3/8/19 NCSBA Bill Tracking NCS NCSBA.ORG 1
3/8/19 Legi Legislation Legi Legislation 2
3/8/19 Legi Legislation Legi Legislation 3
3/8/19 Legi Legislation Legi Legislation 4
3/8/19 Legi Legislation Offici cials 5
3/8/19 Offici cials Offici cials 6
3/8/19 Offici cials Gr Gras assroot oots 7
3/8/19 Gr Gras assroot oots Gr Gras assroot oots 8
3/8/19 Gr Gras assroot oots Gr Gras assroot oots 9
3/8/19 Gr Gras assroot oots Gr Gras assroot oots 10
3/8/19 Gr Gras assroot oots Rebekah Howard rhoward@ncsba.org (919) 747-6688 11
3/8/19 SCHOOL CONSTRUCTION FUNDING BOND VS. PAY-AS-YOU-GO 23 NCSBA Legislative Agenda School Construction/Capital Allow North Carolinians to § vote on a significant statewide school bond and § establish more local option sales taxes to help LEAs address the multi-billion-dollar backlog of school construction needs. 24 12
3/8/19 What is the issue? Facility Needs by Economic Tier (Tier 1: most In April 2016, the DPI economically distressed): School Facility Needs Survey identified $8.1 • 40 Tier 1 counties = $1.8 billion in school capital billion needs across the state over • 40 Tier 2 counties = $2.8 the next 5 years. billion • 20 Tier 3 counties = $3.5 billion 25 2019 County Economic Tiers 26 13
3/8/19 Under-Reporting of Need MGT of America Consulting, LLC selected 9 county LEAs for comprehensive facility evaluations, per a 2016 legislatively mandated study (S.L. 2016-94). § These LEAs under-reported their school facility needs: § MGT estimated $630.2 million in school facility needs in the 9 LEAs. § In the 2016 DPI Facility Needs Survey, these 9 LEAs reported only $287.8 million in school capital needs. 27 Under-Reporting of Need Guilford County Schools also hired MGT of America Consulting to do an assessment of its facilities. § MGT reported on January 9, 2019 that Guilford County would need to spend $1.2 billion to improve all of its school buildings to new or like new status. § The 2016 DPI Facility Needs Survey reported Guilford County’s need as $759.4 million . 28 14
3/8/19 K-3 Class Size Requirements § In response to a 2017 NCSBA Survey, 89 LEAs reported a need for 959 additional classrooms because of K-3 class size legislation. § While not participating in the survey, the press reported Wake needs 559 classrooms, Mecklenburg needs 200 classroom trailers, and Durham needs 63 classrooms, due to K-3 class size changes. 29 Local Funding Capacity MGT Study finding: “Given the current available allocation processes, the funds available from the state, county, and local level are limited. Considering these limiting factors, it is unlikely that there will be an adequate capital funding stream to support the demand districts have to provide 21st Century schools to every student in North Carolina.” 30 15
3/8/19 Local Bond Efforts 46 county bond issues approved $8.2 billion since 2005 ($2.9 Billion since 2016). 6 counties approved $1.2 billion school bond issues in 2018: § Alamance § Gaston § Johnston § Moore § Transylvania § Wake 31 Local Tax Efforts County Purpose Tax revenue (1) May 2018 1/4 Cent Sales Tax Referenda Gaston Repay $250 million 2018 school bond $5,541,951 Jones Fund school technology and capital needs $116,319 Lincoln Fund staffing and instructional resources, upgrade technology, maintain safe $2,007,511 learning environment ,and provide leadership development Pasquotank Fund school capital needs and offset the costs of lowering school class size $1,175,360 Rutherford Fund critical public education facility needs $1,540,627 November 2018 1/4 Cent Sales Tax Referenda Moore Fund debt service on bonds passed in May 2018 $3,119,905 Stanly Fund initiatives related to public education $1,525,601 Swain Fund school infrastructure needs $364,665 (1) North Carolina Center for County Research/N.C. Department of Revenue 32 16
3/8/19 Previous Statewide Bond Issues 1949 1963 1996 $50 million $100 million $1.8 billion $50 million $300 million 1953 1973 33 State Capital and Infrastructure Fund (SCIF) Effective July 1, 2019 § Receives 4% of the net State tax revenue § Receives 1/4 of the unreserved fund balance § Receives money appropriated for capital projects and interest generated by the fund § In FY 2019-20 the fund is anticipated to receive $952.55 million § From this amount it must first pay debt service, then remaining funds can be use for new capital projects and repairs and renovations. 34 17
3/8/19 Senate Bill 5 § This bill increases the amount of earmarked net tax revenue from 4% to 4.5%. § Includes public school districts and community colleges in the list of fund recipients § Dedicates 1/3 of the funds to public school construction for 9 years § Effective Date is July 1, 2019 35 SB 5 Public School Allotment Fiscal 1/3 of SCIF Annual Year Revenue 2019-20 $129,626,254 2020-21 $140,516,736 2021-22 $155,721,776 2022-23 $175,464,542 2023-24 $201,736,098 2024-25 $258,240,325 2025-26 $299,192,111 2026-27 $323,791,950 2027-28 $351,390,882 Total $2,035,680,674 36 18
3/8/19 Senate Bill 5 – Pros § Provides funding for school construction § Begins in FY 2019-20 § Funds new construction and repairs and renovations § Does not require a vote of the people § Does not require debt service costs § Includes School Safety projects in R an R 37 Senate Bill 5 – Cons Funding not guaranteed – § Economic downturn can reduce funding stream – estimates built on 3% annual growth § General Assembly “intends” to appropriate 1/3 of the fund to public schools each year § FY 2019-20 has $184 million in earmarked projects – bill doesn’t specify if these projects come from their dedicated allotment or “off the top” – K-12 might get only $68.3 million in the first year § Projects are chosen by the Department of Public Instruction 38 19
3/8/19 Senate Bill 5 – Cons § No set amounts for LEAs § Without knowing the amount of funds received or when funds will be awarded, LEAs will have hard time planning facilities § LEA not class size compliant must first use capital funds to attain compliance before it can apply for other projects § Increased use of recurring funds for SCIF will reduce availability for teacher pay, school safety personnel, and other operating needs § Commitment of funds to K-12 construction is for nine years, but increased percentage of tax revenues does not expire 39 Chart of SCIF additional .5% Fiscal .5% of G.F. Revenue Year 2019-20 $115,487,000 2020-21 $118,951,610 2021-22 $122,520,158 2022-23 $126,195,763 2023-24 $129,981,636 2024-25 $133,881,085 2025-26 $137,897,518 2026-27 $142,034,443 2027-28 $146,295,476 Total $1,173,244,689 40 20
3/8/19 Pay-As-You-Go (SB5) vs. Bond (HB241) Senate Bill 5 House Bill 241 Description State Capital and Infrastructure Fund General obligation bond for K-12, UNC, and community expanded to include K-12 and colleges community colleges; increase revenue earmarked to fund Requires Vote of the No Yes People Overall Fund Amount Estimated $2 billion over 9 years - $1.9 billion - $1.5 billion for K-12; estimated issuance over 6 Funds not guaranteed; subject to years; funds guaranteed economic conditions Start Date July 1, 2019 If approved March 2020, then first bond issuance could be Fall 2020 General Fund Cost Reduces budget availability by Total debt service for a $1.9 billion bond is $809.4 million of increasing the earmark of General which $639 million is for K-12 portion of the bond Fund revenues from 4% to 4.5%; As current Connect NC bond is paid off, debt service for the removes $1.2 billion from GF new bond can be paid from the current appropriated amount operating budget over next 9 years LEA Allocation Amount determined by Department Each LEA receives amount specified in bill – State Board of of Public Instruction upon application Education distributes funds on basis of plans submitted by by a local school administrative unit local school administrative unit and board of county commissioners 41 Pay-As-You-Go (SB5) vs. Bond (HB241) Senate Bill 5 House Bill 241 Match Requirement No No if LEA receives Low-Wealth or Adjustment Factor funds; yes, if LEA receives only ADM or ADM Growth funds Project Type New construction and Repairs & New construction, renovation, technology infrastructure, Renovations (R&R) building security measures, equipment for repurposed building, and land Project Funding Will fully fund a project, but funding Funding will be allocated when plan for expenditures is will be released only for the amount approved that will be spent in a fiscal year Funding Priority Priority to applicants demonstrating Allocation by counties’ low-wealth status, average school the greatest need; additional priority enrollment, and school enrollment growth; $10 million given to those that have not received minimum per county a grant from the Needs-Based Public School Capital Fund in the past five years K-3 Class Size If LEA is not class size compliant, No restriction capital funds are restricted to capital Compliance expenditures to make LEA compliant with class size requirements Eligible for R&R funding Eligible for capital funds School Safety Enhancements 42 21
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