The Status of School Construction Legislation Post Crossover

February 17, 2022

Numerous bills have been filed seeking to address the issue of School Construction and Modernization, and on the whole, most have passed the Senate while only one bill has made it through the House of Delegates. In 2021, the Commission on School Construction and Modernization examined the state of K-12 school infrastructure across the Commonwealth. They discovered that more than half of Virginia’s school buildings are 50 years old or older and that the cost to replace these buildings is estimated to be $24.8 billion. As previously reported, 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.

The following is the status of bills meant to address this issue:

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. Out of the numerous school construction bills mainly stemming from the recommendations from the Commission on School Construction and Modernization, this bill is the only school construction legislation to have passed the House of Delegates and it did so by a unanimous vote of 100-0. VACo supports this bill.

SB 472 (McClellan) would allow any county or city to levy a local general retail sales tax and a local use tax at a rate not to exceed 1 percent as determined by its governing body to provide revenues solely for capital projects for the construction or renovation of schools if such levy is approved in a voter referendum. Under current law, the power to levy such local sales and use taxes for the construction or renovation of schools is limited to the qualifying localities of Charlotte, Gloucester, Halifax, Henry, Mecklenburg, Northampton, Patrick, and Pittsylvania Counties and the City of Danville. This measure is a bipartisan unanimous recommendation of the Commission on School Construction and Modernization and passed the Senate 28-12. Additional bills expanding this authority to single localities include SB 37 (Norment) and SB 298 (Deeds), which would grant this authority to Isle of Wight County and the City of Charlottesville, respectively. VACo strongly supports these measures. A identical measure to SB 472, HB 531 (Hudson), was narrowly defeated in the House Finance Committee’s Subcommittee #3 by a vote of 5-3, along with HB 545 (Hudson) which would have granted this authority to the City of Charlottesville, as well as HB 63 (Edmunds), which would have done the same for Prince Edward County. An identical bill to HB 531, HB 1099 (LaRock) was struck at the request of the patron.

HB 252 (Simonds) and 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. HB 252 was recommended to be lain on the table by the House Appropriations Committee’s Elementary and Secondary Education Subcommittee by a vote of 5-3. SB 238 passed the Senate unanimously on a 40-0 vote.

HB 253 (Simonds) and 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 Literary Fund provides low-interest loans for school construction, grants under the interest rate subsidy program, debt service for technology funding, and support for the state’s share of teacher retirement required by the Standards of Quality. These bills would increase to $25 million the maximum Literary Fund loan amount, and permits the Board of Education to increase such maximum to up to $35 million for loans on any school construction or renovation project that facilitates the consolidation of schools. The bills would also require the Board of Education to fix the interest rate on all loans made from the Literary Fund at not less than 1 percent per year, not more than 3 percent per year, and at increments of one half of 1 percent per year between such minimum and maximum rates, payable annually, and to utilize a sliding scale based on the local school division’s composite index of local ability to pay to determine the interest rate on each such loan. HB 253 was recommended to be lain on the table by the House Appropriations Committee’s Elementary and Secondary Education Subcommittee by a vote of 5-3. SB 471 was amended to conform to budget language in the introduced biennial budget, reducing the scope of the legislation to reform loan closing cost subsidies of the Literary Fund and prioritize applications based on composite index of local ability to-pay (LCI), among other provisions. SB 471 passed the Senate unanimously on a vote of 40-0.

HB 254 (Simonds) and 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. HB 254 was recommended to be lain on the table by the House Appropriations Elementary and Secondary Education Subcommittee by a vote of 5-3. SB 473 was amended 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 that leverage federal, state, and local programs and resources, meet certain other loan conditions. SB 473 passed the Senate on a vote of 37-3. VACo supports SB 473.

HB 1000 (LaRock) and SB 603 (Stanley), as originally drafted, would have required the Board of Education (the Board) to make recommendations to the General Assembly by December 1, 2022 for amendments to the Standards of Quality to establish standards for the maintenance and operations, renovation, and new construction of public elementary and secondary school buildings. The bills would have required such recommendations to include standards for the percentage of the current replacement value of a public school building that a school board should budget for the maintenance and operations of the building and such other standards as the Board deems appropriate. HB 1100 was recommended to be lain on the table by the House Appropriations Elementary and Secondary Education Subcommittee by a unanimous vote of 8-0. SB 603 was carried over to 2023 by the Senate Finance and Appropriations Committee on a vote of 8-8.

HB 559 (O’Quinn), as originally drafted, would have provided that in any case in which a local school board enters into a comprehensive agreement with a private entity pursuant to the Public-Private Education Facilities and Infrastructure Act of 2002 whereby the private entity finances the construction of a new public school building in the local school division through the issuance of bonds; leases the building to the local school board in an arrangement such as a certificate of participation, a double net lease, or a triple net lease; and expects the local school board to make lease payments in an annual amount that approximates or is equal to the annual debt service on such bonds, the Department of Education shall not consider 50 percent of such lease payments as capital outlay and debt service and therefore shall not subtract such payments in the biennial calculation of net local expenditures for operations or required local effort for the purpose of determining such local school division’s composite index of local ability-to-pay, if so requested by the local school board. The bill was recommended to be lain on the table by the House Appropriations Elementary and Secondary Education Subcommittee by a unanimous vote of 8-0.

Lastly, several bills dealing with school board reversion of unexpended funds have been defeated in the House or amended by the Senate to address VACo’s concerns. As previously reported, four bills were introduced that in their original form were problematic for local governments, would permit any school board to finance school capital projects with any funds appropriated to it by the local governing body that are unexpended by the school board in any year or strongly disincentivize not doing so. SB 276 (Stanley) was amended to address VACo concerns and incorporated into SB 481 (McClellan), which was also amended to address VACo concerns by encouraging, but not mandating agreements between local governing bodies and school boards on the use of such funds. VACo is grateful to the patrons for their responsiveness and collaboration. SB 481 passed the Senate on a unanimous vote of 40-0. HB 251 (Simonds) was also amended to address VACo concerns, however, it was recommended to be lain on the table by the House Education Committee’s Early Childhood/Innovation Subcommittee on a 5-3 vote. VACo is grateful to the patrons for their responsiveness and collaboration. HB 608 (Bourne) was not amended to address VACo’s concerns, and VACo staff testified in opposition to the bill, which was also recommended to be lain on the table by the House Education Committee’s Early Childhood/Innovation Subcommittee on a vote of 5-3.

In conclusion, as it stands at Crossover, there is one viable legislative proposal coming from the House and numerous bills coming from the Senate, though more efforts might be contained in the House and Senate budget proposals. The House bill (HB 563) contains similar content to two viable Senate bills (SB 238 and SB 473). Funding for school construction and renovation is one of the biggest concerns and responsibilities of local governments in the Commonwealth, but many localities face significant challenges in raising sufficient funds to undertake these projects. VACo encourages its members to engage with their legislators to stress the importance of meaningful legislative actions to address this $25 billion issue.

VACo Contact: Jeremy R. Bennett

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