On December 1, the Commission on School Construction and Modernizations met to review efforts by the General Assembly and Governor to act on the Commission’s recommendations from 2021 as well as make recommendations for the 2023 legislative session. Overall and with one exception, the most recent Commission recommendations align with VACo priorities to address the issue of aging school infrastructure and the ability of local governments to finance modernization and construction efforts. The Commission is tasked with assessing the Commonwealth’s school facilities and determining school construction and modernization funding needs, among other duties.
Of the seven recommendations from the Commission, the first three are closely modeled on recommendations made by VACo to the Virginia Board of Education pertaining to the guidelines for the School Construction Assistance Program. The fourth and fifth recommendations are consistent with VACo legislative priorities, including VACo supported legislation from the 2022 General Assembly session that will likely be reintroduced in 2023. VACo staff thanked the Commission for their past and ongoing work to address the $25 billion in need for local governments to renovate or replace aging school infrastructure in Virginia. Recommendation 6 was adopted by the Commission in concept. VACo staff raised concerns to the Commission over the potential of this recommendation for imposing an unfunded mandate on localities.
The full list of recommendations are as follows:
- Either (a) use multiple years of composite index and fiscal stress data for determining the 10%, 20%, or 30% grant award amounts to recognize changing local economic conditions or fluctuating data values from a single year, or (b) use the most favorable of the latest or multi-year data. Currently, only the latest composite index and fiscal stress data are used in determining the grant amounts to divisions.
- Make school projects where construction began July 1, 2022, or after eligible for application, consistent with Board of Education intent for its final guidelines.
- Make the principal portion of future debt service payments not yet begun on school projects where construction is pending or just begun an allowable cost with grant funding.
- Authorize up to a 1% new local sales tax for all counties and cities with revenues solely used for school construction and renovation projects. Note: Recommendation #3 from the 2021 Commission Interim Report
- Include additional funding of $2.5 billion in the appropriation act for the School Construction Grant and Assistance Program ($500 million for entitlement/ direct in School Construction Grant Program; $2 billion for competitive grants in School Construction Assistance Program).
- Require a minimum local effort for capital maintenance programs and require school boards to include in any capital improvement plans a minimum 1.5% capital asset replacement value commitment target to avoid major replacement costs in the future.
- A Section 1 bill to direct the Board of Education to make recommendations to the General Assembly for revisions to the Standards of Quality to establish standards for operations, maintenance, and new construction of public school buildings. Note: Recommendation #4 from the 2021 Commission Interim Report
The full recommendations may also be accessed here.
Additionally, earlier this year, the Virginia Board of Education approved guidelines for Implementing new Appropriation Act provisions for Literary Fund School Construction Loans in the 2022-2024 Biennium. Prior to this, the Literary Fund had become almost unusable as a source of school construction financing and had been used by the state to pay the state share of employer contributions for the VRS Teacher Plan. The following changes to the Fund have been made:
- Language authorizing the Board to offer up to $200,000,000 in fiscal year (FY) 2023 and up to $200,000,000 in FY 2024 from the Literary Fund for school construction loans, subject to the availability of funds. Amounts designated for school construction loans that are not obligated in FY 2023 may be obligated in FY 2024;
- Establishing an annual open enrollment process by which localities and school boards apply to the Literary Fund for school construction loans, in lieu of the First Priority and Second Priority waiting list process for awarding loans. Priority for loan funding is based on the local composite index of ability-to-pay (but the Board may consider other critical projects for priority);
- Establishing a maximum Literary Fund loan amount per project of $25.0 million (from $7.5 million currently authorized in the Code of Virginia);
- In consultation with the Department of the Treasury, establishing loan interest rates that are benchmarked to a market index interest rate on an annual basis, not to exceed 2.0 percent for the tier of localities with a school division local composite index of ability-to-pay between 0.0000 and 0.2999; and
- Language authorizing the Board to offer a loan add-on amount not to exceed $5.0 million per loan for projects that will result in school consolidation and the net reduction of at least one existing school.
The open enrollment period for the Literary Fund is likely to occur in January and will be announced via a Superintendent of Public Instruction memo.
VACo Contact: Jeremy R. Bennett