Use State Bonding to Address Required Capital Improvements

Summary:

Washington state has a constitutional limit on its bonding capacity of 9%. Said another way, the state can use no more than 9% of its revenues to service bond funding. Of course, revenues fluctuate each year – in recessions, there is a reduction in revenue, and thus a reduction in bonding capacity. And in high revenue years, bonding capacity would increase. The underlying obligations don’t change, of course… just like your monthly mortgage payment doesn’t change, regardless of whether you get a raise or start a different job that pays less.

Currently, the state is approaching its bonding limit. At last glance, it was somewhere around 8.5%.

With Tenet 2, local levy collection would be shifted to the state. That also means state revenues would increase, and that’s where this Tenet comes in: in my plan, we would reserve the additional bonding capacity realized by the state collection of local levy dollars for K-12 education, and use bonds to help fund the capital improvements necessary to implement the redefinition of basic education.

And let me make that clear: that additional bonding capacity would be reserved only for K-12 education, and only for capital improvements associated with additional class space required to implement the programs associated with 2261.

Like some of the other Tenets, this tenet would be weighted toward the neediest districts. But hold on, those of you who think someone’s getting a free lunch… there are caveats to this, and it will require local skin in the game.

Methodology:

Benefits:

A significant element of 2261 is class sizes, and specifically, setting class size funding targets for grade levels and categorical groups, all with the goal of improving learning in students. Another provision of 2261 is implementing all-day kindergarten, so those little learners can be as prepared as possible for success in subsequent years.

It doesn’t take much math to realize that if you reduce class size, and provide full-day kindergarten (instead of using the same physical classroom for two half-day groups of kids), you’re going to need more space. Most districts do not have unused classroom space – some do, but I suspect those are the exceptions.

I’m not sure everyone realizes the gravity of this future capital need. If you don’t have the space, you cannot reduce class size. If you don’t have the classrooms, you cannot implement full-day kindergarten in your district. This unfortunate scenario has already happened. Recently the Governor funded all-day kindergarten for a few high-poverty districts. Funding for the program was provided, but funding for increases in classroom space (capital improvements, as that’s sometimes called) was not. The result: some districts eligible for all-day kindergarten could not offer the program, because they didn’t have the space. Now imagine we implement the education reform outlined in 2261, and fund all those great education-improving programs… but districts don’t have the space.

This Tenet addresses precisely that. But it needs a short diversion through state bonding law, first.

Remember Tenet 2, and how it sets all districts to the 28% local levy amounts? And remember that some districts are not currently at 28%, and others have no levy at all? For them, the 28% local levy authority has always been there, so the tax has been on the books… they’ve just chosen not to pursue it or fund it. So for those districts, the implementation of Tenet 2 is going to be noticed.

But… many of those same districts will be the first to realize the benefits (pronounced education investments) coming out of this plan… both based on Tenet 4 (which I’ll address next), and based on this tenet.

Here’s how many of the low/no-levy districts will benefit from this. Many of those districts have high poverty levels or high ELL populations, and many do not have unused school space available to implement the 2261 reforms. By weighting the capital improvement funds toward districts with the highest need, those same districts that saw their mil rates increase will be among the first beneficiaries of the program.

Let’s take another fictional district, called Bondville. In Bondville they used 50% of their local levy authority (translated: they were at 14% of their 28% levy lid), and they do not have available classroom space to reduce class size, offer full-day kindergarten, or offer reduced-class instruction for their significant ELL population. So even if they get program funding as a result of 2261, they don’t have the classroom space to implement them. Uh oh. Bondville is also receiving Local Burden Assistance (LBA) funds to offset the tax burden associated with setting them to 28% levy collection (as described in the previous tenet).

With Tenet 3, it’s determined (based on a formula) that Bondville is eligible for a 4:1 match. In other words, for every dollar that Bondville raises in a local bond campaign, the Tenet 3 bonding proceeds will match it with four dollars. So it requires that Bondville pass a local bond, to get that generous matching.

On to the next benefit, or at least the next requirement of this Tenet: construction costs. In this plan, the state would determine real-life construction costs for each school type (elementary, middle, high) that were cost-effective to build, instructionally sound, environmentally safe, and expandable – and fund based on those calculations, adjusted based on costs in different areas of the state. And let me emphasize the cost-effective to build element: I also envision a set of stock plans for each school type, that have been built multiple times before and are proven to be good (i.e, cost-effective, instructionally sound, environmentally safe, expandable), perhaps with multiple trim packages that enable each school to be visually tailored for their local culture and community, and fund based on those stock plans. Maybe the collection of plans are regionally-specific (stock plans for western WA, stock for eastern, stock for rural, stock for urban), but regardless, they are not palaces… if a given community wants to build a palace and they are receiving matching funds, that’s fine, but they’ll need to pay for those palace-like enhancements out of their local bond money.

There’s a study that says stock plans do not result in savings. To be honest, I’m not convinced. I’m not closed-minded to that, but I’m just not convinced that stock plans wouldn’t result in more efficient use of limited funds.

So… what is the bond-based assistance formula? I’m not sure yet, though the current construction match assistance could be looked at as a model, and improved as necessary to ensure the right emphasis and avoid gaming. But there’s a finite bonding capacity created by my plan – about $2 billion – and you would have to use a calculation based on current space, necessary space for fully-funded 2261 education enhancements, poverty/ELL/LAP levels, and any other factors that should play a part – and come up with the right weighting toward districts in need (without penalizing other districts). It’s complex, but by no means impossible. So there’s some work to do there yet… but the premise is that there would be help.