’s worked? What hasn’t?

Reviewing each state program in depth

Hope to reach consensus on Subcommittee Recommendations to full SAB Recommendations from SAB to Legislature on new bond

SAB Program Review

Current areas of focus and initial consensus

Reestablish program eligibility for New Construction Current list is dated, many districts have had significant

changes in conditions

Develop a statewide school facilities inventory No single database of CA schools—age, type, capacity

Create a more flexible definition of a classroom Based upon “Area of Student Learning” concept

Dis-incentivize Portables Lower funding/no funding(?) for portables

Challenges & Opportunities

A time of transition in school facilities…

Lingering economic concerns Even with recovery

Competition for state infrastructure support Water bond for example

No Legislative action on a statewide school bond Measure delayed until 2014 (at the earliest)

Governor’s Budget Message on School Facilities Lays out issues

17

Challenges & Opportunities

Reaching consensus regarding how to fund K-12 school facilities

Governor’s budget message Raises core questions regarding funding

Recognition that the local capacity for funding school facilities may be greater than the state’s

“Central to thisdiscussion must be a consideration of what role, if any, the state

should play in the future of facilities funding.”

CASH Legislative Update

18

Challenges & Opportunities

Finding ways to simplify the program and school construction process

Governor’s budget message frames the issue

Multiple state agencies: OPSC, DSA, CDE, DTSC, DIR

How can we streamline?

2/26/2013

“The current SchoolFacilities Program is overly complex and administered by multiple

control agencies with fragmented responsibilities. The current program is also largely state driven, restricting‑

local flexibility and control.”

Proposition 39 (2012) Energy efficiency upgrade funding for CA schools

Including Community Colleges Workforce development component

Next 5 years up to $550 mil. each year Small revolving Loan fund

Funding is direct allocation based on per pupil ADA With 15% of funds based upon Free-Reduced Lunch eligibility in district

Projects based upon guidelines developed by Energy Commission, CDE, PUC

Districts prepare a multi-project plan for funding Prioritize projects based on potential savings, ROI, age of bldgs., etc. Projects include energy auditing, measurement and verification

Citizen Oversight Commission Expenditure audits

School Facilities related legislation update

AB 182 (Buchanan) Capital Appreciation Bonds (CAB’s) Limits on CAB’s: 4-1 debt ratio, 25 year term, callable Senate Ed hearing

SB 316 (Block) Classroom Locks Requires interior locking ability on all classrooms Student safety issue

SB 581 (Wyland) Prop. 39 (2000) Audits Timing of delivery to Oversight Committees

SB 584 (Wyland) Financial & Performance Audit Stds. Audit scope included in state’s education audit guide

Continue the strong state/local partnership for schoolsMartin Luther King jr. Elementary Reconstruction Richmond, CAFunded by WCCUSD local bonds and State of California Modernization & HPI funding from the School Facilities Program.