Senate task force recommends ‘pay-as-you-go’ financing for future school improvements

Rhode Island should prioritize its school building improvements and finance them with a “pay-as-you-go” approach, instead of borrowing, which costs the state millions of dollars in interest, a new R.I. Senate task force report has found. More

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Senate task force recommends ‘pay-as-you-go’ financing for future school improvements

Posted 4/16/14

PROVIDENCE – Rhode Island should prioritize its school building improvements and finance them with a “pay-as-you-go” approach, instead of borrowing, which costs the state millions of dollars in interest, a new R.I. Senate task force report has found.

The recommendations from the Senate Task Force on School Housing Aid, released Wednesday, aim to frame a 10-year plan based on findings that suggest “pay-as-you-go” would be sound fiscal policy, said Sen. Ryan W. Pearson, D-Cumberland, the task force chairman.

“On average,” the report reads, “approximately 40 percent of housing aid reimbursements fund bond interest rather than school improvements, due to the historical reliance on bonding.” Shifting to pay-as-you-go would reduce costs by as much as 40 percent, the report says.

The task force undertook a sweeping examination of the state’s approach to school building improvements in anticipation of the expiration of a three-year moratorium on aid this June 30, the end of the state’s fiscal year.

Every school district or “local education agency,” which could also be a public charter school, has a different “share ratio” based on its ability to pay, Pearson said. That ratio in the future would be calculated the same way it is today.

“The real obligation is how you find the money on the state side to” make that work, Pearson said.

Aside from that shift in payment, the report recommends the state earmark 1 percent of the 7 percent sales tax, beginning in fiscal year 2016, to meet the needs of running a quasi-public agency dubbed an “infrastructure authority” and to fund school construction programs.

The authority would be modeled on one in Massachusetts that prioritizes school building improvements, Pearson said.

The authority’s seven-member board would include the state general treasurer as chairman; the director of administration; the commissioner of elementary and secondary education; and four additional members appointed by the governor and confirmed by the Senate with professional expertise in construction, engineering and public financing.

The report also recommends allowing school districts or LEAs to negotiate their own redistricting arrangements to better consolidate facility use; a statewide onsite facility assessment every five years starting in 2014; a revolving loan fund for smaller school upgrades; and promotion of energy efficient improvements.

Pearson says the current housing aid program, without either a cap or prioritization, has a $600 million backlog and is not sustainable.

The R.I. Department of Education’s “Public Schoolhouse Assessment,” which came out in January, estimated the total cost to bring all 276 district schools into “good” condition is $1.79 billion. That estimate, however, is based on self-reporting from the districts and “does not provide an objective, uniform, statewide assessment” of facility needs, the report states.

Approvals from the Board of Education for “necessary” school construction costs have averaged $74.8 million a year, the task force found.

A tentative timetable for implementing these and other recommendations includes: the sunset on the moratorium this June; statewide assessments by RIDE starting in July and completed by February 2015; a newly established “infrastructure authority” by March 2015; and revisions to housing aid programs from that authority by June 2015.

Dedicated funding stream to the authority in July 2015 would include the money coming from 1 percent of the state’s sales tax.

The task force report was also based on four public hearings held in January and February.

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