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Voices: Uncertain future for building funds

Colorado schools need an estimated $13.9 billion in upgrades and Matt Samuelson, special projects director for the Donnell-Kay Foundation, wants to ensure they’ll get it.

A week ago, a board charged with recommending ways to help schools pay for capital construction finalized its list of grant recipients to send to the State Board of Education for approval. If the school districts and charters reach their required matches, $282.7 million worth of school facility projects will move forward across the state through the Building Excellent Schools Today program, otherwise known as BEST.

Altogether, provided the current recipients of BEST grants successfully reach their local matches, the state and local schools will have green-lighted nearly $1 billion in K-12 public school facility work in five years. Read more about BEST grant finalists.

All the more impressive, this work has been done without using general fund dollars. The source of BEST funds is the public school capital construction assistance fund, which consists of money earned from a portion of lottery proceeds, interest from the fund and revenue from state public school lands.

The state of Colorado owns roughly 2.7 million acres of surface property and 3.9 million acres of mineral property rights specifically dedicated to the state’s permanent school trust fund, which helps fund BEST and a variety of other educational programs. Revenues generated from these lands occur through three types of land uses: mineral, surface and commercial. In recent years, oil and gas royalties and leases account for roughly 80 percent of the revenues generated on state trust lands.

Schools need $13.9 billion

The successes have been impressive, but the needs remain great. In 2009, an assessment that examined more than 8,400 public school facilities statewide determined that school districts in Colorado had $13.9 billion in capital construction needs projected through 2013. Just as disconcerting as that staggering number, the assessment determined that the 10-year capital renewal needs of all the state’s K-12 public school facilities was $10.1 billion. That’s a billion dollars annually just to maintain the current stock of facilities.

Created in 2008 with bipartisan support, the state’s capital construction grant program for K-12 public schools has had an immense impact addressing Colorado’s crumbling classrooms. The competitive grant program has provided $674 million in matching grants to school districts, charter schools and boards of cooperative services in order to address public school facility needs. Since its inception, 143 grants have been awarded to 78 school districts, 13 charter schools and the Colorado School for the Deaf & Blind. These projects with BEST funds have taken place across the state of Colorado. See map.

Communities such as Akron, Center, Holly, Monte Vista and Rush now have new schools due to voter-approved bond issue coupled with a BEST grant. The BEST grant was absolutely essential to constructing these schools because many Colorado school districts with low local property wealth are legally restricted by the state from raising enough funds to address their school facility needs locally.

BEST helps older schools too

But it’s not solely new schools that BEST addresses. New roofs and boilers extend the lives of buildings and help to create an effective learning environment. For example, South Routt School District replaced its coal-fired boiler with a biomass boiler by bundling a BEST grant with a local bond issue and other state funds.

By partnering with local school districts and charter schools, BEST has helped tackle some of the state’s public school facility needs. Since the assessment was completed, voters in 30 school districts have been asked to vote on bond questions. Of the 13 successful local bond elections, 12 were to match a BEST grant. Amazingly, in seven of those bond elections, the school district maxed out its bonding capacity in order to provide that local match.

That’s a tall order for school districts lacking a substantial property tax base. For example, in 2010, when voters of Center School District in Saguache County approved its bond measure to match its BEST grant, the district’s mill levy – or tax rate – jumped from 27 to 45. But on Saturday, the community will celebrate the ribbon-cutting of its new PK-12 school facility, which replaces a school constructed in 1919.

However, these ribbon-cutting ceremonies will slow to a trickle under BEST’s current statutory arrangement. The state has a $40 million annual cap for its share of BEST certificate of participation or COP payments. COPs are lease-purchase arrangements utilized by the state to fund large project grants, such as new schools and major renovations.

The current state share of COP payments is $28 million. Entering into last month’s BEST grant selection meetings, the state had $12 million remaining that it could obligate to annual payments for school projects. According to current interest rates, that would support about $260 million in state share of school projects.

The BEST board will not reach the annual payment threshold after this year’s round of grants. However, the COP cap will most likely be reached in June 2013. Once the state hits that cap, the BEST program runs the risk of not funding new schools and major renovations for several years.

Saving money for schools’ capital needs

Here are some ideas as we barrel toward the COP ceiling:

  1. The cap could be raised by $10 million, which would provide the BEST program another two years of COP funding to address the most egregious facility needs in the state.
  2. A school district could run a bond election based on 6 percent of the district’s actual valuation instead of 20 percent of the district’s assessed valuation. Colorado law (C.R.S 22-42-104(1)(b)) allows districts to use the actual valuation, but the district may want to secure pro bono services from a law firm prior because whispers of TABOR compliance concerns have plagued the actual valuation option.
  3. Wait. After a couple years of payments, the annual COP payment will decrease and there will be another opportunity for a round of new school and major renovations.
  4. Keep the funding mechanism in place. The Colorado Constitution requires that the “public school fund of the state shall, except as provided in this article IX, forever remain inviolate and intact and the interest and other income thereon, only, shall be expended in the maintenance of the schools of the state.” BEST uses income from the fund to help school districts construct buildings that will last 50 to 60 years. Multiple generations of school children will benefit from these schools.

Rumblings of knee-capping the BEST program in order to grow the states permanent school trust fund to $1 billion seem misplaced. Under current investment strategies, a $1 billion permanent school trust fund – used for a variety of educational purposes such as BEST, the School Finance Act and the recent literacy law – will spin off $42 million in interest. That is a significant amount. But it will take upwards of a decade to reach that number. In the meantime, thousands of Colorado children will be forced to attend schools in classroom environments that hinder learning rather than enhancing it.

Leveraging BEST grants with local dollars now allows children across Colorado the opportunity to be educated in safe and secure facilities.

About our First Person series:

First Person is where Chalkbeat features personal essays by educators, students, parents, and others trying to improve public education. Read our submission guidelines here.

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