School Construction Legislation Roundup

March 3, 2022

As previously reported, numerous bills have been filed seeking to address the issue of School Construction and Modernization this session. Many of these bills have been defeated, however, several efforts are still ongoing. VACo supports additional state resources and additional funding options for localities for capital and school construction costs, including expanding dedicated local sales and use tax authority first given to select counties by the General Assembly in 2019. What follows is an update on the bills of importance, all of which VACo supports:

HB 563 (O’Quinn) as originally drafted, would establish the School Construction Matching Grant Fund and Program for the purpose of awarding matching grants on a competitive basis to local school boards that demonstrate poor school building conditions, commitment, and need, based on certain enumerated factors, in order for such local school boards to fund the construction of new public school buildings in the local school division. This bill was amended to require the Department of Education in collaboration with the Department of General Services to adopt and maintain a data collection tool to determine the age of school buildings across the Commonwealth and the amount of maintenance reserve funds needed to restore each building. The Construction Fund language was also altered to require unobligated state gaming proceeds be directed to the Construction Fund for the purpose of awarding grants to local school boards for school construction or renovation. On March 2, the Senate Finance and Appropriations Committee conformed the bill to SB 473 (McClellan) and included provisions from SB 238 (McPike). The bill reported by a 14-1 vote.

SB 238 (McPike) would require the Department of Education, in consultation with the Department of General Services, to develop or adopt and maintain a data collection tool to assist each school board to determine the relative age of each public school building in the local school division and the amount of maintenance reserve funds that are necessary to restore each such building. The bill was reported unanimously by the House Education Committee 22-0.

SB 473 (McClellan), as originally drafted, would establish the School Construction Fund as a special nonreverting fund in the state treasury for the purpose of providing grants from the Fund, subject to certain conditions, to school boards that leverage federal, state, and local programs and resources to finance the design and construction of new school buildings and facilities or the modernization and maintenance of existing school buildings and facilities. The bill provides that 3 percent of any fiscal year’s budget surplus shall be appropriated to the School Construction Fund and Program. The bill also provides that any remaining revenues not appropriated by the Gaming Proceeds Fund shall be appropriated to the School Construction Fund and Program. On February 23, the House Finance Committee conformed the bill to the version of HB 563 as it passed the House. The Senate subsequently rejected the House amendments, which were then insisted upon by the House.

The actions by the legislature regarding HB 563, SB 238, and SB 473 mean that the issue of School Construction Fund will need to be settled in a conference committee. This matches the different approaches of the House and Senate reflected in their budget proposals, which also will need to be resolved in the budget conference committee. The House proposal Establishes a School Construction Loan Rebate Program with $291.7 million from the General Fund and $250 million from the Literary Fund in FY 2023 to award grants to school boards meeting certain criteria to fund construction, expansion, or modernization of public school buildings. Grants provide either 30 percent of principal and interest costs, or interest costs, with grant selection based on demonstrations of poor building conditions, local commitment, and need. (Item 137 #19h). The Senate proposal retains $500 million School Construction Grants Program funding included in the introduced bill. Language allows School Construction grant funds to be used for debt service payments on school projects that have been completed Page 3 of 19 or initiated during the last ten years and bars the use of funds for parking lot repair or replacement or for facilities predominantly used for athletics. (Item 137 #5s).

SB 471 (McClellan), as originally drafted, would make several changes to the Literary Fund recommended by the Department of Education and the Department of Treasury. The original bill was changed by the Senate Finance and Appropriations Committee to conform with Senate budget language to establish a loan closing cost subsidies program to provide up to $25,000 to a school division that receives a Literary Fund loan, prioritize Literary Fund loan applications on the basis of the local composite index (LCI), increase the maximum loan amount from $7.5 million to $25 million, as well as establish loan interest rates that benchmarked to a annual market index, not to exceed 2 percent for localities with the lowest LCI, among other provisions. On February 28, the House Education Committee added a 2023 reenactment clause to the bill and subsequently reported the bill by a vote of 21-1.

Lastly, as previously reported, several bills dealing with school board reversion of unexpended funds were meeting mixed fates in the House and Senate. The remaining surviving bill on this issue SB 481 (McClellan), which was amended to address VACo concerns by encouraging, but not mandating agreements between local governing bodies and school boards on the use of such funds was also recommended to be lain on the table by the House Education Committee’s Early Childhood/Innovation Subcommittee on a vote of 4-3.

VACo Contact: Jeremy R. Bennett

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