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Published in Print: June 20, 2001, as Doling Out Facilities Aid Proves Tricky

Doling Out Facilities Aid Proves Tricky

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In the three years since California voters authorized a bond issue providing $6.7 billion to help ease school crowding, state policymakers have been saddled with a classic imbalance of supply and demand. It's as if they're trying to feed dozens of people with a single loaf of bread: No matter how they slice it, people still end up hungry.

A coalition of Los Angeles students and community groups filed suit in March of last year, charging that the state's original method of giving out school construction money was rigged against city districts. The suit contended that because urban districts like Los Angeles need more time to secure school sites, distributing money on a first-come, first-served basis cheated them of their fair share.

A state trial court judge agreed, and last fall, the state agency responsible for overseeing the school construction program changed the system to favor districts with the greatest facilities needs. Now, many of the growing suburban districts bumped to the back of the line because of the state's midcourse shift are fighting back: In November, a coalition of such districts filed their own suit challenging the new rules.

California is one of a growing number of states that have been compelled by litigation, school crowding, or the overwhelming need to replace inadequate facilities to play a greater role in helping districts build or renovate schools. In so doing, some states have learned through trial by fire that securing the money is only one part of the equation in helping districts pay for construction. Then, the states have to figure out how best to give it out.

States have come up with many different ways to do that, from providing a limited amount of earmarked per-pupil funding to all districts, to offering help with debt service, to reimbursing districts for construction costs on a sliding scale based on need.

"Different states take different things into consideration, whether it's actual need, growth, or poverty in the area," said Joe Agron, the editor in chief of American School and University Magazine, which tracks school construction trends.

Yet despite that diversity, many states have struck a similar stumbling block as they've become more active in helping districts fix their facilities problems: Whatever they do seems to leave someone unhappy. However evenhanded policymakers try to be, complaints have abounded that the systems they have devised for distributing construction aid are unfair.

"We are very dependent on the state because those are the rules they've set up," said Deborah Bettencourt, the deputy superintendent of the 16,000-student Folsom-Cordova Unified School District, one of the California school systems fighting the state's recent change in the way it distributes bond money. "They're trying to please everyone, and they're pleasing no one."

Adjusting for Wealth

As they struggle to reconcile competing claims for state dollars to help meet school building needs, many states have moved in recent years toward formulas that provide a greater amount of aid to those districts that are less able to pay for schools on their own. In the 1998- 99 school year, 22 states were using some type of such an "equalized" method for handing out their school construction funds, sometimes in combination with other programs, according to the December 2000 issue of the journal School Business Affairs.

The adoption of equalized approaches to construction funding has been in part driven by finance-equity lawsuits that incorporate facilities, including those in such states as Arizona, New Jersey, and Ohio.

In theory, it means that "you're putting money into the high-need areas where most of the at-risk students are," said Thomas A. Kube, the executive director of the Council of Educational Facility Planners, based in Scottsdale, Ariz. "Affluent districts either have to take care of their own needs or wait their turn."

Ohio lawmakers opted for an equalized-funding approach four years ago when they established the state's first school facilities commission. By the time the commission set up shop in Columbus in 1997, the shoddy condition of many of the Buckeye State's school buildings had been well documented in a long-running lawsuit that challenged the state's overwhelming reliance on local property taxes to pay for schools' facilities and basic operating expenses.

Those conditions had received national notoriety, too: A 1996 survey by the U.S. General Accounting Office found that Ohio students were more likely to attend unsafe or inadequate schools than those in any other state.

The state has responded by pumping $2.7 billion into school facilities since 1997, an expenditure that one school official estimates is more than triple the amount the state had directed to such purposes over the preceding 100 years.

The bulk of the money has been allocated through a formula that ranks districts on a list according to their local property wealth per pupil. Districts with the least property wealth are given priority, while those at the other extreme understand that they may never see a dime from the state.

So far, at least 116 of the Ohio's 612 school districts have received help from the state.

The 1,650-student Minford district in southern Ohio is one school system that has unequivocally benefited from the state's largess. A small, rural district with little to speak of in the way of property wealth, Minford was one of the first districts on the facilities commission's priority list.

After assessing the district's needs, state officials agreed to spend $33 million to help build Minford a new high school and a new middle school, and to renovate the district's elementary school. Local taxpayers, for their part, were required to spend only $2.2 million.

Students have already moved out of the old high school, which was constructed in 1970 with a foundation so weak that soon after the school was completed, a hump appeared in a floor in the bottom story of the building because of soil shifting underneath. With cracks also forming on the interior of the building, Superintendent Dennis J. Meade called in a structural engineer every three months to ensure that the building was safe for habitation.

The middle school and elementary school projects will be completed by 2003. Even with a huge increase in the local mill rate, the district would not have been able to afford a construction project of such magnitude, Mr. Meade said.

"Our people had been supportive and had passed levies for repairs, but there was only so much we could do," he said. "We could have passed 100 mills and not come close to raising this kind of money."

With all three of its school buildings tended to by the state, Minford received what one state official calls a "full district fix." Rather than spreading state money out to a greater number of districts by helping districts one building at a time, state officials have opted instead to try to address all the facilities needs in each district as they work their way up the priority list.

"It causes us to go through districts more slowly and more methodically," said Rick Savors, the spokesman for the Ohio School Facilities Commission. "And we're not hitting districts with $10 million here or $15 million there. But it's our belief that you better take care of everything and then move on to the next district."

But that approach also means wealthier districts with pressing facilities needs are unlikely to receive state money any time soon.

Ranked as No. 416 out of 611 districts on the state's priority list in 1998, the South-Western City School District near Columbus decided it could not afford to wait years before receiving state aid. Instead, the 19,000- student district asked local taxpayers to pass a $128 million bond to build seven new schools and alleviate crowding in a district that was over capacity by 3,200 students.

The district had made three failed attempts to pass a bond in as many years and had begun taking desperate measures to house students: converting janitors' closets and greenhouses into classrooms, turning to split schedules at some schools, leasing vacant bank space to house kindergarten classes.

The bond passed in November 1998, and the district has begun its construction push. Still, as district officials look ahead to years of debt, they can't help feeling slighted. After all, their taxpayers will be paying the whole tab, while the state pours money into other districts.

"We don't want to be whiners, but it's certainly very disheartening," said Jeffrey B. Warner, a district spokesman, noting that the average family income in the community is roughly $30,000 a year. "When you look at the growth of our district and our demographic position," he said, "it would seem reasonable that South-West schools would have qualified" for state aid.

Counting the 'Unhoused'

A rapidly expanding district such as South-Western would likely fare better in California, where the state has earmarked $2.9 billion for new construction in growing school districts, out of the $6.7 billion in bond money approved in 1998. Other funds were devoted to school modernization and class-size-reduction programs, and to fulfilling the various facilities needs of districts unable to obtain sufficient local funding.

In determining which districts should qualify for state aid for new school construction, California factors in the number of "unhoused" students in each district—that is, students the district projects it will receive in future years, those accommodated through split or multitrack school schedules, or those in portable classrooms.

Under the state's original requirements for its bond-funded construction program, districts qualified for the state money if they had any unhoused students and enough local matching dollars in hand to build a new school. Once those requirements were met, districts had to secure land, verify that it was environmentally sound, and receive approval for construction plans through a state architect before they could line up for state aid. The state would then distribute funds for all qualified projects on a first-come, first- served basis.

By the time the state was about halfway through its pot of money approved through the 1998 bond election, community members in Los Angeles realized that the district would likely receive only $50 million in new construction aid from the state—even though the 723,000-student district was eligible for $1 billion based on its number of unhoused students. The district had the local funds in hand to provide a match, and it clearly had demonstrated a need, but it couldn't move fast enough.

"What you had was a race for the funds, and the race went to the swiftest," said Hector O. Villagra, a staff lawyer with the Los Angeles office of the Mexican American Legal Defense and Educational Fund, one of a coalition of community groups and students that challenged in court the state's method of distributing bond money. "It turns out the swiftest were districts that were higher income and had more Anglo students than districts that were losing out."

Urban districts such as Los Angeles were behind the curve, Mr. Villagra said, because without much available land, it simply took them longer to locate, secure, and clean up appropriate school sites, while suburban districts could often zero in on never- developed space in open fields.

And after the district's recent debacle with the Belmont Learning Center, a $175 million high school built on land polluted with toxic chemicals, Los Angeles officials have to be especially cautious "in having everyone cross all the t's and dot all the i's in making sure there are no environmental issues on their sites," Mr. Villagra said.

A state trial court judge ruled in favor of the Los Angeles coalition last August, and since then the state has shifted its method of distributing new construction funds. Each district is assigned "priority points" based on its number of unhoused students, and the state distributes roughly $120 million on a quarterly basis to districts with the most points. If all goes according to plan, Los Angeles now expects to receive $450 million in new construction aid from the state before the money runs out.

High and Dry

But while Los Angeles stands to benefit from the new distribution method, the sudden shift to priority points has wreaked havoc in other districts that were, in some cases, ready to break ground on construction projects before the state changed course.

In Ms. Bettencourt's district of Folsom-Cordova, for example, officials had already signed a contract for the construction of an $11 million elementary school when the state shifted gears. Folsom-Cordova officials had expected to receive $5.25 million from the state under its previous guidelines, but were left in the lurch when they learned that they now did not have enough priority points to garner state funds.

Under contract to build the school, the district cobbled together developers' fees—including those slated for constructing an elementary school in another subdivision—and green-lighted the project without money from the state.

Still, the change has jeopardized construction of the next elementary school, Ms. Bettencourt said. "It's L.A. versus everybody else," she said. "Their shortsightedness should not be our problem. I know there are limited funds to go around, but those of us who did our planning were dependent on those state dollars."

An advocacy group known as the Coalition for Adequate School Housing, along with some individual school systems and the state's Small School Districts Association, filed a lawsuit last November challenging the state's new way of disbursing funds. Even as the lawsuit is still pending in state court, however, education officials on both sides of the legal battle agree that the dispute won't be resolved satisfactorily without more state aid.

"We can argue over these turf issues, and argue that priority points is not the way to go," said Jim Murdoch, a lobbyist for the Sacramento-based Coalition for Adequate School Housing. "The bottom line is California's huge need for school construction. The real issue is our desperate need for another big bond."

To that end, the state Assembly, the legislature's lower house, approved a measure earlier this month to put a $10 billion bond proposal for school facilities before California voters next year.

In shaping the distribution of future bond issues, policymakers would be wise to "acknowledge that there are differences between urban and rural and suburban areas in terms of processing speed," said Jim Bush, the assistant director for facilities in the California education department. "Perhaps there should be money reserved for different categories."

S.C. Splits Pie

South Carolina lawmakers were mindful of districts' varying facilities needs two years ago when they fashioned a formula for dividing the money from a $750 million bond issue approved by taxpayers for school construction.

Based on an approach devised several years earlier, when the state began devoting money from fees generated by a nuclear-waste plant to help districts offset facilities costs, state officials decided to split the money into several different pots.

A total of 35 percent, or roughly $262 million, was set aside to be given to districts on a per-pupil basis; another 35 percent was earmarked for distribution based on local property wealth; 15 percent was designated for offsetting debt-service costs in districts that had recently undertaken construction projects; and 15 percent was set aside for allocation based on districts' actual facilities needs.

"This was basically done because with all the different characteristics of school districts, everyone wanted to make sure that everybody got a fair piece of the pie," said Elmer Whitten, South Carolina's deputy superintendent for finance.

But while all South Carolina districts have benefited to some extent from the state aid, some small rural districts still struggle to cobble enough money together to address their facilities needs.

Orangeburg District 3 in rural Holly Hill, for example, received roughly $5.9 million from the state for construction of a new high school and elementary school. But taxpayers in that impoverished district, where 90 percent of students receive free or reduced-price lunches, were left with a $34 million tab.

Superintendent David Longshore Jr. said that if more state facilities aid were allocated in the same manner as state operations aid— under a sliding-scale formula based on district wealth—local taxpayers wouldn't need to assume so great a tax burden.

"It is a tremendous strain on the taxpayers in my district to do this," Mr. Longshore said.

Ultimately, South Carolina districts, like those in many other states, simply need the state to do more to help with facilities costs, said Robert E. Scarborough, the executive director of the South Carolina Association of School Administrators.

"You can't get very far in this conversation until you talk about the fact that $750 million doesn't even cover half of the total needs we have," Mr. Scarborough said. "At the time that money was approved, our school facilities were in a crisis. And in some places, they still are."

Vol. 20, Issue 41, Pages 1,22-24

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